Being house poor is when you spend too much of your monthly income on housing costs, leaving little money left over for anything else. These housing costs include mortgage payments, home maintenance costs, utility bills, home insurance, and anything else involved in having a home.
We Have Other Things to Pay For!
Housing costs, particularly mortgage payments, are usually our largest monthly expense. However, there are other things we need to be putting money towards. This includes things like
- An emergency fund of savings
- Money towards your retirement
- Any holidays you want to go on
- Days out
- Car costs
Basically, we have a lot of costs to think about that have nothing to do with housing!
Why Do People Become House Poor?
Two main reasons people find themselves house poor are:
- They don’t understand the extent of all of the costs involved in owning a home
- They have an unexpected change in circumstances which seriously impacts and changes their financial situation
Therefore, to avoid being house poor it’s a good idea to seek the help of a financial adviser or mortgage broker when looking to buy a home. After all, there are a lot of costs involved in buying a home aside from mortgage payments. To find out more about the different fees involved when taking out a mortgage, click here. It’s also a good idea to create an emergency fund in case you come across any unexpected costs when buying a home.
50-30-20 Budget Rule
The 50-30-20 budget rule can help you manage your monthly spending through giving you a basic plan of how to spend your money. With this rule, you aim to spend 50% of your income after tax on essential needs and 30% on wants. You then save the remaining 20%.
Remember that this is just a rough guide to managing your money, and that you may find that this level of saving is unrealistic for your own financial situation, and so you can adjust the savings goal to 5% or 10%.
The 50-30-20 rule is just one way in which you can organise your spending, but budgeting is never a one-size-fits-all thing; you should always adopt a style of money management that best suits you.