Finances : How Much Rent is Too Much?

The three biggest expenses one faces in life usually are housing, transportation and food. One has to be careful not to spend too much but just enough on these items especially in relation to one’s monthly income. Usually ones’ salary should read like, a 25% for housing, another 15% each for transportation and food, 60% of his money leaving just 40% for everything else.

The three biggest expenses one faces in life usually are housing, transportation and food. One has to be careful not to spend too much but just enough on these items especially in relation to one’s monthly income.

Usually ones’ salary should read like, a 25% for housing, another 15% each for transportation and food, 60% of his money leaving just 40% for everything else.

The quickest way for a budget to fail is to overspend these ‘big three’ categories. if one spends 65 or 70% it becomes almost impossible to make up the difference in the smaller categories. Even you cut back drastically in areas like entertainment and clothing; there just will not be enough to leave enough to make savings.

Overspending in these big areas is also a problem because we often make commitments for months or even years in advance. It’s not like your electric bill. If it was too high last month, you can start watching your cash power and where it goes by reducing on your energy consumption.

For example, instead of ironing clothes every once in a day, you can do it once in a week. Also, instead of leaving all electric appliances like radios and TV’s plugged all night and day even when they are not in use, or turn the fridge lower because its contents will still be preserved while less power is used. But, if you agreed to pay rent which is 40% of your salary, there’s nothing you can do about it, except moving house which also affects your income more.

The rule of thumb is that no more than a third of your gross annual income should go towards housing. Here, housing means mortgage or rent, fuel, electricity, maintenance, and phone.

Rent or your monthly mortgage payment plus each of the above should never exceed 36%. 1/3 is generally a good rule just as with the 1st answer, but don’t forget that the number includes the other housing expenses.  As for rent alone, you should not spend anymore than 25% of your gross income.

Experts also say that mortgage shouldn’t exceed two years’ gross salary and your monthly mortgage payment shouldn’t exceed 25% of your net salary. Mortgages are better ways of owning your home if you can’t afford to buy a house at once, because it is better to pay monthly mortgage than paying rent.

When a person is in debt, their whole lives are focused on that fact and that is how it feels to saddle oneself with a mortgage they cannot afford.

Ends

Have Your SayLeave a comment