Quicken gives me a nice little breakdown, via a pie chart, of where my money goes each month. According to this chart, rent is typically our largest expense each month. That’s not too surprising, considering it is probably your biggest expense each month as well (except for the lucky few who either paid off their mortgage or live with their parents). Today, I’m gonna spend some time looking in to our housing expense.
Girl Ninja and I take home about $6,000 each month from our 9 – 5′s. Our rent is set at $975/month through April 2012. That means 16.25% of our net pay goes towards rent. That’s pretty darn good if I do say so myself. But, as I’ve mentioned before, Girl Ninja does not always plan to work. Since we wont always have her income to rely on, we like to pretend that it doesn’t exist. If we take our rent payment and only look at it in relationship to my income, our obligation hovers around 25% of my take home pay. Yuck, definitely not as sexy as sub 20%.
Ya see, it’s one thing to think about your rent or mortgage payment as a dollar value, but a whole other thing to think about it as a percentage. I’m not bothered by the $975/month payment, but realizing that payment takes up one-quarter of my take home pay makes my heart sad . Think of all the other things I could do with that money. I could max out my 401K, donate to a bunch more charities, or buy that miniature pony I’ve always wanted….
If I was looking to buy a house (which I’m not), we would likely be qualified for a mortgage payment that would equal 28% of our gross pay, around $2,300/month. If we took advantage of that loan, we’d be….ummm…. STUPID! That would work out to 57% of my take home pay. Wowzer, I hate the sound of that. Could we make it work? Probably, but at what cost? Retirement contributions, vacationing, and dining out would be a thing of the past.
Although I don’t preach a specific percentage of income that should go towards housing, I personally would start getting pretty uncomfortable once it started breaching 35% of my net pay. I like keeping my costs down, and housing is one of the easiest places to save (or spend) some mad coin.
Questions for all of my beautiful (and ugly) readers….
- Is housing your single largest expense?
- What percentage of your net income do you put towards your housing? (include everything but utilities)
- What’s the maximum percentage of your net pay you’d consider putting towards housing?
- After housing, what’s your next biggest income eater? (Ours is charity)