How Healthy is Your Housing Budget?
With rent and home prices hitting record highs, many of us feel the strain of finding affordable housing. So, how much of your monthly budget should you spend on housing?
What’s a Healthy Housing Budget?
A general rule of thumb is to allocate no more than 30% of your gross monthly income—before taxes and deductions—toward housing. While this isn’t a strict rule, it’s a helpful guideline for balancing housing costs with other expenses.
For renters, this 30% should cover rent and utilities like heat, water, and electricity. Homeowners should include their mortgage payment, interest, insurance, property taxes, and utilities within this 30% guideline. By staying within this range, you should still have room in your budget for other necessities like transportation, healthcare, groceries, and savings.
However, with rising costs for everyday essentials like gas and groceries, now may be the perfect time to take a closer look at your budget and make adjustments as needed.
Tips to keep your housing budget healthy:
1. Check In with Your Budget
Inflation has likely changed your financial situation. Take time to reassess your monthly income and compare it to your current expenses. Are you still within the recommended housing budget ratio? Ensure your budget accounts for essentials like groceries, gas, healthcare, childcare, savings, and entertainment. If you don’t already have a budget, now is a great time to create one—even a simple one—to track your expenses and adjust as needed.
2. Review Your Debt
Managing housing costs becomes more complicated when weighed down by high-interest debt, like credit card balances. Carrying this debt eats away at your available monthly income. To save money, prioritize paying off the highest-interest debts first, then move to the next highest once that’s done. This method will help you pay down debt more efficiently and free up more income for housing.
If you’re overwhelmed by debt, consider options like a debt management plan or working with a trusted financial counselor to reduce monthly payments and lower overall debt costs.
3. Look for Ways to Reduce Expenses
To keep your housing budget on track, consider areas where you can cut costs. Meal planning can reduce grocery expenses, canceling unused subscriptions can free up cash, and lowering energy usage can decrease utility bills.
Additionally, look for ways to reduce the cost of debt—such as consolidating loans or negotiating lower interest rates. If you have any big purchases coming up, ask yourself if they can be delayed. For example, if you anticipate needing to replace your washing machine, start saving now to avoid using credit when the time comes.
4. Connect with a Housing Counselor
If you’re facing challenges managing your budget, or if rising prices are making it difficult to keep up with housing payments, consider contacting a housing counselor. GreenPath Financial Wellness, a trusted national nonprofit, offers HUD-certified counselors who can help you create a personalized plan to stay on top of your housing payments. The earlier you seek support, the more options you’ll have to manage your financial situation.
This article is shared by GreenPath Financial Wellness, a trusted partner of People Driven Credit Union.
