It happens. And more often than you think. Even in the mid-west, where affordable housing is a huge part of the draw. Enterprise Community Partners recently analyzed census data and found that 17% of Hoosiers are spending more than half their income on housing. Yep, in Indiana.
“While I know the report was primarily trying to address the problems associated with low-income households and the high cost of renting, I interpret this report much differently. This analysis does help shed light on the struggles of Americans near or below the poverty line, but there’s a great deal more going on here. Allocating more than half of one’s income toward housing certainly isn’t advisable, but, sadly, I see it all the time. And the problem isn’t just limited to renters. Those in the throes of a mortgage are just as culpable and damaged when too much income is allocated toward one expense category.” (courtesy of the Indy Star)
While it’s horrible when there aren’t affordable housing options, those in this data pool who willingly choose to overhouse themselves are damaging their financial lives beyond what they can imagine. Feeling as though they deserve a bigger house or one in a better neighborhood only causes major financial strife. Then there are those who step into a mortgage they can’t afford because a trusted institution says they can. Online mortgage calculators and banks will always recommend more than you can afford, so don’t listen to them. Do your own math, look at your own numbers, and keep your housing at or under 25% of your take-home pay.
Read my full Indy Star column here.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.