Comments on: How Much Should I Spend on Housing?

By: Matt Goulart

Matt Goulart — Tue, 26 May 2009 13:27:46 +0000

Yeah, actually, what you've described is pretty much exactly what we've done, and are planning on doing.

We found something that we really liked and enjoyed, and went for it. It's going to end up being an average percentage of our income, once we're married and settled. After a few more months, or a year or two, the two of us are both going to be making more income, so as long as we stay where we are (which we're planning on doing), then that percentage will drop.

The percentage isn't the final say, it's not like we are going to refuse to spend more money on housing if one of us loses a job, it's just a guide, an ideal.

By: Silicon Pairie

Silicon Pairie — Sat, 23 May 2009 14:39:25 +0000

It’s hard to set a fixed percentage because incomes vary a lot more than housing costs – having a lower income doesn’t automatically mean you should go for the cheapest possible option unless you’re really willing to give up a lot. But on the other side you can keep improving your situation by finding something that you don’t mind (which it sounds like you’ve done) and then not moving up as soon as your income increases. In that context you could set a percentage that you would allow yourself to spend if your income rises significantly, depending on what you’re comfortable with and what else you need to spend on. Personally I’d like to keep my percentage pretty low but that means doing more work to build my income.

Adam: I did this by setting a target for average monthly income based on my past experience and what I knew I could do if I worked for it, and then estimating everything in relation to that. To make sure you’re safe you can set your target a bit lower than what you expect and plan around that, but also have a plan if you exceed it. It also helps to build up some extra cash that you can use in case a payment is delayed. That way you have a good idea what will happen over a long enough period of time, and you have the cash to keep it up if you get paid less one month and more the next.

By: Matt Goulart

Matt Goulart — Thu, 21 May 2009 15:37:51 +0000

Wow, Dave, that’s great that you’re able to put aside money for saving and retirement already. Congrats!

As for renting, I’m not sure how long Ashley and I are planning on it. For one, I am not sure if buying a house is better off financially than renting, I’ve seen the math go in both directions. In addition, as long as we’re planning on living in North Vancouver, we’re planning on renting. Buying a house up here is insane – a down payment on a house would be 3x my annual salary. If/when we move off the North Shore, we’ll probably take into consideration buying a place, but who knows when that will be.

By: David Smith

David Smith — Thu, 21 May 2009 08:16:05 +0000

Great blog Alan, really enjoying your material. It seems we're in a rather similar situation, with Amanda and I only a matter of months into the marriage; living in the Lower Mainland with low incomes.

Between us Amanda and I earn only $1800 monthly and our rent is $875 including all utilities, basement suite in Cloverdale. That's us at 49%. My income took a bit of a jump in May as I moved from being paid 20 hours weekly to 30 hours weekly, forgetting the fact I work 40/50+! This didn't increase my take home pay however as I'm investing the raise in medical/dental/life insurance and a retirement plan (5% that's matched 5%). We've found every time we jump up in pay we try to stick at the same monthly expenditure. That way we've actually been able to invest and save somehow; which we're pleased with particularly with our low income.

We don't give ourselves the chance to go into debt with secured credit cards and never buying anything we can't pay for up front.

I suppose the elephant in the room however is the fact that we're still renting and therefore paying someone else's mortgage. How long to do you plan to be renting Alan?

By: Matt Goulart

Matt Goulart — Thu, 21 May 2009 02:18:53 +0000

Great question.

I think I would suggest that you predict your yearly net income, if possible, and then work your way backwards. So instead of creating your percentages off of a monthly income, you figure out how much you might make this year, and go from there.

For example, if you are going to predict that you will net $20,000 this year, then find 25 or 35% of that, divide it by the 12 months of the year, and you have an approximate budget. Or, because you're going to be combining your money with Alicia, plan all of your expenses around her income, and use your income purely for debt repayment and saving.

Would that work? Anybody else have thoughts/ideas?

By: Adam Loewen

Adam Loewen — Thu, 21 May 2009 00:39:45 +0000

Good post man. But how do you work this stuff out if you’re self employed and don’t have a fixed income. I’m not working with linear percentage figures; income can change drastically from month to month. Any tips??