My Housing Costs

When I first moved to North Vancouver, I moved into a one bedroom apartment with a roommate. North Vancouver is known for being a fairly expensive place to live (besides Victoria and the downtown core, probably the most expensive place in BC). We were paying $1100 a month, so split between us, that was $550 each.

In May, I moved out into the new place that my wife and I will be living in once we’re married. It doubles our square footage, is in a much quieter and safer neighborhood, and comes with access to laundry – three of our most desired features in a home. We thought we’d have to spend at least as much, if not more than I was paying in order to get this place, but luckily because of the economy, my monthly rent is $900. Hurray, that means less rent, right?

Well, not yet. Until we’re married, I’m taking on the rent at this place alone. My parents are willing to lend me the money to help me out over the next few months, if necessary, but that just means more debt I don’t want to go into. So all of a sudden my monthly rent is $350 more a month than it used to be. In addition, I have to pay for one third of the monthly utilities in the house (it is a basement suite). I haven’t seen a bill yet, but I would estimate that it is going to be in between $100-150 a month. That brings my total to, let’s say, $1000 a month on housing. If I was making a significant amount of money, that wouldn’t be such a problem. Sadly, $1000 a month is 62.5% of my monthly net income.

How Much Should I Spend?

This, like so many other things in personal finance, is personal. It differs depending on your situation. If you’re living at home with your parents, your “rent” may be $200 a month – if that. Your percentage might be 0! Your monthly costs are going to change if you are sharing a place, like with a roommate or a spouse, it is going to change depending on where in the world you’re living, and its going to depend on your preferences. For Ashley and I, our home is the most important place. We wanted a place that made us feel comfortable, safe, and like we were at home. We spend a lot of our time at home, so we would rather spend more money on our living expenses and decrease the amount we spent on going out – because we don’t go out that often.

There are some “rules of thumb” out there. Gail, the host of ‘Til Debt Do Us Part, recommends around 35%. Gary Foreman over at Living a Better life says 30 to 35% of your net income. Crown.org says 36%. If you’re single and living in the city, it is not unreasonable to be paying 50-55% of your income, and if you’re living at home, 0% is possible. But the average recommendation seems to be around a third of your income.

My Ideal Housing Percentage

Once I am married and Ashley and I are living together, our joint income will significantly decrease the strain on my finances. At that point, $1000 a month will be about 33% of our take home pay, something that is quite “average”. However, that is not yet my ideal.

As I move towards Serenity, a financial life free from stress or strain, I am going to seek to create a gap in our finances. Leeway in our budget means less stress. If I have to worry about whether or not I can eat dinner because I am not sure if I can make rent next month, I am not going to be stress free. One third of our finances going towards our rent is manageable, but if one of us were to lose our job, or get injured, it would quickly become very tight.

Instead, my ideal is to increase our income to the point where our housing cost is 25% of our income. I am okay with 33%, I would prefer 25%. At 25%, there is enough room in the budget to play with potential costs. Once it is at 25%, I would love to keep it there for as long as possible. That means that if we decide to “upgrade” in the future, I would love to keep that percentage. For now, my goal is simply to reduce it to that amount.

That means we need to increase our monthly income by about $1000. Ashley is working towards a raise that would help, and I am working towards achieving a full time position that would also increase our monthly income. This is a long term goal, so I am hoping to achieve an extra $1000 a month in 1-2 years.

What about you? How much are you spending on your housing? Don’t know? Try recording your spending.