Here's Why I Spend Less on Housing Than I Can Afford

by Maurie Backman | Updated July 17, 2021 - First published on April 24, 2020

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A family eating a meal at a patio table on their back deck.

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Why one writer made a conscious decision not to be house-poor.

We're told to keep our housing costs to 30% of our income or less, and for good reason: Sticking to that threshold can help ensure that we don't get in over our heads, thereby risking falling behind on other bills. And since housing is the typical American's single largest monthly expense, it stands to reason that without that guideline, many people would extend themselves too much financially and risk a host of unfavorable consequences -- depleted savings, piles of debt, and foreclosure, to name a few. 

The average American household today spends $1,674 a month on housing, according to the U.S. Bureau of Labor Statistics (BLS). Meanwhile, the typical American household's after-tax income is $5,603 a month. When we compare those numbers, we see that $1,674 comes in at almost exactly 30% of $5,603, which means the average household isn't going overboard on housing. 

Still, a lot of people do overspend on housing, particularly in areas where it costs a lot to own or rent. I happen to live in one of those areas -- New Jersey, where home prices are well above the national average, and property taxes are the highest in the nation. Despite that, I made the conscious decision to keep my housing costs well under 30% of my take-home pay even though I can afford more. Here's why.

1. My income is variable

As a self-employed writer, my income can fluctuate from month to month or year to year. So I made sure to buy a house that's cost (inclusive of mortgage payments, property taxes, and homeowners insurance) wasn't a strain on my budget. If some months are leaner than others income-wise, I'm not forced to dip into my savings to cover my expenses. 

2. I like having financial flexibility

I have a number of financial goals on my list -- saving enough for a comfortable retirement, and putting my children through college as best as I can. Spending less on housing gives me the flexibility most months to fund my retirement plan and put money into my kids' college accounts. 

3. I prefer to spend my money elsewhere

Though I enjoy spending time at home, I also like traveling, trying new restaurants, and exploring hobbies. All of these things cost money, and I like having enough left over each month to be able to do these things without worry. 

How much should you spend on housing?

Not everyone has the option to keep housing costs low. If you live in an expensive city where renting a studio costs $1,500 a month, your options may be limited. But if you live somewhere with a relatively open housing market, it could pay to keep your housing costs well under 30% of your income.

That said, if having a nicer or larger home is important to you, and there are certain amenities you don't want to give up, then maxing out that 30% of your income might make more sense. If you're struggling to decide how much to spend, ask yourself these questions:

  1. What would having extra money each month do for me? If it buys you things that make you happier than extra square footage, purchasing or renting a less expensive home could be the right move.
  2. Will buying or renting a cheaper home negatively impact my quality of life? If doing so means having to live in a neighborhood you don't really care for and puts you far away from friends, family, and the amenities you enjoy, then spending less on housing may not be worth it. But if it seems that buying or renting a less expensive home won't actually detract from your quality of life, you might as well save that money for other things. 

At the end of the day, I just plain don't feel the need to own the biggest house in town. I'm content with an average home in an average neighborhood -- even if my earnings and bank account say I can afford more. By spending less on a home, I get the freedom to use my money for other things that enhance my quality of life more than an extra bedroom or bathroom might, and I get the peace of mind of knowing I haven't overextended myself. 

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