Americans Are Spending Way Too Much on Housing, Data Shows

Are you overdoing it on housing expenses?

There are certain expenses we all spend money on that are unavoidable -- and housing is one of them. Unless you're willing to live in your car (which, to be clear, you shouldn't be), you'll need to spend some amount of money to put a roof over your head, whether in the form of writing your landlord a monthly check or making a monthly mortgage payment.

But there is such a thing as spending too much money on housing. And recent data reveals that Americans may be going overboard in this particular expense category.

Are housing costs busting your budget?

The average American household's annual income after taxes is $74,949. Meanwhile, the average American spends $1,784 a month, or $21,409 a year, on housing, amounting to roughly 35% of income.

The problem there is that as a general convention, it's a good idea to limit your predictable housing costs to 30% of your take-home pay or less. That way, you won't tie up so much money in housing expenses that you'll risk falling behind on other bills.

At first glance, it's clear the average American exceeds this 30% threshold. When we dig deeper, however, we see the average monthly $1,784 spent on housing isn't just coming in the form of a mortgage or rent payment. Rather, it includes other housing-related costs, like utilities and household operations, which could include things like property taxes and maintenance.

As such, the average consumer isn't going too overboard on housing -- just a little. That's because when we talk about that 30% threshold for homeowners, it generally does not include things like upkeep and maintenance (though homeowners who opt to spend more conservatively on housing may factor it into their personal calculations).

Still, it wouldn't hurt for Americans to start spending less on housing. Doing so might free up money for other bills and important goals like retirement savings. If you're spending a large chunk of your income on housing, you may want to take steps to reduce it. That could mean downsizing to a smaller apartment, refinancing your mortgage, or doing more home maintenance yourself so you're not paying service professionals to do that work for you.

How to know when you're really going overboard

If your housing costs happen to exceed 30% of your take-home pay but you're managing your bills just fine and you're meeting your various savings targets, then there's probably no need to change things up. But if you're constantly stressed about covering your bills in full and you can't remember the last time you put money into a savings or retirement account, then it may be time to scale back on housing costs if they're currently sitting above that 30% threshold.

Of course, adjusting your housing situation isn't necessarily something you can do overnight. If you're a renter, you may have to wait until your lease expires to make a move. If you own a home, you should know that while now is a really good time to sell and move to a less expensive property, it still takes time and money to complete a transaction like that.

The point, therefore, is to do some serious thinking about your housing costs and decide whether changes are in order. And if so, start mapping out a plan to free yourself from the burden of expensive housing that eats up too much of your hard-earned money.