How Healthy is Your Housing Budget?

Ways your housing budget is healthy

Rent and home prices are hitting record highs recently, and many of us face challenges regarding affordable housing.

What’s a healthy amount of your monthly budget to spend on housing?

A common rule of thumb for your housing budget is to spend no more than 30% of your gross monthly income, which is your income before taxes and other deductions are taken out of your monthly paycheck.

While not a hard and fast rule, think of this ratio as a guideline to use when budgeting for housing costs.

Renters should be sure that 30% of gross monthly income includes rent, water, and electricity. That 30% ratio provides mortgage payment and interest, insurance, property taxes, and utilities for homeowners. You should still be able to manage other expenses like transportation, medical costs, groceries, and other living expenses.

For many people, paychecks are being squeezed with rapidly rising prices on gas, groceries, and other essentials, so it might mean it’s time to look at your monthly finances. Shared here are a few tips for the health of your housing budget.

Check-In with Your Budget

With rising inflation, chances are your overall housing budget ratio has changed.

Assess your monthly income against current expenses to review the suggested housing budget ratio. How have things changed? Do you have a realistic plan for the money each month? Be sure there is a line item in your budget for groceries, gas, healthcare, medications, childcare, savings, and entertainment. If you haven’t been following a budget, take time to create one, no matter how simple, to track your expenses to review and adjust as needed.

Take a Look at Debt

Many people find it hard to manage housing costs when struggling with high credit card balances or other debt. The longer you carry a high-interest credit card balance, the more it takes a bite out of your available monthly income. You will save the most money by starting to pay as much extra as you can on your highest-interest debt first, and then once that’s paid off, move on to your second-highest interest debt, and so on.

If you feel stressed by debt, exploring options such as a debt management plan or working with a trusted financial counselor could help you reduce monthly payments and reduce the overall cost of your debt.

Look for Ways to Reduce Expenses

To achieve a healthy housing budget, where might you be able to cut costs? You may be able to save money by doing things like planning your meals to reduce grocery bills, canceling streaming services you’re not using, or reducing your electric bill by cutting energy usage.

As noted above, you may also be able to save money on your debt by finding options to lower interest rates or reduce monthly payments. MyPoint offers a debt consolidation program to help pay off high-balance credit cards, so you only have one monthly payment!

Are any major purchases on the horizon? Can you postpone significant purchases like a new car or another large item? So often, when it is time to make a substantial purchase, it catches us off guard, and we immediately turn to credit to pay for it. If your washing machine will need to be replaced in the coming months, try to set aside cash now. When the time comes to replace it, you may be able to minimize the use of credit.

Connect with a Housing Counselor

Whether you are experiencing budget challenges as prices continue to rise or longer-term financial challenges, a housing counselor can work with you to figure out your plan.

You don't have to go through the process alone. We've partnered with the national nonprofit, GreenPath Financial Wellness. GreenPath has housing counselors available who can help you develop a customized plan to stay in your home.

The earlier a household reaches out to GreenPath’s HUD-certified counselors, who can examine their entire financial picture and prepare them to manage housing payments, the better.

GreenPath can be reached at 1-877-337-3399 (or request a call on their website) to speak with one of their financial wellness experts today. It's free, with no pressure, and 100% confidential.

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MyPoint Credit Union