Spending more than 50% of your income on housing is a drag, but fortunately, there are practical things to do if you’re house poor. What does this mean exactly? Ideally, you shouldn’t spend more than 28% of your gross income on rent or mortgage. Sadly, some people spend way more. This isn’t always avoidable, as the cost of housing in some areas is through the roof. However, you don’t have to accept the situation for what it is. Here are seven practical things to do if you’re house poor.
1. Refinance Your Mortgage Loan
Refinancing your house is one of several things to do if you’re house poor. Refinancing isn’t exactly a walk in the park as you’ll need to apply and qualify for a new mortgage loan. But if you meet the qualifications, refinancing can result in a lower interest rate and a lower monthly payment. The less you spend on your home loan, the more cash in your pocket.
2. Ask Your Landlord for a Break
You may not be able to negotiate lower rent if you live in a big apartment complex. But if you’re renting from a private landlord, getting a lower rent might be as simple as asking. There are no guarantees. To sway things in your direction, make sure that you’re a good tenant – someone who pays the rent on time. Also, offer to do a few things for your landlord. Perhaps you can be responsible for the grounds maintenance at the rental, or maybe sign a multi-year lease.
3. Rent out One of Your Rooms
Renting out one of your rooms is a simple way to generate extra income and help cover your monthly housing expenses. The monthly rent you charge can possibly cover half the utilities and house payment, freeing up your cash. The money saved can alleviate some of your financial stress, and perhaps help you build a rainy day fund.
4. Trim Your Monthly Expenses
Refinancing or asking for cheaper rent isn’t always an option. If you’re spending a greater percentage of your income on housing, look to save in other areas. For example, how much do you spend on cable services? How much is your monthly car payment? Slashing certain expenses in half, or completely eliminating certain expenses may free up cash to cover your house payment.
5. Look for Other Work
If your present income makes it difficult to pay your rent or mortgage, now is the time to seek other opportunities. You can ask your boss for a raise, or look for other opportunities within your company. Then again, maybe you don’t want to quit your job. In this case, finding a part-time job in the evenings or on the weekends can increase your monthly income, helping you meet your housing obligation.
6. Revamp Your Budget
If you don’t have a monthly budget, making your house payment each month may be a challenge. In all likelihood, you may spend money frivolously and lose track of where each dollar goes. Create a budget and determine how much you will spend each week on groceries, gas, entertainment and miscellaneous expenses. Also, decide how much you need to set aside each week for your house payment.
7. Find Cheaper Housing
If all else fails, perhaps it’s time to sell your house or move into a cheaper apartment. Downsizing in order to live within your means may require giving up certain perks or amenities. But at the end of the day, your will have enough money to cover your housing expenses, plus a little extra for emergencies and your savings account.
There is nothing fun about being house poor, and if you spend all your money on rent or mortgage, there won’t be any left for fun. Prioritize your money, know your limitations and live within your budget.
What percentage of your income do you currently spend on housing?