For the past few years, I've been solely responsible for paying my rent and I've had to find places that were within my budget. Even so, I never really calculated the ratio between my rent and my income. I've recently learned that the "rule of thumb" is to spend no more than 30% of your income on housing. And I'll be the first one to admit that my housing is currently more than 30% of my income after taxes. Rent is my biggest expense and I have to save my money all month just to pay it on time... but I live in Chicago. The less you pay, the more you are giving up. If I were to find a place that was $200 cheaper per month, I'd probably have less privacy, less room, more problems, more roommates, and live in a less desirable neighborhood. It's pretty difficult to find a place that you can afford that still has all of the features that you want...
This goes for buying a place too. While I've never purchased a home before, I know that the rule of thumb applies to a mortgage too. If you take out a bigger mortgage than you can afford... well, we already know about the recent housing crisis. Bad things happen.
So are those hardwood floors and granite counter tops really worth it? What about your vicinity to a park or a coffee shop? What are the most important things you look for in a house/apartment/condo and what are you willing to give up? Are you following the 30% rule of thumb?
This goes for buying a place too. While I've never purchased a home before, I know that the rule of thumb applies to a mortgage too. If you take out a bigger mortgage than you can afford... well, we already know about the recent housing crisis. Bad things happen.
So are those hardwood floors and granite counter tops really worth it? What about your vicinity to a park or a coffee shop? What are the most important things you look for in a house/apartment/condo and what are you willing to give up? Are you following the 30% rule of thumb?
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