Author Topic: How much to spend on housing?  (Read 1554 times)

Lady Mustache

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How much to spend on housing?
« on: August 04, 2014, 05:43:26 PM »
I am working towards living off $25k and investing $25k. (I am currently living off $20k and investing $20k. So, not quite there yet.)

In this scenario, how much should I spend on housing? I have a healthy down payment stash and want to use it to buy a small house for myself. I live in a fairly expensive market, but I have seen some deals.

I'm trying to get a handle on how much of my budget to allocate to a monthly payment. I'd love to hear from some Mustachians who are in a similar situation.


Emilyngh

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Re: How much to spend on housing?
« Reply #1 on: August 04, 2014, 06:00:18 PM »
As little as possibly to get a small house that truly has all you value (or that you could turn into having what you value).   This number will vary depending on your market and your values.

We currently spend about 25% of our budget on housing.   This amount is much higher than other Mustachians probably do, but DH is a SAHD, I'm semi-retired, and we pay hefty child support, so our savings is only about 25% currently (but we have an existing stache that's growing in the background).

Also, keep in mind that things may change and what you decide now doesn't have to be forever.  We bought our current 2000 sq ft house with 2 stepkids that needed bedrooms who are now very close to both out of the house, and with the idea that we'd have multiple more kids.   Now that we've decided that we're stopping with our one daughter, I feel like it's too much house and plan to downsize in the next few years.   So, we should be then spending less (which I wouldn't have predicted; if anything years ago I would've guessed we'd be upsizing).   

Basically, decide what you value now, get the best deal on this you can by running numbers and thinking creatively, and remember that if/when things change you can adjust again later.

Beric01

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Re: How much to spend on housing?
« Reply #2 on: August 04, 2014, 06:08:36 PM »
I am working towards living off $25k and investing $25k. (I am currently living off $20k and investing $20k. So, not quite there yet.)

In this scenario, how much should I spend on housing? I have a healthy down payment stash and want to use it to buy a small house for myself. I live in a fairly expensive market, but I have seen some deals.

I'm trying to get a handle on how much of my budget to allocate to a monthly payment. I'd love to hear from some Mustachians who are in a similar situation.

Why not live on 20K and invest 30K?

Moving on, I spend almost 25% of my after-tax income on my very small studio apartment in one of the most expensive areas in the world (which is worth it because it pays more here). This will help me reach FIRE quickly, so that I can jet out of this area to the wild blue yonder. :-)

On the topic of buying, is the area you're in where you want to live for a long time? If not, you may be better off renting to reach FIRE first, and then moving to where you really want to live before considering buying. Expensive areas tend to be better for renters. You also don't want to regret a purchase down the road.