Author Topic: Newbie question re recommended amount for housing  (Read 4487 times)


  • 5 O'Clock Shadow
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Newbie question re recommended amount for housing
« on: May 27, 2012, 11:07:07 AM »
I read somewhere (I think in MMM's blog, but now can't find it) that a good guide for what to spend on housing is $200-300 per month per person.  Can someone explain the rationale behind this?  And does each child 'count' as a person? Thanks for your help!


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Re: Newbie question re recommended amount for housing
« Reply #1 on: May 27, 2012, 11:57:43 AM »
It would help if you can find that.  It's hard to defend or critique something with only a vague guess of what it said.

That being said, the normal rule of thumb is no more than 30% of your income on housing.  Mustachians would likely shoot for much less.

For example, the wife and I spend about 6% of our (combined net) income on housing (PITI+HOA).
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  • Bristles
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Re: Newbie question re recommended amount for housing
« Reply #2 on: May 27, 2012, 02:17:14 PM »
I dont know if MMM has ever talked about it... but that quote certainly comes from Jacob (the ERE guy). $200-$300 per person. Source.


  • Magnum Stache
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Re: Newbie question re recommended amount for housing
« Reply #3 on: May 27, 2012, 02:33:33 PM »
Considering the vast differences in housing costs by location I'd go with the percentage rule.


  • Bristles
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Re: Newbie question re recommended amount for housing
« Reply #4 on: May 28, 2012, 09:17:54 AM »
it's an ERE thing, and I don't think it's the best way to look at it. IF you lived in a place where you could house a family of 3 for 600, you could also house a family of 4 for 600. Moving up to 5 would require another bedroom (legally, unless you own), but in a market where you can afford living in a 2 BR for 600, you probably won't be spending $1k on 3 BR. Overall, kids can cost less than adults (although if you choose to make kids expensive, they can also cost much, much more).

Here in the Boston area, rent alone on even the most affordable 2 bedroom home is going to cost my family more than 900/month. I guess you could argue that an ERE principle would be to not live in an area where housing is so expensive, but if that's where the good paying job is, then I don't really see why not... It really comes back to what your rate of savings can be. But beyond that, your rate of savings can be enhanced if you live in an expensive area. For instance, if you live in a place where cost of living is 150% of the national average, and you manage to achieve a 55% savings rate, then you can conclude (if you want to) that you only need to reach the point where you're generating 30% of your income in order to retire to an area where the CoL is average. so realistically, in order to beat living in the 150% CoL place and maintaining a 55% savings rate, you'd have to find a job in a 100% CoL place where you can achieve a 70% savings rate.
Just some food for thought :).


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Re: Newbie question re recommended amount for housing
« Reply #5 on: May 28, 2012, 12:06:40 PM »
The ERE number applies to adults only. It's pretty extreme. People on the ERE forum are generally living in low cost-of-living areas, have multiple roommates, have found creative living solutions, or have a higher housing expense, though there are exceptions. I live in a high cost-of-living area, and I'm at about $600/month per adult. MMM's housing cost of property taxes + renovations/maintenance + insurance + opportunity cost is about $1500/month, or $750/month per adult.


  • Bristles
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Re: Newbie question re recommended amount for housing
« Reply #6 on: May 29, 2012, 06:03:34 PM »
Even going with the percentage rule doesn't fix all the differences in location. When we moved from Provo, UT to Redmond, WA, almost all of our expenses stayed within 10% of what they were except housing, which is about 80% higher to rent and would be ~150% higher to buy. As a result, our housing expense makes up 40% of our total expenses in a good month for a 1-bedroom apartment, and could be 50% or more when we go to a 2-bedroom next year for our growing family.

My advice would be to not worry about rules like this - figure out what you need in the way of living space (it's not much), look for the best compromise between location and price, and then add frills from there if you think they are worth the cost.