You’ve probably heard the advice over and over: whatever you do, don’t spend more than 25% of your income on housing. That means that if you make $2, 000 a month, your housing costs should be no higher than $500. Ouch! Who in the Austin area can find a decent place to rent for $500?
In recent years, the cost of renting has increased much faster than salaries. So now the magic number is 30%. That’s because the cost of renting is higher than the cost of living.
If you are in the 30% range, you are “cost burdened”. According to Apartment List, over half of renters nationwide spend more than 30% of their income on rent, so you’re not alone. But this seriously impacts your ability to set aside money for emergencies, or a down payment on a home, or retirement.
One way to lower your housing expenses, if you have the down payment, is to buy a home. You could end up with a mortgage that costs about what you pay in rent. Do it if you can. Because your mortgage will not go up year after year the way your rent will definitely go up, especially in desirable cities like Austin. And, it’s a great investment. Instead of giving a landlord your hard-earned money, give it to a mortgage lender, and when you sell, that money comes back to you, plus a profit.
So if you are spending 25-30% of your monthly income on rent, it may be time to look at home ownership.