Wednesday, April 19, 2017

Dont let your basic living expenses get too high

Dear Dave,

I read where you recommend having your house payment or rent at an amount that’s 25 percent or less of your monthly take-home pay. Does this figure include property taxes and insurance too?

Dear Mark,

Yes, it does. I’m trying to keep you from being “house poor.” Did you know you can qualify for a house payment, with taxes and insurance, that’s close to half of your take-home pay? That’s ridiculous. When you don’t have room in your budget to do anything else that matters because your house payment is so large, that’s what we call house poor.

When your income minus your basic living expenses equals almost nothing, it means your basic living expenses are way too high. Being in this kind of situation keeps you from saving for really important stuff like investing, retirement, and college for your kids. I’m trying to position you where you can get the house and everything paid off so you can become wealthy. Remember, your most powerful wealth building tool is your income.

When we talk about driving a crappy car, not going out to eat, or not going on vacation -- those are temporarythings. It’s all about living like no one else, so that later you can live and give like no one else.

-- Dave