Setting up a budget to reach your financial goals can be a tricky job. A big factor in this situation is knowing how much you should spend on housing every month.
- How much?
There are 2 ways of defining this. First, the most used rule is the “30% rule” where you should not spend more than 30% of your gross income on housing. This sounds easy, but it is not that simple. You should keep in mind that this 30% is from your gross income, which means that it does not consider any expenses or needs you have.
Another other rule that people follow is the “50/30/20 rule”. In this scenario, you will be spending 50% in needs, 30% in wants and 20% on savings and debt repayment. This rule is a little more flexible since it does not tell you an exact amount you should be spending.
Keep in mind that with mortgage payments, lenders look for people that do not exceed 43% of their income spent on housing.
- In conclusion
Choose a rule that best helps you improve your budgeting to reach your financial goals. Here are some budgeting apps that can also help you get your finances in order.