The biggest expense you have.

Quicken gives me a nice little breakdown, via a pie chart, of where my money goes each month. According to this chart, rent is typically our largest expense each month. That’s not too surprising, considering it is probably your biggest expense each month as well (except for the lucky few who either paid off their mortgage or live with their parents). Today, I’m gonna spend some time looking in to our housing expense.

Girl Ninja and I take home about $6,000 each month from our 9 – 5’s. Our rent is set at $975/month through April 2012. That means 16.25% of our net pay goes towards rent. That’s pretty darn good if I do say so myself. But, as I’ve mentioned before, Girl Ninja does not always plan to work. Since we wont always have her income to rely on, we like to pretend that it doesn’t exist. If we take our rent payment and only look at it in relationship to my income, our obligation hovers around 25% of my take home pay. Yuck, definitely not as sexy as sub 20%.

Ya see, it’s one thing to think about your rent or mortgage payment as a dollar value, but a whole other thing to think about it as a percentage. I’m not bothered by the $975/month payment, but realizing that payment takes up one-quarter of my take home pay makes my heart sad :(. Think of all the other things I could do with that money. I could max out my 401K, donate to a bunch more charities, or buy that miniature pony I’ve always wanted….

If I was looking to buy a house (which I’m not), we would likely be qualified for a mortgage payment that would equal 28% of our gross pay, around $2,300/month. If we took advantage of that loan, we’d be….ummm…. STUPID! That would work out to 57% of my take home pay. Wowzer, I hate the sound of that. Could we make it work? Probably, but at what cost? Retirement contributions, vacationing, and dining out would be a thing of the past.

Although I don’t preach a specific percentage of income that should go towards housing, I personally would start getting pretty uncomfortable once it started breaching 35% of my net pay. I like keeping my costs down, and housing is one of the easiest places to save (or spend) some mad coin.

Questions for all of my beautiful (and ugly) readers….

  1. Is housing your single largest expense?
  2. What percentage of your net income do you put towards your housing? (include everything but utilities)
  3. What’s the maximum percentage of your net pay you’d consider putting towards housing?
  4. After housing, what’s your next biggest income eater? (Ours is charity)

46 thoughts on “The biggest expense you have.”

  1. 1. Not since our daughter was born = 2 kids in full time day care
    2. For mortgage (P&I, prop taxes, and homeowners insurance) = 24% of take home
    3. 25% – when we bought our house they suggested less than 30% of gross, but i was shooting for 25% of net so i knew we could put something away for retirement.
    4. Day care/preschool – two kids in day care full time is about $300 higher than our mortgage. Day care = 27% of take home (net after taxes, 401k x2, insurance, etc)

    The real evaluation we make whenever day care prices go up each year is if my wife should still work. I estimated (at current rates) that she breaks even at about 3 kids (2.8). Luckily as kids age, they move into older rooms which require lower teacher ratios and give a price break. 2 months and we’ll see a $300 drop.

  2. I have dreamed of the day I would be among the first few comments. Dreams really do come true!

    Right now my rent is 35% of my income. I also live in arguably the most expensive city in North America / the world and am not exactly rolling in the dough. There was a study done last year that showed housing price in Vancouver would take up 98% of the average family’s yearly gross income.

    I think I would start freaking out if my rent was more than 40% of my net income. After that, my next biggest expense is groceries. Riveting stuff, my budget.

  3. 1. Yes
    2. Currently we are at 19% of net income. After the baby comes my wife will stay home and then we will be at 23.3% of my net income.
    3. Hard to say, I want enough wiggle room to pay extra on principal. My goal is to pay off the mortgage in less than 10 years (I am 28 fyi).
    4. For a while it was fertility treatments but now, the $833 dollars a month into our Roth IRAs is the second largest income eater. And I am OK with that!!!!

    Looking at those numbers, I need to ramp up the side business. (teaching guitar, etc…)

  4. I still live at home, and while I do have to pay rent it is pretty cheap when compared to others that live at home. However I do more then my share in the household responsibilities which is why my rent is so cheap. My biggest income eater is the money I am putting towards my debt. I’m trying to put at least $1,000 or more a month towards it.

  5. 1.) Housing is our single largest budgeted expense, however charitable gifts are our single largest actual expense.
    2.) We are currently at 20.4% of net.
    3.) We would consider going to 25%, but not much higher.
    4.) Our top 3 budgeted is Housing, Savings, Charity. Our top 3 actual are Charity, Housing, Savings.

    As a general rule we give away 20% of what we earn; we save 30%, and we live on the remaining 50%. It doesn’t work for everyone, but it works for us.

  6. 1. Housing is our single largest expense.
    2. This isn’t an easy question. 25% of our income goes towards rent/property tax/home insurance and I included utilities (I wouldn’t be paying utilities without a home!). So what about the amount we save for a home maintenance emergency fund per month? What about home furnishings? (Not that we buy a lot but it’s hard to draw a line-I’d count a couch but would I could bed sheets?)
    3. I have a 10 year pay off my mortgage plan: Every year I will be putting 20K-30K extra towards my mortgage.
    4. CAR!!!

    • Taking a look at the question I only included expenses and not savings. If you add in the amount of my household savings that we put towards house & #4 then my answers change.

      2. 46% (19% in extra payments)
      4. RRSPs at 23%. Car is at 8%.

      I dream about what I can do with that extra income once that mortgage is paid off!

  7. My rent is about 45% of my take-home income. I got a raise at work recently, so before that happened, it was more like 60%. I don’t have a particularly nice apartment in a particularly nice neighbourhood. Hooray for city living! It’s definitely my biggest expense, and I wouldn’t pay any more for it than I’m paying now. My hope is to keep increasing my income and leaving my rent at the same level, so I can eventually get it into the 30-35% range, which I feel would be reasonable.

    After housing, my next biggest line item is savings (about 30% of my take-home). After that, probably entertainment.

  8. 1) Housing is our largest expense
    2) 24.7% of our net income goes towards mortgage/condo fee/property taxes, BUT our condo fee includes ALL utilities (yep, and basic cable) but not land line, which we cancelled about 6 months ago. Hubby’s been offered a supervisor position at work; if he decides to take it (and he’s 99% sure he will), we estimate a lower percentage (probably in the low 20%).
    3) I’m comfortable with 25%, but any higher, we’d have to trim back on other stuff
    4) I would say our grocery bill and cars run 2nd and 3rd place.
    5) Wish we had room for a miniature pony… AND unicorn! 🙂

  9. With mortgage, prepayments of 1/12 of the mortgage each month to reduce principal, taxes, home insurance, flood insurance, utilities, and a “house fund” contribution for repairs/maintaince, our housing costs are the biggest, about 32-33%

    The second biggest is non-work investments – Roth IRA and non-retirement investments.

    Third is food and toiletries.

  10. Our mortgage is about 55% of my husband’s take home pay every month. But it was when we lived in a crappy apartment too. The less you make the more the essentials take up space in your budget. After that, our next biggest expense is food, no eating out. Food is 1/6th of our budget and I feed a family of 5 on whole grain, organic, home cooked food for $500 a month. My family of 5, including 2 with special needs, lives on half of what you and GN bring home. Consider yourself lucky.

  11. Mine is, uh, 41.5% of my monthly take home, which is obviously my biggest expense from my take home pay. I would maybe be comfortable with a little more if I weren’t renting. Yay DC housing prices….I’m not even the highest of all of my coworkers who live alone! After that, it is a little difficult to tell–my two “extra” paychecks go to my Roth each year, but aren’t included in my monthly numbers, so it is either that or my non-retirement savings.

    I usually look at my expense gross of taxes/work subtractions, which gives me Taxes, Rent, and Retirement as my top three this year (as of August). In 2010, it was Taxes, Student Loans, and Retirement–this “living alone” thing was new for this year, and definitely worth it in my opinion.

    • I hear ya about DC – 28% and we rent! It would be higher if we bought a house. I swear we’re gonna leave one day…

  12. Housing in the form of a mortgage payment which includes real estate taxes and insurance is our largest expense comprising 29.8% our take-home pay income. If we weren’t saving the maximum into our retirement accounts it would be a considerably lower percentage. We could comfortably afford it to be a bigger percentage, but I am actually considering downsizing. I wouldn’t want to go over 30% as I just don’t need that much house.

    Food and transportation are about a toss up at around 6% of our monthly take home.

  13. Currently we pay around 36% of our take home pay on our household expenses. This includes, mortgage, property taxes, HOA dues and insurance. If you add in utilities that jumps up to around 40%. I have to say the worst thing we did was buy this house as it is way out in the suburbs and we work downtown which increases our transportation costs considerably.

  14. Is housing your single largest expense?

    What percentage of your net income do you put towards your housing? (include everything but utilities)
    49% Ouch. When we purchased our home we made sure the payments were low enough that we could live off either one of our salaries if something happened. Well…my wife is full time in grad school and I refi’d our mortgage to a 15-year. That explains the high percentage.

    What’s the maximum percentage of your net pay you’d consider putting towards housing?
    We’re above where I want to be. When my wife graduates, she should pull in 3 to 5 times more than she did before school, and 2 to 3 times more than I do. Then I can no longer brag about bringing home the bacon. *sigh*

    After housing, what’s your next biggest income eater?
    Our next largest chunk of money goes to retirement, then groceries. Ninja, I feel you on the variable food costs man. That category still occasionally slaps me in the face.

  15. Housing is often one of the largest expenses, if not the largest. Mortgage lenders usually want to see that you’re paying no more than 28% of your gross towards your mortgage and up to 36% total debt. Personally I’m near the last 7-8 years of a 30-year mortgage and am paying about 4.5% of my gross, which is mostly principal at this point, but about 15.5% if I add in monthly maintenance fees to my co-op association, which is my largest expense and which won’t go away after I satisfy the mortgage. On the other hand the maintenance fees always give me a decent tax deduction, so I’d have to compute the gross, the monthly outlay, and the net after taxes to come up with a really accurate figure.

  16. Housing is definitely my largest expense, followed closely by transportation (that is, of course, if we’re not counting tuition as an expense). My rent is about 28% of my take home pay, but that’s cause I’m a student and make a pitiful amount of money 🙂 I’d probably keep it at 25% in the future, particularly when we buy.

  17. 1. No
    2. 19%
    3. The most I would feel comfortable with right now is 19% until we get out of debt. After we are out of debt around 22%
    4. Currently 26% of my net income is going to debt. I hope to see that 26% be added to savings and retirement in the future.

    • Correction to #4 – 34% including credit card debt, car payment and student loans. I am so focused on credit card debt that I sometimes forget about the car and student loans 🙁

  18. Just rent is 28% of my net income. If you add in utilities that comes to 32%. My next largest expense is for my car and auto insurance; that is 21%. I don’t think I could afford to live alone for any more, and the thought of a roommate makes me die a little bit inside. This just spurs me on to find a better job since my rent is not really that high.

  19. 1) Definitely yes.
    2) 32% – My rent is surprisingly reasonable, considering that I live in Vancouver, BC.
    3) 40% – This is only because I don’t have a car or debt, and have a healthy emergency fund.
    4) Retirement savings (until it was funded for the year) & now food. The prices of everything has gone up this past year.

  20. 1. No, house is paid off.
    2. Property taxes and insurance is about 2k/year.
    3. As little as possible. Big advocate of the 15 year or less mortgage also.
    4. Food is the biggest drain on our finances. I now know why gluttony is such a sin :/

  21. 1. Housing is definitely my largest expense.
    2. including HOA fees, PMI, Taxes and homeowners insurance, 50% of my regular take home goes to housing expenses. Although, thankfully I have a job with overtime.
    3. No more than what I am paying now.
    4. Food is my next biggest income eater. This includes groceries and eating out.

  22. Housing is largest. We’re examining buying a house, and to do so we’d put more to mortgage and less to savings. I logically know*that the equity is kinda like savings…but not at first when you’re paying only interest, but emotionally, less hard money in the bank is hard to stomach.

  23. 1. Yes, Housing is by far my largest expense.
    2. I put 48% of my net income toward housing 🙁
    3. I would not go any higher. Ever.
    4. My next biggest money eater is student loan payments.

    Also, that miniature pony drawing is hilarious.

    • Really surprised that more people don’t have student loan payments up there at the top of their expenses list. In 1.5 years, those are going to be our #1 expense. (We decided to stay in our student apartment for one extra year to try and pay off the debt as quickly as possible.

  24. 1. Housing is $425, since the BF and I split the rent, and it’s about 20% of my income.
    The next biggest chunk o’ money is $350, which I’m putting away to pay for necessities in the summer (when I don’t get paid). If you count that money (which will eventually go to rent), I spend about 25-30% of my income on housing.
    4. The next biggest chunk o’ money is debt payments, which is $300/month (I’m paying early, since I’m still in school; this isn’t a bill, but pre-emptive payments).

    The BF and I have talked about downgrading apartments, but in reality we get an awesome deal on our place and downgrading would only save about $50/month to move into a decent studio (we’re in a 1 bedroom now). With the money we’d spend moving it wouldn’t be worth it. The only way I’ll end up moving is if the BF has trouble finding work when he graduates/if he finds work in another city. But if I ended up paying for a studio for myself, I’d end up putting around $700 to housing (about 25-30% of my income) – and that’s without saving for summer living!

  25. Biggest would def. be housing which totals up to 30% of our take home **sad face**

    2nd income eater is, which I am very ashamed to admit to is food. We literally eat our money away each month.

  26. 41.5%. When I originally calculated it, it was way more than I thought it would be – but it gives me confidence that many of your readers have high %’s too. Living in SF, we are in the most affordable place we could be and still not be living in a shoebox. And the fiance went back to school, so it’s one income for now. Luckily we are renting, I’d be much more uncomfortable with that number if we owed a home, as then we’d be in deep trouble if I lost my job.
    My goal would be under 20% like you, and our next biggest expense is definitely food. I agree with “Rebecca” above who says that when your take home pay is smaller, the essentials start to take up a much larger percent.

  27. Our housing cost is 6% of take home (house is paid off, this is the condo maintenance). Our biggest outlay is savings (42% of take home), then our personal allowance (26.5% of take home). We don’t have a car payment, any loans, or credit card debt that we carry month to month (we charge everything and then pay it off).

  28. 1. Is housing your single largest expense? No, we own the house free and clear.

    2. What percentage of your net income do you put towards your housing? (include everything but utilities). A very small percentage since it is only insurance and property taxes

    3. What’s the maximum percentage of your net pay you’d consider putting towards housing? It would depend on the location. If i was in a low cost of living area I would say 30%, If it was high cost of living I would say 40%

    4. After housing, what’s your next biggest income eater? Retirement savings and other investments.

  29. Is housing your single largest expense? Yes.

    What percentage of your net income do you put towards your housing? (include everything but utilities) 24% (but we live downtown, close enough so we can both walk to work, so we save a ton of money that would normally go into a car).

    What’s the maximum percentage of your net pay you’d consider putting towards housing? Up to 30%, but only if it was going towards a mortgage vs. rent.

    After housing, what’s your next biggest income eater? Food (husband is a chef and he likes to eat well!)

  30. 1. Housing is my largest expense
    2. 23% of my monthly net income. (We recently refinanced to a 15 year mortgage)
    3. 25% is the max we would pay towards housing
    4. Our next biggest expense is our money taxable investing account. Even though this is going to make us money we count it as an expense because it is an outflow

  31. Housing is definitely the largest expense for most Americans. When looking to buy a house, you also have to think about the miscellaneous costs that are involved with it (furnishings, repairs, etc).

    Anyone that can have a 25-30% of their gross income going towards their housing is in pretty good shape. So if you’re in this ballpark, good job!

  32. Opps.

    The answer is no, housing is not the #1 expense out of our budget. Retirement funds to 401ks and IRAs take up a little bit more.

    I probably wouldnt exceed 20-25% of NET on a house, let alone gross. House poor is the last thing I would ever want to be.

  33. Housing is definitely my biggest expense, followed by either tuition (only because I don’t actually pay tuition) or food. It’s hard to tell because tuition isn’t a monthly expense. It’s hard to say what anything is as a percentage of my income, because my income isn’t enough to cover my expenses. I work full time during the summers when I’m not taking classes, and use the money I save up then to supplement my income the rest of the year.

    As for the maximum I’d be willing to put toward housing, I’m currently trying to figure out what my ideal budget will be when I graduate. My first attempt went up on my blog today, but I’ve already realized some issues with my cost estimates so there will be another iteration coming out once I’ve looked at my October spending.

  34. 1. My largest expense is actually my tithe. It’s 10% of my total pay, but 15% of my take-home pay.
    2. My rent already includes my utilities and it is 13% of my take-home pay. (I live in an area with a low cost of living.)
    3. I’d never want to go over 25%, but really, I’d hate to even get over 20%. I’ve really been spoiled having such low rent. I don’t want to give that up!
    4. After my tithe and housing, the next biggest monthly expense would probably be food. I go out to eat with my friends a lot, and that really adds up.

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