How to avoid the trap of becoming 'house poor'
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The journey to home ownership can be exciting, but personal finance columnist Christopher Liew warns about the trappings of becoming 'house poor' -- where an overwhelming portion of your income is devoured by housing costs. Liew offers some practical strategies to maintain better financial health while owning a home.
The journey to home ownership can be very exciting, especially with your realtor selling you dreams of the perfect home.
However, it’s important to avoid the trap of becoming house poor -- a situation where an overwhelming portion of your income is devoured by housing costs, leaving little for other aspects of life.
Below, I’ll explain some practical strategies to maintain better financial health while owning a home. With careful planning and smart decisions, your home will enhance your quality of life, not constrain it.
The next time that you drive through a nice neighbourhood to admire the homes, take a minute to consider how much the home owners are paying to live there:
Buying a home is often presented as a more affordable alternative to renting. If you were to compare monthly rent versus mortgage payments on the same property, the mortgage payments would almost certainly be smaller.
However, as the property owner, you’ll also have more financial obligations. You’ll bear full responsibility for maintenance, taxes, and repairs -- all of which you should account extra for in your monthly housing budget.
If you fail to do so, it’s easy to find yourself house poor, with a large portion of your monthly income going toward living expenses, and little left over for saving, investing, or doing other things you enjoy.
