If you do not budget correctly and buy more home than you can afford, you can become house poor. Meaning, you spend a majority of your total income on home costs like mortgages and repairs. While not the best situation to be in, it is sometimes temporary and there are steps you can take to lessen the impact on your finances and well-being.
Prioritize & Budget
In addition to buying more house than you can afford, you can also become house poor if your income drops and you have no disposable income. When you’re house poor, it’s very important that you budget and prioritize costs. Look at how much you are spending per month on house costs and everyday items—from essentials like food and nonessentials like entertainment—to how much you make.
After you have determined your income and monthly costs, comb through it and determine where you can make spending cuts and sacrifices. Perhaps you may have to pick up a second job and cut back on luxury items.
Keep Up on Repairs
It seems counterproductive, but keeping up with home repairs while house poor will prevent bigger problems in the future. For example, fixing that leaky sink will save you the trouble of coming home to find that your kitchen has flooded.
However, you must prioritize these repairs. If your home needs a cosmetic update, that’s not as important as maintenance that needs to be done sooner rather than later. Holding off on these types of updates to your home can save you a lot of money in the long run.
Sell Your Home
As a last resort, if you’re house poor and are not underwater, you can sell your home and find a home that you can afford. If you do choose to take this route, be sure to sell your home sooner rather than later. If your being house poor isn’t a temporary situation, then you don’t want to have to quickly sell your home and getting less for it than you normally would.
Avoid Becoming House Poor
To avoid becoming house poor in the future, always remember to shop within your budget and never buy a home if you believe you’ll be moving again in a few years. That way, you can have peace of mind knowing that you are financially secure and can afford to keep living in the home you love.