How Much of Your Income Should REALLY Go Towards Housing

When it comes to housing, it can get tricky to determine exactly how much of your income you should spend. Because there are now more of us working remotely than ever before, a larger percentage of the younger population is choosing rent instead of buying. But no matter which option you choose, the same amount of your income should be going towards your housing expenses. But just how much should that be?

Percentage of Income on Housing

When you’re trying to determine how much of your income should go to housing, there are a few different variables at play. The easy answer is to only consider how much your take home pay is spend no more than 30% of that on housing.

Here is a quick example of what that would look like:

  • Your net pay is $3,500.00 per month
  • $3,500 * 30%
  • Your housing cost should be $1,050 or less per month

If you want to stick within your budget, then this is the amount you cannot exceed for housing monthly.

However, this is just the basic housing allowance, and not the overall cost of housing. When we dive into it a little bit deeper, we have to remember that there are a few other aspects to include in our number.

Things that should be included in your overall housing number, to stick within your budget, and also help keep you on the path to financial independence are:

  • Utilities – such as electricity, gas and water
  • Internet
  • Cable or Streaming Services, such as Hulu
  • Homeowner’s or Renter’s Insurance

Some people don’t include these items in their housing budget, but I do. This is because I want to keep my housing numbers as low as possible, while still accounting for everything needed to keep the house running.

If I can keep all of the associated housing costs, and my mortgage, under 30% of our income, then that is just more financial freedom for us. Keeping in line with this train of thought, I have found some good ways to reduce these other associated costs to help keep the budget on track.


If you choose to rent instead of own, then you may be lucky enough to have your utilities included in your rent. But, if they don’t include all of the utilities, then water is still usually included. This is because multiplexes have their water sub-metered.

If you choose to own, most electric companies are now offering ways to reduce your electric bill. More often than not, this is by placing a device on your meter that reduces the electricity used during high usage times. They also offer to do a free energy audit of your home so that you can see where you may be using, or losing, a lot of your electricity. This can make your home more energy efficient if you perform the fixes the electric company recommends.

In fact, I have noticed that a lot of them will offer cash incentives for certain energy saving work done to your home. So this might be a great thing to get done to your home to help save more money on utilities in the long run.

Internet & Cable

I have a feeling a lot of us have a similar perspective on our internet bill; it could be a whole lot lower! These days the few companies that offer internet are running really high prices, and that is because they have a corner on the market. But that doesn’t mean that we have to sit by and do nothing about it.

Internet providers usually offer deals for the first year if you switch. So I have done this a few times, because I have found that whoever I am using as my current provider won’t give me a deal, even for sticking with them. So, I switch to the competitor and usually get a good deal for a year.

Once that year is up, I ask for the same renewal rate. If they say they don’t have any deals that I “qualify” for, then I tell them I am going to cancel my service and switch to somebody else.

More often than not, they still won’t give me a better deal, so I leave them. And then I go back after a year. It may sound like a silly system, because it is, but it is one of the only ways I have found to save money on internet currently.

Cable is another service that seems to only have gotten more expensive lately. So we cut ours years ago and now only have streaming services instead. Streaming services, like Hulu and Netflix, cost a fraction of what cable does and you can watch it whenever you want to. I like this a lot better, since we don’t watch much television to begin with, and it is a cost that we are okay with paying because it only runs us about $12.00 per month.

Housing Insurance

Having housing insurance is a must, whether you rent or own. It is simply too risky to not have it. Plus, a lot of multiplexes won’t rent to you these days if you don’t have it. And if you have a mortgage on your primary residence, it is a requirement to get the loan.

Renter’s insurance usually costs a lot less than homeowner’s insurance. This is due to the fact that the renter’s insurance policy only needs to cover your physical property inside of the rental unit. Whereas, a homeowner’s policy covers the house, everything inside of it and the land.

A quick example of how much renter’s insurance generally costs vs. homeowner’s insurance is:

  • Renter’s insurance policy =  average of $16 per month
  • Homeowner’s insurance policy = average of $98 per month

Please keep in mind that this will be based upon what part of the country you live in, which type of housing you live in (A, B, C or D class) and how much personal property needs to be insured.

In our case, our homeowner’s insurance is a bit higher than normal because we have an in-ground pool, and that is considered an extra liability. But it is very worth it for us because we use it all summer long and it keeps the kids busy and active!

Overall Housing Costs

What you end up spending on housing will vary by state and situation. And since we all have different income, financial responsibilities, goals and budgets, these things will impact how much we actually spend on housing monthly.

While the 30% guideline is helpful, it may not work for everyone in every situation. We use it as a guideline to keep our budget in check. For us, we actually only spend 24% of our income on everything mentioned above for housing. Although, our current goal is to pay off the mortgage as quickly as possible to increase our level of financial freedom. Once we do that, our housing costs will be reduced to 8%, which I like a whole lot better!

Our current goal is to pay off the mortgage as quickly as possible to increase our level of financial freedom. Click To Tweet

Here is a top residual income idea for you to consider as well.

How much of your monthly income do you spend on housing? Have you found ways to reduce your housing rate?