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but I understand that, even with taxes, a house payment should be less than the rent you are paying now.
That's not true. If you're renting a one bedroom 400 square foot apartment and buy a 4 bedroom 2500 square foot house, you cannot possibly think your house payment would be less than your rent.
If you want to use that formula, then at least calculate the amount by square footage.
To the OP -- use your current expenses. Update them yearly.
It's old school, but because I do everything via auto-deduction instead of going into my accounts and generating a payment, I write all my fixed expenses down on a calendar on the dates they are taken from my checking account. My calendar becomes my current expenses list.
As I list the amounts in my check register (I am old school -- I still keep everything on paper, as I HATE quicken), I run a line through the amount on the calendar so I know I wrote it down in my checkbook. I run the line cross wise like one half an X, so I can still read the amounts.
I keep my calendars as part of my taxes (I write mileage down on them) so I have a few years worth....
Work with your current expenses, and adjust if they change.
Exactly.
I have two budget sheets. One that shows the bare minimum expenses. What we absolutely have to cover if there is a job loss (which we recently went through). I do not take into account anything like payments from unemployment. I also don't take into account the rental income we get from a building we own. I've planned emergency expenses as if we had to pay that out of pocket. After all that, I round up a tad.
That's not true. If you're renting a one bedroom 400 square foot apartment and buy a 4 bedroom 2500 square foot house, you cannot possibly think your house payment would be less than your rent.
If you want to use that formula, then at least calculate the amount by square footage.
To the OP -- use your current expenses. Update them yearly.
It's old school, but because I do everything via auto-deduction instead of going into my accounts and generating a payment, I write all my fixed expenses down on a calendar on the dates they are taken from my checking account. My calendar becomes my current expenses list.
As I list the amounts in my check register (I am old school -- I still keep everything on paper, as I HATE quicken), I run a line through the amount on the calendar so I know I wrote it down in my checkbook. I run the line cross wise like one half an X, so I can still read the amounts.
I keep my calendars as part of my taxes (I write mileage down on them) so I have a few years worth....
If your house payment is more than your rent, then you would be living beyond your means. Get a smaller house.
Or it could be that you were living significantly under your means while renting. It's quite possible to increase your housing costs while still .aintaining a reasonable debt ratio.
If your house payment is more than your rent, then you would be living beyond your means. Get a smaller house.
That only works if you are renting similar houses. Look at it this way... if you buy an orange, you can pay 25 cents for it. you can't expect to 25 cents for a four pound chuck roast, even though they are both food.
That only works if you are renting similar houses. Look at it this way... if you buy an orange, you can pay 25 cents for it. you can't expect to 25 cents for a four pound chuck roast, even though they are both food.
If you have $4 bucks to spend on dinner, it doesn't matter if you eat at Sardi's or McDonald's. You still have the same amount of money to work with.
You'll probably get more to eat at McDonald's though.
If you're spending $1000 on rent, then you have that much to spend on mortgage+taxes, and no more. You buy what you can afford to.
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