Do the old rules still apply?

[Aunt Bea]

This morning, I was going over my year to date expenses and started thinking about some of the old rules that I started out with and how they have changed in the years since I retired.

The big one was budgeting 25-28% of income for rent/housing expenses and limiting total housing/consumer debt to 33-36% of gross income.

Today, my rent/housing expense, without consumer debt, is approaching 50%.

Other outdated guidelines that I remember were limiting a house purchase to 2 1/2 times annual gross income and limiting automobiles to 6 months gross income.

Not complaining, just noticing the changes in my life and wondering what, if any, changes in the old guidelines others may have noticed.

 

[Tommy]

The big one was budgeting 25-28% of income for rent/housing expenses and limiting total housing/consumer debt to 33-36% of gross income.

If a person owns their home (i.e., no mortgage) then I was thinking that their only "housing expenses" would be taxes and insurance. But shouldn't that also include repair and upkeep? I guess when the roof needs to be replaced, the house exterior painted, or the heating system upgraded for instance, those costs should be included as part of "housing expenses" but I think they would be hard to estimate and prorate.

 

[C50]

There are so very many variables when it comes to those kind of financial rules that I'm not sure they were valid fifty years ago or today. Personally I've never budgeted according to any rules but my own, and that rule is live within my means.

 

[squatting dog]

^^^^^^^ Likewise.

 

[againstthegrain]

If a person owns their home (i.e., no mortgage) then I was thinking that their only "housing expenses" would be taxes and insurance. But shouldn't that also include repair and upkeep? I guess when the roof needs to be replaced, the house exterior painted, or the heating system upgraded for instance, those costs should be included as part of "housing expenses" but I think they would be hard to estimate and prorate.

Maintenance costs 3-5% of the home's value per year.

 

[Muskrat]

The farther we have gotten from the Great Depression the easier we seem to feel about debt. We no longer have poor houses…and people can easily declare bankruptcy..so fiscal responsibility is out the window in many cases.

 

[MACKTEXAS]

During our working years, my wife and I didn't follow prescribed budgets, but always lived below our means, and that's how we managed to save money.

We only bought 2 houses, and paid far less for both than the loan(s) we would have qualified for. But the costs of maintenance, taxes, insurance, equipment to mow the yard (or paying to have it mowed) and optional periodic updates, were far more than the mortgage(s).

Now I'm living alone. My mortgage payment is only $326 / month, but I just now checked to see what I averaged spending per month for this house last year, and it was $1100 / month. Had we bought a more expensive house, I could be forced to sell it in order to make savings last through the remaining years of retirement.

I have a very low principal balance. I have the money to pay it off, but it's a low interest rate, so I do not. The house has risen significantly in value since we bought it, but that will not personally benefit me in any way, since any gain will go to heirs when it's sold.

 

[gruntlabor]

Maintenance costs 3-5% of the home's value per year.

I will study this and apply.