What Percentage of Your Income Should You Spend on Housing?

So I lied. My house budgeting kick isn’t quite over. I was ready to take a break and then I saw this cool graph on Kiplinger’s Tumblr called “How to Divvy Up Your Paycheck.” In short, it’s a guideline to an “ideal budget.”

I love these kinds of charts because I really enjoy dissecting our budget. I then use our figures to determine whether we fall into the safer standards that experts suggest. While Kiplinger’s post talks about total budget, I just want to focus on the housing figures to keep within the theme of this week. (I will definitely talk about an entire budget later on.)

Kiplinger’s chart (based average expenditures tracked by the Bureau of Labor and Statistics) suggests spending up to 35% of your net income (after tax) on housing. Their housing category includes mortgage or rent, utilities, and insurance.

As you can imagine, differing opinions exist. Here are some others:

CNN: 30% of your gross income on housing and debt. Housing for them just includes the mortgage.

CBS Money Watch: 30% of your net income on housing, including rent and your utilities.

US News and World Report: No more than 30% of your budget on housing, but ideally 25%. (The article doesn’t mention a tax portion to your budget, so I assume they equate “budget” with the total net income.) They also offer an more detailed breakdown of your housing budget if you include everything:  58% on your mortgage, 21% on utilities, 9.2% on household furnishings and equipment, 6.8% on household operations (maid or lawn service), and 3.6% on household supplies. They don’t say what to do with the last 1.4%, so let’s assume that falls under miscellaneous.

Nerd Wallet Finance: 25% of your net income to rent or mortgage payments.  Not sure how much would be safe to spend on utilities in this case.

The Nest: Mortgage or rent should be no more than 20-25% of your income (it doesn’t specify gross or net) and total housing should be no more than 30-40% of your income.

So no real consensus. You see the percentages range from 20-40% of your income. But each source varies on whether they are talking about net or gross income. And they also differ on whether to include expenses beyond your mortgage or rent, like utilities, association dues, and home repairs.

In my opinion, you should budget based on your net income since that’s what you have to work with. You should also include all expenses related to housing (insurance, taxes, utilities, household supplies, household services, etc.).  If you take into account your net income and total housing, using 25% to 35% of that income on housing seems reasonable.

As always, that percentage may be more or less depending on your specific situation. For example, if you have a lot of debt to pay, you want to be on the lower end of that spectrum. Or if you live in an expensive area, you may spend on the higher end.

I hope these figures inspire you to open up your budget this weekend and take some time to make sure your housing is in line.