Published
September 23, 2024
Topic
Deep DivesSpending
Should he use the 30% rule, the 28% rule or something else?
In This Article
- Current Rules of Thumb
- Where Do These Rules Come From?
- These Rules Aren’t Really for Renters of Buyers—They’re for Landlords and Lenders
- Finding a Better Rule of Thumb
- Partial Housing Costs → True Housing Costs
- Gross Income → Net Income
- Costs in a Vacuum → Costs in a Pie
- What If Ahmed Needs to Spend More on 1/3 of Net Income on Housing?
- Setting Our Own Anchors
- Related Articles
Ahmed teaches math at a junior high school in Alberta. He earns $105,000/year or $8,750/month.
He’s married with one child, and his wife, Fatima, has taken time off from her career to stay at home with their newborn baby. At least for the time being, they will be a single-income family.
As their family grows, Ahmed and Fatima feel they need a larger space than the studio apartment, but they’re unsure how much they should spend on housing.
Like most of us would, Ahmed turns to the internet and searches, "How much should I spend on housing?"
After hours of sifting through conflicting advice, Ahmed is more confused than ever. The rules for renting or buying seem contradictory, leaving him unsure of the next step.