The Fragile Home

The long term rule of thumb (from The Great Depression forward) for how much you should spend on a home — mortgage, insurance, and taxes — is 25% or your income.

Unfortunately, inexpensive debt, bad advice, and the shrinking incomes we’ve seen since the 1970’s has changed that.   Today, over 50% of households with mortgages pay in excess of 25%!

Of course, that’s unsustainable.  Here’s why:

  • It makes it nearly impossible to save any money, or the home becomes the sole source of “savings.”  We already see this. 60% of Americans aged 55-65 don’t have any money saved for retirement.
  • It forces bad financial decisions.  With costs that high, there’s few options other than consumer debt to finance ongoing financial hiccups/needs.
  • A home like this makes you financially fragile.  The loss of a job (or part of a job) or an unexpected medical/legal expense can drive people into bankruptcy very quickly.

The upshot?  Owning a standard family home — a fragile home — makes attaining the American dream nearly impossible.  The solution?  Change the dream.

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