How to set a housing budget?

When setting a housing budget, Brad Barrett suggests following a few guidelines and principles to manage your finances effectively:

1. 25% Rule:

   • Aim to spend no more than 25% of your take-home pay on rent or mortgage payments. This helps ensure you aren't "house poor," meaning you won't have the majority of your income tied up in housing costs, leaving room for savings and other expenses 1.

2. Pseudo Budget:

   • Create a simple budget that factors in all potential expenses such as utilities, groceries, health costs, and transportation. This helps you account for life’s unpredictabilities and ensures you aren't caught off guard by unexpected bills. Use 25% of your income as a rough guideline for housing expenses to understand how much you can afford 2.

3. Living on Last Month’s Income:

   • It’s wise to live on the previous month’s paycheck rather than the current one. This strategy allows you to have a buffer and reduces financial stress. If you can maintain a buffer in your checking account equivalent to 1-2 months of living expenses, it simplifies management and ensures you aren’t worried about timing issues with bills 3.
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       1

       Smart Spending Strategies

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       2

       Housing Budget Insights

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       3

       Financial Simplicity

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