Being house poor is a financial burden faced by a significant number of individuals, especially millennials and younger generations. This term refers to when a person spends more than 30% of their income on housing-related expenses, including rent or mortgage payments, utilities, and maintenance costs. Here’s a look at how the prevalence of house poverty in the United States affects the lives of millions of Americans and what steps you can follow if you’re looking to take some financial control back for yourself.
House poverty
The issue of being house poor has become increasingly common, with more than 25% of Americans falling into this category. That means around 75 million Americans are living through this phenomenon. This financial burden is particularly prevalent in major cities such as Miami, New York, Los Angeles, and Honolulu, where the cost of living is exorbitant. In these urban centers, it has become nearly impossible to avoid being house poor due to soaring housing prices and limited affordable housing options.
For instance, New York City stands out as a prime example, with just under half of its population classified as house poor. However, one silver lining is that New Yorkers can forgo the expenses of owning a car, providing some relief in an otherwise challenging financial landscape. Still, that doesn’t make up for the drop in quality of life that millions of Americans experience throughout the country. It’s estimated over 40% of Americans are skipping meals to make ends meet.
Additional costs to daily life
In addition to housing costs, the burden of car payments and insurance adds to the financial strain Americans face, further limiting their ability to afford other necessities and enjoy a comfortable lifestyle. The average monthly cost of a new car payment plus insurance can easily surpass $900, placing an enormous strain on household budgets.
When we consider the average take-home pay per person hovering around $3,000 per month, it becomes evident that the financial math does not align. These escalating expenses make it increasingly challenging for individuals to build savings, invest in their future, or even meet their basic needs without sacrificing other areas of their lives.
Mitigating the issue
While the burden of being house poor and facing high car expenses may seem overwhelming, there are steps individuals can take to alleviate their financial strain and work towards a more sustainable future.
Creating a comprehensive budget that outlines income, expenses, and savings goals can provide a clear overview of one’s financial situation. This enables individuals to identify areas where expenses can be reduced or optimized.
Another option cash-strapped Americans could consider is downsizing; moving to a smaller, more affordable home or apartment. While this may involve sacrifices in terms of space, it can significantly reduce housing expenses and free up funds for other priorities. Of course, this is easier said than done since moving costs and security deposits could be more than the average American has saved up or is able to spend.
In a trend that younger generations like Gen Z and millennials are more than familiar with, extra income from part-time jobs, freelancing, or side hustles can help mitigate the financial strain that millions are experiencing. This extra income can be directed toward paying off debts, building an emergency fund, or achieving financial goals.
Finally, Americans can educate themselves on financial literacy. Investing time and effort in learning about personal finance, budgeting, and investing can empower individuals to make informed decisions and better manage their financial resources.
