How To Not Ruin Your Life With Fixed Expenses

Or, at least your mortgage:

When people end up in financial trouble, you often hear tsk-tsking about premium cable and fancy vacations. But if you talk to bankruptcy lawyers and financial counselors, that isn’t the normal story you hear. You’re more likely to hear about car loans, mortgages, alimony. In other words, it’s not the luxury splurges that do you in — it’s the fixed expenses. That’s because discretionary luxury expenses can be cut in an emergency, while the fixed payments go on and on until they empty your bank account.

Megan McArdle writes about buying a house for BloombergView, aptly titled, “Finding a House That Won’t Destroy You” (omg). She cites good ol’ Dave Ramsey’s recommendation of spending no more than 25% of your take-home pay on your monthly mortgage bill, but explains how she and her husband decided to go even lower:

…before we bought a house, my husband and I asked ourselves what would happen if we both lost our jobs. Obviously, we’d have to get new ones. But what if the new ones didn’t pay as much? What if they paid only half as much? How much mortgage would we be able to afford?

The answer worked out to about 20 percent of our take-home pay.

I daydream about owning a house all the time — these daydreams revolve mostly around washers, dryers, and not hearing my landlord in the hallway — but yes, the idea of such a big fixed monthly expense scares me. Also staying in one place forever, ahhhhh.

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