5. How much money can I spend on a house?
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Let me give to you a rule of thumb used by most financial planners to give you an idea of an approximate amount that you can afford to spend on your house.
The average realtor will examine your annual salary and say that you can safely spend 30 to 35 percent of your annual income on a mortgage for your house. In some cases, it’s possible to go as high as 40 percent. But that’s pushing it.
The only problem is that your realtor has not factored in God. Getting our fields ready means that we take a closer look at how much we are really going to need.
Let me share with you some of the things to keep in mind from a biblical perspective when you are thinking about purchasing a house.
Most Christian financial planners work with a term called “Net Spendable Income.”
Take your gross income per month and subtract three things from it. God’s part, the government’s part, and savings... What is left we can define as our Net Spendable Income.
For simplicity’s sake, let’s illustrate and use 33 percent. Let’s say your gross income is $36,000 per year, or $3,000 per month.
God’s part =10 percent or $300. Leaving $2,700.
Government’s part = 20 percent or $600. Leaving $2,100.
Savings = $300. Leaving $1,800.
$1,800 x 33 percent = $600 per month to spend on housing if you make $36,000 per year.
Let’s not forget that many families struggle by with an income of $36,000 per year or less.
Now, let’s go to a higher figure and say that your gross income per year is $120,000, or $10,000 per month.
God’s part = 10 percent or $1,000. Leaving $9,000.
Government’s part = 30 percent or $3,000. Leaving $6,000.
Savings = 10 percent or $1,000. Leaving $5,000.
$5,000 x 33 percent = $1,650 per month to spend on housing if you make $120,000 per year.
Of course, we recognize that we may not have much of a house by following this rule. But by following this rule, we remain faithful to the principle of allocating resources rather than trying to pay for our desires. In this way, we have a financial plan that is designed by God for solid success.
If we go out and find the house we desire and then try to pay for it, we are going to fail. We have to allocate resources.
Is it alright to have a mortgage? The Bible teaches that it is alright to borrow money on an appreciating asset. It is not alright to go into debt for depreciating items like cars and refrigerators. A house can be a great asset and a marvelous investment. But remember, houses can go up and down in value.
There are many scenarios in today’s economy where renting a house is a much wiser decision than buying a house.
And we are not throwing our money away by renting.
We are getting value received when we rent. We are getting a place to live and we get the total flexibility to walk out of it clean at any time without a mortgage hanging around our necks. We are free of the worry of maintenance, insurance, and taxes.
And, we have gotten rid of the risk that the property will go down in value.
Biblical economics helps us to reach healthy financial goals.
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