You may not have heard of the term “house poor”, but you probably know what it means. The family that owns a three-bedroom house but can’t afford to pay their credit card bill. There’s a difference between being poor and being “house poor”, and it’s possible to avoid with a little patience.
Picture: Stan Houseman/Flickr
As personal finance blog Canadian Budget Binder explains, being “house poor” is something that happens over time. When you’re living month to month, not because you don’t have a better option, but because you choose a lifestyle that’s more expensive than the one you can actually afford. The solution to avoid this is dead simple: employ a little patience.
Becoming house poor doesn’t happen overnight, rather it happens month over month after moving into your home or when situations arise that you are unable to cope with financially.
The seller told me that a couple of their friends bought big houses after graduating because they thought they would try to get ahead of everyone else.
Many friends in his circle graduated finding work right away and the money was good so they played the role of “look at how good I’m doing” which they didn’t want to do.
Lifestyle inflation is a hard thing to avoid, but it’s key to financial health. While it may be hard to live in a smaller house than you really want while you save up, patience can keep you financially solvent while you work towards your dream.
Young adult teaches us about being house poor in 15 minutes [Canadian Budget Binder via Rockstar Finance]
Comments
8 responses to “Avoid Being ‘House Poor’ By Learning To Be Patient”
So in other words asset rich, cash poor.
No, just poor. You’re not asset rich when your assets are owned buy the bank.
Well no. Asset rich, cash poor simply means you own valuable assets but have no disposable income or at least a very small income.
Retirees tend to be in that situation. You may own a lot of property but houses aren’t accepted as payment at Coles.
This is where reverse mortgages come into play where the bank gives you money in exchange for the house you already own outright.
When you die the bank gets your house or their share of what’s thiers and the rest going to your estate.
As the old saying goes, dont bite off more than you can chew. I dont understand why people are hell bent on impressing others with their show of wealth. Keeping life simple and saving money for holidays and experiences is a better aim to have than a new 4K TV and PS4 or large house with an expensive car that you can barely afford to pay off.
Perhaps it’s my own eccentricities, but I’m always rather amused by this concept that placing funds into what is essentially a once off experience is a much more financially sensible thing to do than purchasing something that continues to bring continued leisure.
Particularly given that I’ll go off on a trip at a whim but will spend hours agonising whether I should update my PC/mobile phone/miscellaneous tech item. The only explanation I’ve found so far is that a trip seems to come with much less buyer’s remorse
This describes my parents exactly. Everything is about keeping up the appearance of being rich, but behind the scenes they’re totally cash strapped. It’s even more concerning that they’re nearing retirement age and pretty much have no financial plan for what to do.
them feels… my parents are in the exact same boat and I’m scared of what is going to happen to them… other than my supporting them.
But that’s what kids are for, aren’t they?
God knows I’m going to enjoy my money and then mooch off my kids when I retire. Win win situation for me, not so much for them. I’ll even make sure they have shitty diapers to change on a regular basis.