There is a very common term used in the financial world called house poor. The exact meaning of the term can be found at the link below but in layman’s terms … it means you’re living a life style beyond what your earnings can pay for. While we say house poor, it can also be car poor, utility poor or lifestyle poor. A combination of more than one of these and you have some issues for sure.
https://www.investopedia.com/terms/h/housepoor.asp
So the question is how do we end up there? Not many people are going to intentionally put themselves in debt to such an extent that they cant get by. The most common way is our ego gets in the way. You see a friend with a nice new car so we have to have one. Or another friend who moves into a new home in a new subdivision. Other friends who travel a lot or who have lots of adult toys like boats and 4 wheelers. We feel the need to keep up to them and dont want to admit we cant afford the luxury items.
So what do we do about it? One sure fire way to make sure we dont overextend ourselves financially is to use a “debt to income ratio calculator” Just a fancy term for a way to see if we can afford to buy certain things. There are several options to use for this but one I like is shown below. Its a simple process to use. Enter in your earnings. Be honest when listing your debts. Hit the calculate button. It will literally tell you if you can afford something else on top of your current debt load. Again, if you lie to the calculator it will lie to you lol. If you wanted a loan with a bank, anything over a 40% ratio and you will be out of luck.
But the best way to make sure you dont end up overextended is to be smart when making big purchases. Consider your current earnings. Do you currently have money left over from pay cheque to pay cheque? If you dont how can you afford more debt? If you have 500$ left over between you pay periods can you afford a new big payment? Financial problems can place massive pressures on your life including your relationship.
https://www.hermoney.com/connect/love/4188-how-to-handle-financial-challenges-in-relationships/
We would all like to think fiscal responsibility is a done deal but the reality it is its hard work and commitment to keep our head above water. Planning, self control and diligence when making purchases will keep you on the right path and reduce one of life’s great stresses.
If you were wondering how big an issue this is check out how many memes are available. In this case I had no trouble finding all kinds of options to use in this post. While the reason for them is not funny it does indicate just how much trouble we are in. Just be aware, if you find yourself in this situation, you are not alone. In Canada, for every 1$ we make we owe 1.70$. How crazy is that as a country? And its reported to be worse in the USA.
So, if you find yourself in trouble but can’t seem to get out of it google this.”How to get out of financial troubles”. This will send you to a spot with multiple links to help you out. And if it doesn’t work modify the wording to better suit your needs.
