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FIRST-PERSON: More expense than money at the end of the month?

GAINESVILLE, Ga. (BP)–Caution: Buying a house at the upper limit of your financial capability could be hazardous to your economic health.

One of the most common financial problems occurs when the end of your money arrives before the end of the month. If a small bill is involved, the situation is an annoyance; but when the shortage involves something like a mortgage payment, the results can border on highly critical.

That’s why I usually suggest that a safe maximum expenditure for housing is about 33 to 40 percent of your net spendable income — that’s after tithing and taxes. However, too many people fail to take into account the fact that housing expenses are more than just mortgage payments.

Your housing budget should include all utilities, property taxes and insurance, and maintenance.

So, staying at the lower end of that 33 to 40 percent range will result in a far more workable budget for most families; in fact, the lower the better. Extreme financial problems can develop when a family purchases a house at the upper limits of its financial capability. Consider what a couple I’ll call John and Mary discovered when they failed to plan properly.

John and Mary had an annual net spendable income (remember, that means after tithing and taxes) of $32,000. They decided to designate 36 percent of that net spendable income — $11,520 — for housing. That came to $960 a month.

They felt good about their decision and began to look around. They found a 15-year-old house they really liked, were convinced that it was within their budget, and signed a contract to purchase the house.

The monthly mortgage payment was $805, and the escrow account for property taxes and insurance was $148 — a total of $953. John and Mary felt comfortable. In fact, they felt downright happy about the house, because they knew they were right at 36 percent of their net spendable income. So they bought the house.

However, shortly after they moved in, a heavy rain revealed several leaks in the ceilings of three rooms and the basement. When the weather cleared, they discovered that a new roof, downspouts and underground drainage system would be required. Because they used what little savings they had for a down payment, the repair costs forced John and Mary to borrow money, and they chose to take a second mortgage on the house.

Unexpectedly, they had an additional monthly payment of $210 on the second mortgage. That increased the housing portion of their budget from 36 percent to 44 percent of their net spendable income. What was to have been John and Mary’s dream home suddenly became their nightmare house of financial bondage.

What went wrong? Remember what I said earlier? The housing portion of a budget must include maintenance and utilities, and John and Mary didn’t figure those items into their housing budget when they purchased the house.

Financial problems can quickly arise when families buy homes they can’t afford. Even new homes may require maintenance and repairs, often sooner than expected, and money for taxes, insurance and utilities must be set aside.

The decision on whether to buy new or used or to rent is a very personal decision. But, whatever you decide, the decision should be based on real needs and financial ability, rather than on external pressures from family and friends or on unrealistic fantasies.

If you buy a used house, have the house checked by a licensed, bonded inspector. Even then be sure you do some research and get references on work they have done. When the inspection is complete, you should know whether extensive repairs or improvements would be needed before you buy or move in.

Of course, if repairs are needed, the best scenario probably would be for the present owner to have all of them completed before the sale. Or, the selling price could be adjusted down enough for you to be able to do the repairs later to your satisfaction. But you must be sure you have an accurate idea of what those repair costs will be. If that can’t happen, maybe the Lord has a different and better house for you.

As always, the best advice comes from Jesus: “Which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who observe it begin to ridicule him” (Luke 14:28-29).

Don’t neglect the Lord’s tower strategy in Luke 14. Calculate the cost first and be sure you can comfortably complete your dream.
Burkett is chairman of the board of Crown Financial Ministries, which merged last year with the ministry he founded in 1976, Christian Financial Concepts. A Southern Baptist layman based in Gainesville, Ga., Burkett is the host of the national “Money Matters” radio program and author of two resources published by LifeWay Christian Resources of the Southern Baptist Convention: “How Much Is Enough? 30 Days to Personal Revival” and “Jesus on Money.”

    About the Author

  • Larry Burkett