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Navigate the most significant expense to increase your financial freedom
If you earn $100,000 a year in gross income, your car should only cost $10,000.
If you earn $50,000 a year in gross income, your car should only cost $5,000.
If you earn $25,000 a year in gross income, your car should only cost $2,500.
His advice might seem insane to most since 85% of Americans hold car notes, and many of these cars they buy cost around half their gross income.
But the advice is sound.
If you follow this advice, you will decrease your financial stress and anxiety by a long shot. You will also:
Mitigate your debt load.
Mitigate the impact on your net worth.
Be able to invest and save more income to create more assets.
Be less concerned about maintenance repairs that cost too much because the car will be within your means.
What If You Applied The 10% Rule To Housing?
Few people apply Financial Samarai’s advice to the car buying process.
So few will apply the same logic to housing costs, but it’s worth a shot of consideration.
Housing costs usually account for 30% or more of people’s gross income, and it is also the most significant expense for most people, which means most people’s money goes here.
But imagine if only 10%(or less) of your income went to housing.
That would leave 90% of your income to everything else, which would increase your financial liberation significantly.
How To Make Housing 10% Of Your Gross Income
If you currently have housing costs that equate to more than ten percent of your income, here are some strategies to decrease the cost:
Move out of your home and downsize to a place that costs less.
Rent out rooms to friends and family to offset your costs.
Sell your home and live out of a van or RV.
Use your place as an Air BNB.
Increase your income.
Live with roommates.
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These are some key strategies to lower your housing costs.
It’s not always the most convenient, but it can significantly boost your financial opportunities in the short term. You might even consider applying these strategies in the long term to boost your financial stance aggressively.
The biggest financial wins come from learning how to decrease your expenses.
You’re winning if you can decrease one of the largest expenses most people pay: housing.
Exercise
What is 10% of your net annual income?
What is 10% of your gross annual income?
How much of your net income is spent on housing?
How much of your gross annual income is spent on housing?
Challenge
Aim to decrease your housing costs to 10% of your annual income.
Aim to decrease your housing costs to 10% of your net annual income.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.