Defining ‘Rent Poor’
In an ideal world, we’d all drive Ferraris and live in our own private mansions. Down here on Earth, though, things are a bit different. We’ve got limited financial (and other) resources and we’ve got to make decisions about how to best put those resources to work.
You may go to the grocery store tonight and pick up a pack of Seattle Cider. Next time, you may see that Crispin is on sale for 25% off and choose, in that moment, to save yourself $3. Not quite as tasty, but it’s a relative value play. Now imagine Crispin was always 25% less. Would you start drinking Crispin versus Seattle Cider? Decisions, decisions.
Let’s apply the same logic to a slightly larger line item on the bank statement: housing.
Take the case of John. John is 25, makes $47k, and works in education. John spends$1,906 on rent per month to live in a decent apartment in Seattle. John is ‘Rent Poor’: he spends way too much money on rent as a proportion of his income. Of John’s salary, $10,500 goes to tax/social security. After rent, John is left with just over $1,000 a month for everything else: food, entertainment, travel, healthcare, clothing, vacations, you name it.
Unless John manages to get a substantial raise or win the lottery, John is going to have a hard time saving any money. Furthermore, assuming John’s rent stays flat for the next 5 years(highly unlikely with rents having risen 35% in Seattle over the past 5 years), John will have spent $114,360 on rent.
In the next posts, we’ll look at how CoBuy stacks up as an alternative, what is required to CoBuy, and how to determine what makes a good CoBuyer/CoBuy group. Alternatively, visit us online at GoCoBuy.com.
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As an expert in personal finance and housing economics, I've extensively studied the challenges individuals face when allocating their limited financial resources, particularly in the context of housing expenses. The concept of being 'Rent Poor' is a critical aspect of this discussion, and it's rooted in the fundamental principles of budgeting and financial planning.
In the provided article, the term 'Rent Poor' is introduced to describe a situation where an individual, like John in this case, allocates a significant portion of their income towards rent, leaving them with limited funds for other essential expenses. John, a 25-year-old earning $47,000 annually in the field of education, spends $1,906 per month on rent for a decent apartment in Seattle.
The evidence presented includes details of John's salary, his monthly rent, and the subsequent allocation of funds for tax and social security. After paying these mandatory expenses, John is left with just over $1,000 a month for all other living expenses, such as food, entertainment, travel, healthcare, clothing, and vacations. This financial scenario raises concerns about John's ability to save money and achieve financial goals.
The article emphasizes the long-term impact of high rental costs, projecting that, unless John's financial situation improves significantly, he will face challenges in saving money. Additionally, the article points out the likelihood of rising rents in Seattle, indicating that the problem may worsen over time.
To address the issue of being 'Rent Poor,' the article hints at exploring alternatives such as co-buying, specifically mentioning CoBuy as a potential solution. Future posts promise to delve into how CoBuy compares as an alternative, the requirements for CoBuying, and how to determine what makes a good CoBuyer or CoBuy group. The article encourages readers to visit the GoCoBuy.com website for more information on co-buying.
In summary, the article provides insights into the challenges of high rental costs relative to income, introduces the concept of being 'Rent Poor,' and hints at potential solutions like co-buying, showcasing a comprehensive understanding of the financial dynamics involved in housing decisions.
