Real Estate and Mortgage

Young adult teaches us about being house poor in 15 minutes

Young Adult Teaches Us About Being House Poor In 15 minutes


Being house poor doesn’t necessarily mean that you simply have no money but it can mean that you have too much house you can’t afford.

House poor can also mean you have too much stuff, no money and/or piles of consumer debt that you are struggling financially to make ends meet.

The term “poor” means so many things to everyone that the only way to describe it from a financial perspective would be lack of money.

Some people may not consider themselves poor until starvation kicks in and they have to go to the food bank or when they reach the point of bankruptcy.

Others may take on a different view but no matter what poor means to you it’s not a place that people “dream” of.

House poor is not easy living

You might consider yourself house poor when you can’t pay your mortgage which could be for a variety of reasons.

There are also plenty of poor people living in the ritzy part of town who are struggling to take control of their financial situation.

I think there are many misconceptions of the word poor and the only person who can really define it is yourself.

There are also people enjoying what they have in affordable housing because they know how to manage their money.

Just because you have a low-income doesn’t mean you don’t know how to budget your cash.

So, you see being poor really does take on many situations but one thing is for sure that being poor does revolve around money.

Our 15 minute life lesson on being house poor

While searching Kijiji the other day I found a stereo that the wife and I both agreed was a great deal especially since we don’t normally purchase electronics second-hand.

The regular cost of the stereo ran about $249 plus tax back 3 years ago when it was new. The speakers are loud enough for chilling out on our deck or for when company comes around.

When we arrived we went to a townhouse in an area of town that would be considered low-income housing.

Some people might automatically assume that everyone who lives in such townhouse complexes are on welfare or are only there because they can’t manage their money but that’s just not always the case.

Even so, it doesn’t really matter, what matters is financial awareness and here’s why.

The young guy (we’ll call the “seller”) who answered the door invited us in but instructed us to take our shoes off first.

Well, of course we would as we’d never step foot into someone’s house with our shoes on.

The townhouse was pristine inside, even the walls. When the seller spoke you knew that this guy wanted everything to be neat, tidy and in its place. I can relate to that since my wife is the same way.

I won’t drop the bomb on my wife because I’m just as organized and our house stays fairly clean on a daily basis.

The seller pulls out the stereo all wrapped up in a box for us and we both looked at each other with that “wow” look on our face.

How many times do you go to buy something used and the owner of the item has taken such good care of it that it’s still in its original packaging?

I know, we knew that this guy took very good care of the item.

We paid $20 for an item that should have cost us hundreds more and it looks like we bought it brand new. We tested the stereo out and there was nothing wrong with it.

This is when I asked him if he was moving. Judging by the ring on his finger and the wedding photos all over the walls it was safe to assume he was married. (I should really never assume but I did in this case)

Rushing for no reason

I agree there has to be some form of motivation to get what we want in life but rushing to do so leaving a trail of debt behind you is not the smartest of plans.

The seller told me that they had just bought a new house in a newly developed side of the city and that they had rented this townhouse for 10 years to save up because the rent was very low.

He said it was a complex you needed to get accepted into but since they were students they qualified as they had limited income.

They both went to University and when they graduated back ten years ago OSAP loans loomed over them.

They managed to save up enough to get married and pay back their student loans but they didn’t want to leave the townhouse complex because the rent was reasonable and it was close to work.

This enabled them to save more money for a down payment on their first home.

Intrigued that such a young couple would be thinking about finances the way they were I continued to chat to him about money and he was more than happy to chat to me.

I asked him why it took him so long to save up for the mortgage down payment (I know I’m nosey) but that’s how I learn about what people do and don’t do financially.

He didn’t have to answer me and I would have been fine with that.

He simply replied, “We started budgeting and wanted to have emergency savings and the ability to buy on one income and save enough so our weekly mortgage payments were attainable even if something were to happen.

The main reason they waited so long was because they didn’t want to be house poor like other graduates he knew.

You could imagine me wanting to shake his hand and say, wow I wish more people would think about doing what you both did before jumping in and becoming homeowners.

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.

Bravo, I thought!

Maybe finance isn’t dead among the millennial generation as much as we thought it was.

The most important lesson we can teach our children is how to manage money. Without these valuable lessons they might find themselves rushing in and wanting that white picket fence far ahead of when they should be getting it.

House poor is not a fun place to be especially if the only reason you are there is to prove a point to everyone else about how successful you think you are.

Success is not defined just by money, it’s about living the life you want to live without stress, being happy with what you have and without worrying about what other people think of you.

If that means you are poor and successful then so be it but being poor and having boatloads of debt can take on two different roles in the financial world.

I’m sure many people who consider themselves poor would be happy to live life without having creditors calling day in and day out.

There are plenty of poor people out there so think twice before putting yourself in a situation where you may become house poor or spending money that you don’t have.

So, in 15 minutes this is what we learned from the seller…

  • We learned that renting to save for a down payment worked for them.
  • Low-income housing is what it is… judging those means you fail to look at your own situation.
  • Some people rush to get ahead and that there’s no shame in not having everything you ever desired in a flash.
  • Budgeting is important

After all in order to get stuff that we want in life we need to work hard and save the cash to be able to do it but for many especially those who work for minimum wage or part-time it’s not that easy.

Some of the happiest workers I’ve met are those who earn minimum wage and sometimes it makes me wonder if we put too much emphasis on money and not on happiness.

Not all fun revolves around stuff and money though because if you don’t have the means to get ahead the way you want being grateful for what you have is most important.

Working Poor

These may be the people that work very hard but every penny they have goes to paying the bills.

There is either nothing left or not much left to buy the things they want but if they save a little at a time they may be able to meet savings goals.

You may find that incomes of the working poor fall below the poverty line as well. Just because some people work minimum wage jobs doesn’t mean they don’t hold degrees either.

I know a few people who can’t find work and have a degree, heck I was one when I moved to Canada.

I had to take myself back to school just gone 30 years old while people my age were buying houses and starting a family.

I started from the ground up and it’s no fun but I had to do what I had to do in order to get the career I wanted.

That wasn’t even promised to me either and it was pretty scary for me.

The seller said he had to work earning minimum wage until he could find something in his field. For some, it never happens and for others they might have their dream job and lose it.

Job loss is important to think about when buying a home.

It’s a tough world out there but someone will always have to clean bathrooms and flip burgers even though some do enjoy what they do. Just because you don’t own a home doesn’t make you poor.

What makes you poor is what you do with your money and how you view what makes you happy.

Life is what you make it

What really makes someone house poor?

It really is a mish-mash of things and only you can narrow down where you might have went wrong and what you could do to pull yourself out.

If you find that being house poor is simply too much then downsizing by selling stuff at a garage sale or online might generate some extra income to help you get a foot out of the sand.

Ultimately selling your current home before you lose it to the bank and buying a smaller house or renting until you can save again for a down payment on a more realistic type of mortgage might work out better for you.

Just because you rent doesn’t mean you aren’t living your dream.

Talk to the professionals first and don’t wait until it’s too late either. The only shame you should carry is that if you do nothing at all.

Reasons why you might be house poor

The only thing you can do is be prepared to buy a house by considering everything that could go wrong and make sure you are able financially sustain it.

If you cannot then perhaps waiting a bit and increasing your savings and earning power is a smart financial move.

Lost your job

Getting the pink slip at work can be a huge financial blow to an employee especially if there are many years of service behind them.

It’s also difficult when job loss in Canada happens at the wrong time such as after buying a new home, newly married or with a baby on the way.

If you want to make sure that you are covering all of your bases don’t buy more than you can afford.

Being able to keep the house running on one income if you or your partner loses their jobs is a blessing, trust me.

Health Issues

Do you ever think about the “What if’s”? You should because at any point your health could take a nose dive or you may even get injured at work and if you have no cash to back you while you are off work you might find you are house poor.

Don’t leave zero room for movement with your finances when buying a home because you can’t squeeze money out if you don’t have any.

Maternity leave and kids

Some couples don’t think ahead when they buy their first home. They fail to picture the possibility of starting a family and the costs involved.

Starting a baby budget is a great way to tie in your regular budget just to see how much having kids might run you but it’s safe to think about this BEFORE signing on the dotted line.

Another financial aspect many turn a blind eye to is maternity/paternity leave which only pays you a portion of your income. Are you able to sustain your current living with a lowered income? If not then you might find yourself house poor.

No emergency savings

I don’t know how many people jump into buying a home without any emergency savings nor do they think of the upkeep of a house.

Having your house fall apart is not only a very bad financial move as it brings down the value of your home and maybe those in your neighbourhood.

No one wants to move into a neighbourhood with houses that are not being taken care of.

If you aren’t prepared for emergencies before you buy your home it will be much tougher to save up especially if you have other debts you are bringing along with you.

We also opened a line of credit just in case we lost our jobs but keep in mind the interest rates were crazy high.

We’ve never used it but it was for peace of mind the banks said.

I don’t know about that but it might just get you over the hump until you can sell your house and move into something smaller.

Too big of a house or mortgage

How do you buy a house? Well, if you listen to what the bank and some real estate agents might tell you than you might just buy more than your finances can handle.

Buying a house at the top of your price range is far too risky for anyone to take on.

If you don’t have a solid emergency savings or the discipline to make sure that you pay your mortgage payment each time no matter what the circumstances are then you might be digging a hole.

Remember that nothing is certain in life and just because someone says you can have something doesn’t mean you should get it.

Do the math yourself and pat yourself on the back when you look back and thank yourself for not getting in over your head.

Besides if you don’t have kids you really don’t need a mansion of a home and if you do have kids you still don’t need a mansion of a home.

If you buy a large home to show off…have fun paying those bills that I wouldn’t be happy to show off. You can keep them!

Too much debt

When buying a new house you might move in with very little furniture if any and some suitcases and boxes from University or College.

Buying furniture, decor and all the start-up things you need for a house can blow your finances out of the water.

Looking for second-hand items might be wise or saving up to buy quality items one by one rather than putting them on credit, thus creating debt.

Any time you put payment plans into place you’ve started the vicious circle of minimum payments, no-payments for a year, two years, interest free but it all might come back to haunt you.

Not budgeting

I’m not here to push budgets on anyone, in fact some of my personal finance friends don’t even use a budget rather they track their finances without using one.

The key here is that they are tracking their finances.

Related: The AtoZ Budgeting Guide

If you think you can store it all up in your head and become successful well then you have another thing coming.

If you work for a company think about how that company would run if you weren’t in your role.

Let’s say you are an accountant to explore a comparable situation.

Would the company survive without you? Think twice about your finances and use a budget because it doesn’t get any easier to know where your money is going.

Talking to random people about finance is always something I enjoy doing even if they don’t offer up any juicy information.

I like to build on what I learn from people so I too gain valuable knowledge about what’s happening in the financial world.

Relying on people to take care of us whether it’s financially or any other aspect of life is not something I’d put on my plate unless I was forced to for reasons beyond my control.

In the meantime, take control for yourself because no one will be there to catch you in the end but the people looking for money you owe them.

Are you house poor? Find out by using the The Real Life Ratio Calculator over at The Globe and Mail Canada.


What reasons do you think people become house poor?

What tips could you offer to others?

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