Real Estate and Mortgage

Young adult teaches us about being house poor in 15 minutes

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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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  1. Hi Mr. CBB. I just came across your site. This is a great article that addresses the real issues of biting off more than you can chew when it comes to home ownership. I’m in the Toronto area, and when it comes to home buyer, the only way to describe it is “irrational exuberance”. to quote Alan Greenspan. I’m in the inspection industry and I see how crazy people can get when it comes to buying houses, and taking on so much debt. This problem is exacerbated by agents who egg on their client to buy bigger and more expensive, just because the interest rates are so low. Often many of these people don’t think about how they will deal with those major and minor home repairs and expenses down the road.

  2. I’m not sure if we are house poor or working poor, or both! My husband and I bought the “best” house on the market at the time that was well within our budget. We had the home inspected and of course everything important was missed. Being first time home buyers, we had little building and construction knowledge. We know better now! Our roof structure was compromised, foundation was not sound, extensive termite damage, leaking roof, hidden rot, terribly old electrical, and a messy plumbing job in our under height basement. To tackle the foundation and termite damage we lifted the house, a major expense which we would never recoup in our repairs. To attempt to recoup our losses we built an addition and lifted the house so we could have a full height basement. The renovation bills have mounted beyond expected (most of the problems I listed weren’t known until it was exposed ie. foundation problems, and roof structure and electrical problems buried in insulation. We have a 2nd mortgage with plans to dump the debt into our increased equity. Risky yes, but the only way to get ahead of this problem as the house was almost worthless before fixing. I’m pregnant and we were expecting this project to be completed about four or five months ago, but this build has quadrupled in size since we started (originally lift house and fix rotting/termite damaged structure), so now I can’t go back to work for a few months (almost due). We are watching every penny, but the bills are getting unmanageable. We have always been very budget and thrifty type people so this stage is going to be short lived I’m sure, if only we survive!

  3. Hello Mr. CBB,

    I definitely am not house poor. I sold the previous place (which was a three-bedroom, two-bathroom house, about 2300 square feet, that I purchased in June 1998) I owned in July 2004 for just over double what I paid for it. I saved the money I made (which included the profit and the equity buildup from paying down the mortgage) from the sale of that property and invested the money very well. I retired from my previous employer at the beginning of March 2007 and am getting a small monthly pension. I rented from July 2004 to October 2008, when I purchased (from a bank which foreclosed on the previous owner), during the depths of the last recession, my present place, which is a small (849-square-foot) condominium with two bedrooms and two bathrooms. I used a very small portion of the money from the sale of the house for the down payment on the condominium and had a very small mortgage, which I refinanced (from a 30-year loan to a 15-year loan) to a much lower interest rate in August 2009 with another financial institution and which I paid off last year. I set aside my savings, which includes the money remaining, which is substantial, from the sale of the house plus the investment income, the money that was in my former employer’s 457 and 401K plans and that is now in a traditional IRA, and my Roth IRA, for my old age. Back in October 2008, my real estate agent suggested that I purchase a bigger (and, of course, a more expensive) place. I told him “NO”. I told him that I had a strict limit with regard to how much I would spend. Financially, I am in excellent shape. I now am just letting time pass by until I celebrate my 70th birthday, at which time I truly will be financially independent. I will be age 70 in less than 11 1/2 years. Even though I must watch my spending very closely until I reach age 70, I really am enjoying my retirement.

    People really need to be careful when they spend their money, especially with a large purchase, such as a house, when debt often is necessary. There is too much of a “keeping up with the Jones” mentality, especially in the United States. My Mom and Dad, may they rest in peace, grew up during “The Great Depression” years of the 1930’s. My parents and I talked about personal finances on a very regular basis, even when I was very young. I learned my lessons well from my parents.

  4. I was asked a few months ago to talk with a family in our neighborhood who was struggling with their home and finances. They struggled for 5 years with their home barely surviving month to month. They had no wiggle room for anything and ran in problems with their vehicles and then medical issues. We sat down and put it on paper and showed there was no way with their current income to change the situation, plus they had 2 kids entering college. I said what if you left this house and got something cheaper. They loved their home and I said “do you love your house or family more because your family will be happier when your finances are in shape. Your home is just wood and drywall and there is lots of that around.” They started looking and found a house just slightly smaller just a few miles away and it was $70,000 cheaper. They moved and all of a sudden stopped living month to month. The stress from the last 5 years was instantly gone and they were no longer crippled by by their home. It is supposed to be a happy place and not the reason for stress in your life.

  5. I have many friends that I can’t even imagine how they are able to pay their mortgage. One of my friends is going through some unforeseen financial issues that she could not have predicted. She is having a hard time even budgeting her mortgage in with her pay being the only income. It is very sad. She had to purchase the biggest house on the block right after she had gotten married. She is having a lot of doubts and a lot of “what ifs.” I try to help her as much as I can, but I think even she knows that she is fighting a losing battle.

  6. We became house poor due to job loss, not budgeting and having four kids, but the biggest reason was not budgeting.
    I’m sure it was a breath of fresh air when he told you his story. I’m actually surprised he was selling his stereo for so little if it was in such good condition. On the other hand, some people are quite reasonable at pricing their clutter, which is great for frugal minded buyers, like yourself.

    I have a question for you about the shoe thing. As I know you are from UK, my experience is that people in the UK do not remove their shoes in the UK in someone’s house. Do you find this to be true? In Canada, everyone removes their shoes, but maybe it has something to do with being used to doing so, because we have out boots on for so much of the year and no one would dare walk around in their boots in someone’s house! LOL Of course another thing that I notice is different to Europe is that no one their has screens on their windows. They do not have to worry about the mosquito and fly population like we do here in North America!

    1. No, we had to take our shoes off all the time and same goes at my house in the UK. I’d never let people walk through the house with their shoes on. I think it depends on the family. Even now we don’t let anyone in our house with their shoes on. Why track more mess into the house than you need to. True about mosquitoes… they attacked me from day 1. I get welts if I get bit however now that I’ve been here for almost 7 years they aren’t as big. I take B1 at my docs request.

  7. Oh wow they’re really mature about their finances and not a lot of people my age are like that. I personally won’t rush to be a homeowner. Some people say mortgage is a good debt, but it’s still debt and best to take when you have resources to pay for it. Thanks for sharing, they’re really inspiring.

  8. We were house poor when we first bought our home. We were 20 years old and we had “okay” jobs, but nothing great. We mainly bought our because we thought that we were both going to get better jobs quickly (I was about to graduate from college with two degrees). Luckily, it all worked out and I found a job before I graduated, but I don’t know what we would have done if I didn’t.

  9. That’s an awesome story. I always love to read/hear about and meet people who are smart with their money. And I think like your story goes to show, you can’t necessarily judge a book by it’s cover, or a person by the apartment complex in which they live. Like you said, some people drive slick cars and live in crazy houses, but can barely make ends meet because they’ve stretched themselves too thin. I’d rather be comfortable in a smaller home than poor in a bigger one.

    1. Well exactly. I enjoy learning about finances from all perspectives. We have friends who can barely make the bills, some stretched too thin and others who have no worries at all. I especially enjoy talking to strangers because I find the most unique situations come my way. Thanks for dropping by Ryan.

    1. Typically, that is the case. It’s a pity that some people put “stuff” over living the good life even if that means you don’t have the best of the best. We rented a room in a basement for 2 years just to get by. It was the smartest thing we did for our finances when we needed to save. Cheers Brian.. Mr.CBB

  10. Actually, being house poor weighs on you mentally when you see the broken stuff every day that you live in the home. It is not peaceful to have to worry about where the money is going to come from when something needs fixing. By living with your means and saving for repairs, then home ownership can be stress-free.

    1. Yes and I’d rather be happy with less than miserable with more that I’d probably have to sell anyways just to make extra cash to pay the bills. Thanks for stopping by ALicia!! Say hi to Glenn for me! MR.CBB

      1. I’m still here and enjoy reading the articles, just don’t get time to comment like I once did 🙁

        Great post by the way – we are currently looking at building a new house and are trying to keep our mortgage down as much as possible to make sure we don’t drown in debt. Unfortunately house prices have gone up since the last time we looked, so things are a lot more expensive than we would have liked.

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