Budgeting
Many property managers have a rule that you must earn at least three times the amount of the rent in income in order to qualify for a lease. However, this is still a large chunk of your income. Consider your budget carefully. It may be that 80 percent of your monthly income is dedicated to the 20 percent of time you actually spend in your home.
Between rent, renter’s insurance, utilities, internet, and other household bills, maintaining your home could easily equate to 80 percent of your income. If you are rarely at home or do not spend much time enjoying your space, it makes sense to downsize and eliminate the excess rent that you are paying out of your budget.
Property Management Rule
There is a little-known rule that is sometimes applied to property management. Eighty percent of your rent is going to the mortgage and insurance costs that the landlord has for upkeeping the home, while 20 percent of your rent is simply filling the pockets of the landlord. If you think about this from a renter’s perspective, you could spend 80 percent of your rent on a mortgage payment and actually decrease your expenses for the same amount of space.
Taking Action
Now that you understand what the 80/20 principle is and how it can be applied to renting, take action to apply it to your life. You may want to carefully consider whether your current renting situation is truly benefiting you.
If you find that it does not, consider downsizing or finding alternative methods of home ownership that can get you out from under the crushing weight of constantly renting. You will also find that you can apply the 80/20 rule to your home ownership goals.
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