Being “house poor” is a term used to describe individuals who dedicate so much of their budget to house and living expenses that they don’t have enough money left over for other lifestyle needs. House poor individuals are most commonly people who are over-extended financially on the purchase price of their home, or who live in an area with an ultra-high cost of living.

When someone is house poor, their housing expenses account for an exorbitant percentage of their monthly budget. This typically leaves them with too little money to survive on, let alone afford any form of luxury, vacation, or other recreational lifestyle-based expenses. In extreme cases, it can even cause difficulty meeting other financial obligations like vehicle payments.

The housing market can often be tricky to navigate, especially for first-time homeowners. Inexperience can lead people to overextend their finances to secure a property and with increased mortgage prices and ever-growing taxes, can leave them house and budget poor. As housing costs tend to increase year on year, owners also need to be aware of their own financial obligations; as home prices increase, so too can the homeowner’s financial obligation.

There are several strategies that house poor individuals can use to escape their financial difficulty. Limiting discretionary expenses and creating a budget to fit the situation is a good start. Besides reducing expenses, people may need to take on another job to offset the amount of money going to housing. Dipping into savings may be an option, as well as selling assets, or downsizing to a smaller home.

In extreme cases, it may even be necessary to declare bankruptcy and request a mortgage workout from the lender. While this is a last resort and considered a drastic measure, it may be the only way to manage the financial obligation and set a person on the path toward financial freedom.

Regardless of the strategy chosen, being house poor is a difficult financial position to be in. It is important to actively monitor monthly expenses and budget with care, to ensure housing expenses remain manageable and within budget. Understanding how to effectively manage housing expenses and setting reasonable goals can help individuals steer clear of financial difficulties and live happy, comfortable lives.