What is the recommended minimum percentage of income that should be spent on housing costs?

• A. 20%-25%
• B. 28%-30%
• C. 32%-35%
• D. 35%-40%

Answer: (B)

The recommended minimum percentage of income that should be allocated for housing costs, such as rent or mortgage payments, is generally considered to be in the range of 28% to 30%. This guideline stems from financial planning advice aimed at ensuring that individuals do not overextend themselves financially when it comes to housing. Spending within this range allows individuals to maintain a balanced budget, ensuring that they have enough remaining income for other essential expenses such as utilities, food, transportation, and savings.

Adhering to this percentage helps to mitigate the risk of being "house poor," which occurs when a large portion of an individual's income is consumed by housing costs, leaving little for other necessities and discretionary spending. Therefore, the 28%-30% figure is widely recognized and endorsed by financial experts as a healthy benchmark for housing affordability.