Ramit Sethi breaks down the 28% rule: housing costs should stay under 28% of gross income. But that means everything—mortgage, repairs like a $19,000 roof, maintenance, and interest on your down payment. Don't just look at the monthly payment. Calculate the total cost of ownership.
Roughly less than 28% of gross income.
A roof repair costing $19,000 projected nine years from now.
A $75,000 truck.
Your total housing costs should be roughly less than 28% of gross income. Total housing costs means not just your mortgage. It means repairing the sprinklers. It means the roof repair that cost $19,000 nine years from now. You need to actually spread that out. The interest that you're going to pay and the opportunity cost of however much you put for your down payment, what you could have made in the market. Most people are like, I don't want to calculate all that. They go to their realtor who's incentivized to get you to spend more, and the realtor tells them the worst two words on earth. Monthly payment. That's how financially unsavvy people buy. Right? You are always going to be thinking, tco, total cost of ownership. A lot of people come to me. They have trucks. The $75,000 truck they bought. If you factor in all the phantom costs, sure. Insurance, gas, repairs, all of it. It ends up costing them like 100, 500, $8,000. So you've got to run the numbers on the biggest purchase of your life.
