It is a mistake to buy beyond one's ability to pay, for that usually results in the loss of the home or in a most discouraging struggle. The purchase should be safe; thus, if a family cannot pay $7,500 for a house, a $5,000 house may be within its means.
The amount that can be paid for a house depends partly on what inter- . est rates are charged for the money borrowed to make the purchase and the rate at which the principal is to be paid off. These fixed payments must be met regularly, and they must be met from the family's income. It is, therefore, always best to leave some margin of safety to provide for illness or other emergency. While one may be too optimistic when an attractive house is in view, and count on increased income that he may never receive, nearly every family can and should cut down other expenses when the savings are to be invested in a home.
If a certain family pays a sixth of its income for rent, it may be able to devote one-fourth or more to buying and maintaining a house, for the amount thus used may include both rent and savings. Rent, or payments on a home, may require anywhere from one-eighth to one-third of the family income, depending on the special circumstances in each case. In addition to interest payments and installments on the principal of a loan, allowance must be made for renewals and repairs, taxes, special assessments, insurance, water tax, and various accessories and improvements. Families accustomed to living in apartments sometimes fail to allow for the cost of fuel for heating purposes.....
Where does money count for most? - Usually a house can be obtained for less than the amount a family could pay if it were pressed to the limit. Every family wants to spend its money so that it "goes the farthest," and the exact amount to be spent on a home can be determined wisely only by carefully checking over the family's needs and its expenses. There are, first of all, the obvious budget items of food, shelter, and clothing. Proper nutrition, especially, should not be neglected. In addition, there are expenses such as life insurance, doctors, hospitals, etc. If there are children, it may be wise to send them away to school, to buy a piano for their use, or to give them other advantages which cost money. Every family needs a vacation and some recreation, and every family wants to contribute to worthy causes. Phonographs and automobiles or new pieces of furniture may be wanted before the house is paid for. Many other items of expense cannot well be avoided. If the amount put into a house is out of proportion to other expenditures, the result is usually regretted.
In deciding how to spend money above the simple necessities of life it is always best to note which expenditures have permanent value. Money spent to provide education and wholesome outdoor life for children, for instance, will help them throughout life, while certain expensive amusements are harmful or less wholesome than the simpler forms of play. Articles for the household that are useful or in good taste, again, may serve for many years, whereas expensive foods are quickly eaten and soon forgotten.