I had my heart set on a tiny 525 sf cottage in Gainesville, FL. My application was denied because my rent to income ratio was too low. The problem isn’t with me, it’s with the formulas. What Is the Rent to Income Ratio? The rent-to-income ratio requires that you earn 40 times the rent, which was roughly $5,600 more than my net income. However, this ratio figures in things such as car expenses and debt, which I do not have. It also factors in extras such as entertainment (movies, cable tv, the theatre, concerts, etc.), clothing, eating out, work-related expenses (clothes, makeup, accessories, lunches, transportation) and a pretty hefty “miscellaneous” budget.
Why Financial Formulas Don’t Always Work
Financial ratios are not made for people who live a frugal lifestyle. They are made for materialistic, consumerists. Most people can’t survive if they are spending 40% of what they earn on rent, but I can, and have for years. How do I do it?
- I grow my own food and stockpile sales items
- I buy almost everything second-hand, mostly from thrift stores and yard sales.
- I don’t go out to eat or to bars
- I don’t entertain, except an occasional potluck with friends
- I don’t go to movies, the theater or concerts
- I don’t travel
- I don’t have a lot of work-related expenses, since I work at home
- I don’t have to have every tech gadget that comes down the pike. I don’t even have a smartphone.
- I don’t use cable or satellite t.v., in fact, I only watch the shows you can see free online.
- I don’t mind being a little uncomfortable to save on heat and air.
Here is the breakdown according to how I live my life, as opposed to how they figure I live my life.
- The cottage I was turned down for was $560 a month. I called the utility company, and the average utility bill with water, electric and gas was $140 a month. That’s $700 a month total
- When I grow most of my own food, my grocery bill is usually about $100 a month — $150 if I splurge.
- My transportation is normally about $35 a month for a monthly bus pass.
- Internet is generally $60 a month. I do like high speed broadband, and it’s partially deductible as a business expense.
- I give myself $100 a month for miscellaneous, which includes $25 for a phone card, and usually don’t spend all of that.
- Add that all together and it comes to $1045, which leaves me with $355 to do with as I please. A lot of people don’t have that left over at the end of the month, even the ones who make 40 times the rent.
Financial formulas are something landlords use to discriminate against people they consider to be “poor”, and why this one would want to discriminate against anyone for a $560 cottage is beyond me. I think it was more an age thing than a money thing, since he rents to students mostly, and I bet none of them make 40 times the rent. But age discrimination is another topic for another time.