Iowa State University Extension

Problem:
Lower income people may be paying too much for their housing. Often, people who rent an apartment or home do not realize what percent of their income should be spent on housing and end up spending too much because of the location they have chosen and the fact that the rental house is not well insulated and is costing more in utilities.

Response:
A client who was taking the 12-hour Financial Literacy class that Extension teaches for ISED, worked on her spending plan and realized that she was spending almost 50% on her rent and utilities. The home she was renting was an older home in a neighborhood that was comfortable and near other people she knew. She had rented this home for over 12 years and had raised 3 children in it. Now there were just she and a 17 yr. old in this larger home. She learned in the financial class that a suggested expense for housing and utilities was 28-33% of your income. She was spending over $300 a month just on utilities and she knew with winter coming it would be even higher. She was trying to save money to purchase a home through the Iowa Saves matching program.

After talking with her son and knowing that the lease was expiring, she decided to look for an apartment that would be less money. She gave the landlord written notice and found an apartment that most of the heat and utilities were already paid for. The apartment was much smaller, but she knew she would save over $500 a month that could be used to put toward a home. She also had a garage sale and made over $1200 to use toward a purchase of a new home and the matching funds of Iowa Saves Program. She did this all in a two-month time period.

Impact:
This person thanked me for having the Financial Literacy class. She had been frustrated with her housing and utilities costs and not having any money left at the end of the month. She said this class helped her realize what she was spending on housing by completing a spending plan. Then she could actually see where her money was going each month. Tracking and doing a spending plan really motivated her to “take charge” of her finances and make the housing move. She now has her money under control and is saving over $500 a month between housing and utilities that she can save to buy her home. She is also working on improving her credit report and planning to use her Iowa Save match to buy a home by January 2009.

Contact:
Margaret VanGinkel
Urbandale Outreach Center
10861 Douglas, Ste B
Urbandale, IA 50322
vangin@iastate.edu