Millionaire Rule 1.49 By Thomas J. Stanley, Ph.D.

[Bryan Hancock]

I thought others may be interested in this:

Millionaire Rule 1.49

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I have found that when millionaires made their first home purchase, the ratio of the purchase price over their annual household income was just 1.49 [median]. And today they have seven times more wealth [median] than their non millionaire neighbors.
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This kind of highlights how important it is to avoid the Realtor propaganda about your home being an "investment." The often-quoted 2.5 ratio seems to be a negative contributor to wealth instead of what the salesmen would have you believe.

[Harry M.]

Interesting article, and I believe it to be right on the money.
When my wife and I bought our house 9 years ago, I wasn't making that much money. At that stage in our lives, our thinking was more whether we could afford a house, rather than how nice a house we should buy. We didn't have enough money to be too picky, so we bought the nicest house we could find at the price we could afford. The ratio ending up being about 1.93 at the time.
Things went really well for me at my job over the next several years, and I had a series of great pay raises. We found ourselves able to afford a lot more house, and it was tempting not to reward ourselves for all the hard work.
The best financial decision we've ever made to this point was to resist the temptation, and not trade up. We decided that our house was still sufficient for what we needed, if a big smaller than ideal. As a result we've been able to save a lot more money each month to put towards investments than if we'd traded up and bought the kind of house that we could afford with the higher income.