The Cash Flow Compass
The Cash Flow Compass
Four readings on a housing decision. This points you in a direction and leaves the walking to you, because two people with the same numbers can be right to do opposite things. Click any ? if a question isn’t clear.
Reading 1
Cost
Money always costs something. If you pay cash, you give up whatever that cash could have earned. If you borrow, you pay interest. One of those two numbers is bigger, and that tells you what to do.
The average 30-year loan was 6.66% on July 30, 2026
This is the rate on your mortgage, or the rate a bank is offering you. If you already have a loan, use that rate.
The chunk of cash you’re deciding what to do with. Your down payment, or extra money you’re thinking about throwing at the loan.
Use what you actually get, not what a brochure promises
Where else could this money go, and what does that pay you? A savings account, an investment, a policy, your own business. Use the real number after fees, not the best year you ever had.
About 9 out of 10 people answer No
Itemizing means you list out deductions instead of taking the standard one. If you don’t know, the answer is almost certainly No. And if it’s No, the mortgage interest write-off you’ve heard about does nothing for you.
The percentage you pay on your last dollar of income. Common ones are 12, 22, 24 and 32. Only matters if you answered Yes above.
If your money grows somewhere, the government usually takes a cut. Long-term investment gains are often 15%. Put 0 if it grows tax free, like in a Roth.
Reading 2
Freedom
Every dollar you spend each year is a dollar you have to save up before you can stop working. A house adds a lot of those dollars, so it moves your finish line.
Food, gas, insurance, kids, travel, rent, all of it. A rough number is fine. If you don’t know, take your monthly spending and multiply by 12.
What you pay now for a place to live. We subtract this, because buying replaces it.
Money you put away and don’t spend. This tells you how many extra years of work the house costs you.
25 is the common rule of thumb
How many years of expenses you’d want in the bank before you’d feel free. Most people use 25. Use a smaller number if you plan to keep earning, a bigger one if you want extra cushion.
US average was $4,427 in 2025
What the city or county charges you every year for owning the place. It’s on every listing, and it goes up over time.
Average was $2,948 in 2025, up 12% in one year
Insurance on the building itself. This has been rising fast, so don’t assume today’s quote holds.
Put 0 if there’s no HOA
A fee some neighborhoods and condo buildings charge for shared upkeep. About 44% of listings have one, and where they exist the middle amount is $135 a month.
What you’d pay for it. We use this to estimate repairs, since bigger and pricier homes cost more to keep up.
1% for a newer home, up to 4% for one over 30 years old
Roof, water heater, furnace, paint, the sprinkler that breaks on a Tuesday. Nobody budgets for this and it’s the number one thing buyers regret. Fannie Mae says 1% to 4% of the price every year.
A house is usually bigger than an apartment, so heating, cooling and water cost more. Guess the difference, not the total.
Reading 3
Flow
Take what you owe on a loan and divide it by the payment. A small number means that loan is squeezing your monthly cash hard, so it gets your attention before anything else.
Reading 4
Feel
How you sleep is a real input. If a loan would keep you up at night, weigh that above the math. That is a legitimate answer.
Zillow worked out how many years you’d have to own in each city before buying beats renting. Pick the closest one to you.
Pick the realistic number. Job changes, kids, and family moves all shorten this. Most people overestimate.
A house payment is the same every month whether you had a good month or not. The less steady your income, the heavier that payment feels.
Six is the floor before you buy anything
If your income stopped tomorrow, how many months could you cover? This is separate from your down payment. Draining this to buy is the most common way a good purchase turns bad.
5
1 = it keeps me up at night 10 = it’s just another bill
There’s no right answer. Some people carry a loan and never think about it. Others feel it every day. Knowing which one you are is worth more than a percentage point.
What do you actually want, before anybody shows you a spreadsheet. This one counts.
Where the numbers come from. How long until buying beats renting, Zillow Research, June 2026. Loan rates, Freddie Mac, week of July 30, 2026. Property tax, ATTOM, 2025. Insurance, Insurify, 2025. HOA dues, Realtor.com, 2025. Repair guidance, Fannie Mae. How many people itemize, Tax Policy Center.
What this is not. It is not advice and it does not tell you what to do. It shows you the four costs of a decision most people only count one of, and then it tells you exactly what would have to change for your answer to flip. The walking is still yours.
What this is not. It is not advice and it does not tell you what to do. It shows you the four costs of a decision most people only count one of, and then it tells you exactly what would have to change for your answer to flip. The walking is still yours.