2019 was a crazy year for my living situations so I knew I wanted to write an article about it. I’m not writing this article to say these are the necessary steps to reach financial independence or even to improve your financial position. I’m simply writing it to show that there are sacrifices or small changes that all of us can take to decrease our monthly spending on housing.
And sacrifice may be a strong word choice as well. Possibly re-framing our thoughts may be a better way to put it. Housing is expensive so if we can find different avenues to cut this cost we can save a lot of money to invest or fund other areas of our life.
How Much Does Housing Actually Cost?
According to the U.S. Bureau of Labor Statistics, from 2017 to 2018, the average American in the United States spent almost 35% of their income on housing. That’s over ⅓ of your take home pay every single year being wiped out in order to have a roof over your head. When combined with transportation, food, and healthcare, this leaves us only 25% of our take home pay left to pay off potential student loan debt, buy clothes, travel, etc. (see graph below) It makes sense that the average savings rate in the United States is just over 6%…
Obviously, shelter is a basic human need so it’s something we all need to account for in our budget. But I think the above graph does a great job of showing us just how much of a chunk housing takes out of our monthly paycheck. You can see right away that if you were somehow able to cut this expense down, that you’d have significantly more of this pie chart left over to save, invest, or pay off debt.
Yes, we need housing. But do we need as much housing as we think we do?
For example, I know many people who think that because they have graduated college or are making a certain threshold of income that it means they now need to have this “level” of an apartment or house to show their status in life.
My question then is why? Why do we feel like this?
Do you feel like this because this is something you have valued for a long time or is it something you feel because you were told by others to feel this way? Do you need all of the features of this house, or are you just trying to keep up with your family, friends, or colleagues. Have you actually questioned yourself about what it is you value in a home? Or are you feeling the pressure to buy from your real estate agent and social circle?
These are the questions we should all be asking ourselves before we make any financial decision with the magnitude that choosing housing has.
What benefit does living in the more expensive apartment that has a gym and a pool have? Will you actually use the gym or are you still more likely to just use your main gym, attend exercise classes, or run outside? Will you actually use the pool? Because these amenities that draw you to a property are calculated into your rent price. Because if you aren’t using them, you are overpaying.
Does living in a certain location improve your quality of life? Does this area allow you to cut your transportation costs?
Do you need X amount of bedrooms or square footage? Will you actually use this space? Or is this just more space that you will have to spend money on to fill?
Do roommates really change your living experience right now? Or do roommates actually help pay for some or all of your mortgage?
Like all things, it’s important to write down what it is you truly value about your living situations. Once you know this, you can now find locations that reflect these values. Or you can now attempt to fulfill these values in unique and more cost effective ways.
What do I value?
Again, before I talk about my year of housing experiences I want to emphasize that these are my own personal values with housing. These aren’t a set of rules that you need to follow. Everyone’s situation will be unique based on their own values but I promise you, we can all find ways to cut our housing costs regardless of what it is we value.
As of right now, traveling healthcare has led to a very nomadic approach to housing for me. I only have with me what I can fit into my small SUV. And because I up and leave a location before most normal leases would be up, it leads to me needing to find very short term housing.
My current requirements for housing in my life right now are safety, and a bed. And that’s about it. I don’t care if I have roommates, the nicest decor, or amenities. I simply need a place to sleep, use the bathroom, shower, and eat.
Boston
I talked about this already in my traveling healthcare assignment about Boston so I’ll keep this one brief. I was able to find a short term lease for a bedroom in a 3 bedroom apartment that rented for $700 with utilities paid for just outside the city. Similar apartments in this area were renting for well over double this price.
The downside was that the room was unfurnished. So I spent two long nights sleeping on the floor using folded blankets and towels as a makeshift sleeping pad until my air mattress arrived. Because of how much I was saving on rent I was able to buy a high end air mattress which I actually enjoyed sleeping on. I got some weird looks/responses when I told people I slept on an air mattress but eventually it turned into a running joke with my friends and people I met. Which actually made a not that bad of a situation even better.
The Snake House
To this day, I can’t believe I ended up in this house. I was moving from Boston to Arizona and had not yet found housing, so I was beginning to scramble. As I was talking about this situation with some of my friends, one told me that he had actually had a relative around my age in the area that I would be working. He mentioned that he lived a unique life, but I still asked for his contact information regardless.
I reached out to him and he told me that he had a spare bedroom *with a bed in it that I could rent for $400 utilities paid for. I’d even have my own bathroom. He asked if I was okay with pets as they had 2 dogs and a cat, which didn’t bother me. So I said yes. It was much cheaper than anything else I was finding so I agreed.
What he didn’t tell me, was that in this house, they also had 5-6 tanks with snakes and lizards in them. He also failed to mention that two of these tanks sat directly on the kitchen counter so that the snakes could basically watch me cook at night…
And I want to be very clear when I say that I hate snakes. As in, they give me chills down my spine type of hate. So you can imagine that greeting one everyday when I went to the kitchen to grab my lunch and then again as I walked out the door to work was not my favorite activity.
I ended up lasting here for 3 months before a co-worker offered me a spare bedroom she had for the same price as she likely felt bad for me. Thankfully, no snakes escaped their tanks while I was there. I never grew to like snakes but I did learn how to avoid looking into their tanks really well.
Airbnb
I eventually changed jobs but remained in the state of Arizona. This new job was in a large retirement community so finding housing managed to again be very difficult. I was starting that week and still didn’t have a place, so I ended up staying at an Airbnb. I bounced around various Airbnb’s for a few weeks paying roughly $125 to $200 per week which was well above what I was hoping to spend.
At every location, I would leave the same note when I left. I would say “I would be willing to clean the house for the week for the next guest if you could decrease the rent” and I left my number. I did eventually receive a call, but I was already starting my transition to my next housing experience.
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5th Wheel
Again, through always talking about my experiences at work, another coworker heard about my living situation and told me that she had a vacant 5th wheel sitting in their driveway that I could rent for $100 per week utilities paid for. Because this dramatically decreased my rent, I agreed.
The 5th wheeler was hooked up to electricity and water so I could shower, use the bathroom and cook. I even was able to get a strong enough WiFi signal from their house to stream from my computer.
I actually loved this set up. For the first time in a while, I had my privacy in my own space on top of all the requirements I needed in a home. And for only $400 per month. The only problem was that this home was mobile and something my coworker understandably used from time to time. So her family was going on a trip in the 5th wheel for the next week, so I knew I needed to find a new place to live during this time.
The Bare Bones House
So her vacation led me to my final unique and current living situation. Again, through talking about my housing situation, a separate coworker asked her husband to ask around his work for potential housing opportunities.
He ended up finding a guy who worked a unique schedule where he worked a rotating 4 days on, 4 days off schedule. His family lived out of town, so he rented a house in town and then went home to his family when he wasn’t working. So because he only used this house to sleep in as well, the house was bare.
And bare is an understatement. He had a 3 bedroom, 2 bath single level home that was furnished with his bed and a lawn chair. The other two bedrooms, living room, and dining room were all unfurnished and completely empty. The house didn’t have rugs, decorations, or even blinds. The kitchen had a mini fridge where the main fridge would go and cut outs/hook ups where the stove and dishwasher would normally be. The counter had a small, one burner, portable stove top and a microwave. Otherwise the kitchen was just as empty as the rest of the house.
Basically, we had walls and heat. So I brought my trusted air mattress and I was living large again. Thankfully, I spent a lot of time at my girlfriends place and this is where we did the majority of our joint meal prepping for the week. So really all I needed for food preparation during the week was a fridge to store it in and a microwave to heat it up if needed. My work also had a fridge, so I took advantage of that as space in the mini fridge was often limited.
This place costs me $50 per week, utilities paid. I had cut my living expenses down to around $200 dollars per month…
I will only be able to live here until the end of May when my contract is up, but if I were to live here all year, it would come out to only $2,400 per year. This would bring my housing down to only 2.68% of my income. Over 32% less than the average American.
This alone allows me to further increase my savings rate but when paired with all my other normal savings in the other areas of spending, it likely will make 2020 my highest savings rate yet.
A Longgg Conclusion
The past year of housing has been interesting to say the least. I have made many friends in this process and have better learned about what it is I value in my future home someday. It’s shown me the power of networking and helped me create a lot of independence throughout this process.
Again, I realize that this type of lifestyle might not be feasible or necessary for many of you. But I wanted to use my story as an opportunity to discuss the demands that housing places on our budget. It’s over ⅓ of our income, year after year. A monthly expense that most of us don’t even question because everyone else is also paying it.
And yes, after 30 years many of you will own this house outright. An investment as many people put it. But even without a mortgage, our housing costs don’t end. They still include repairs, updates, decorations, new furniture, cleaning, HOA fees, and property taxes. Plus all the time it takes to take care of all of this very expensive space.
And how many people actually stay in one house for the entire 30 years? I’d venture to say not many. Just like all lifestyle inflation, housing is no different. Eventually we want to move to a nicer location, a new job, or closer to family. We also move to acquire more square footage, more bedrooms, a walk in closet, or an extra garage stall. Even when we don’t move, we often buy a second home or a cabin.
Just because one mortgage is gone, doesn’t mean that we still don’t feel the need to be paying for our housing. It’s innately programmed into us. And this programming costs us many years of our life to pay for.
A $300,000 house on a 30 year mortgage at a 3.5 % interest rate will cost you $484,968 in the end. Again without any of the repairs, remodels, or general upkeep attached to this price tag. If your take home pay was $50,000 a year, your house alone would take you 10 years of your life just to pay off.
10 years of your life or 20,800 working hours to pay for it. Sometimes putting it into an hourly rate, puts it into perspective of how much of your working life/time something truly costs.
Following in my footsteps and sleeping on an air mattress isn’t necessary, but critically thinking about your own housing costs is.
Let me know how you decrease your housing expenses? Any housing hacks that you have used?
If you have any questions or concerns, please feel free to comment below. Or if you have specific questions, feel free to email me at fiscaltherapist1@gmail.com.
