Consider Lowering Your Housing Costs

Housing is normally the largest expense in a budget and today I am going to challenge you to do something most people never think of… Minimize your housing costs. Why would you want you to do that?

I know you work hard and want to go home to a nice home in a nice neighborhood. The thing is that the definition of a nice home in a nice neighborhood keeps getting more and more expensive as you make more money. In reality you can get a nice home in a nice neighborhood for much less than your maximum housing budget in most cases. They key is you’re going to have to be willing to challenge the norm.

Thinking of buying a home

My girlfriend and I make decent money for where we live in Florida. If we followed the general convention of spending 25-35% of our income on housing we could live in a very nice house. We decided not to take that route though and instead only spend 7% of our combined income on our mortgage payment.

That frees up 18-28% of our monthly income to spend on other items. Right now we’re using that extra to help pay down her student loans. Today I am suggesting three ways you can lower your housing expenses.

Location is Key to Lowering Your Housing Costs

The first is to move to a different area of your city. If you live in one of the nicest areas of town (or most expensive cities) consider moving to an area (city) that is a little less ritzy.

My parents live in one of the nicer areas of town. It is all single family homes and the houses are mostly occupied by their owners. I think the area is great and would love to live there but it would put us at the top of the 25% to 35% range. The two car garages are a nice feature we would like but we know it would just turn into a junk storage space.

Instead, we live in a part of town that has a lot of renters and is mostly townhomes and duplexes. Most of the people are really nice and it is a safe area which was important to us.

While we won’t have the same neighbors for extended periods of time like my parents, we have the benefit of getting to meet more people! The properties are kept up pretty well by the landlords so that helps to keep the value of our property up.

There is another advantage of living where we do. While the people that live near probably don’t make as much money as we do, we see this as a good thing. I don’t regularly see luxury cars sitting in the driveways or boxes for new big screen TVs out at the curb.

In one sense I almost feel like we’re the Joneses in our neighborhood. Although, we don’t want people to feel like they have to keep up with us and we don’t flaunt that we have a higher than ordinary income for our neighborhood.

If you do decide to downsize or relocate and you own your home remember that you have options. It may be a good idea to sell your home or you could become a landlord and begin renting it instead.

However, if you’re renting it will be much easier. You just have to wait until the end of your lease and then find a new home.

Go Small or Go Home

Another great option is to move to a smaller house.

Prior to the home we live in now, we were staying in a 4 bedroom house. It was huge and there were two bedrooms that we never used! Along with the lack of usage, they really weren’t furnished properly either.

Sure, we could have bought a bunch of stuff to fill the rooms, but that means we’d simply be wasting money for the sole purpose of filling space. What’s the point in that?

By moving into a two bedroom townhouse we were forced to combine our guest room and office, but we saved a lot money and it’s rare that we have to use the office/guest room for both purposes at the same time. We also don’t feel the obligation to buy a bunch of stuff to fill up our empty rooms!

Two is Better Than One

My final tip on how to save money on housing costs is to get a roommate.

If you’re living in a larger house and want to continue doing so you can rent out one of your extra bedrooms. Consolidate your stuff into different rooms and then start searching for a roommate.

Make sure that the expectations of the arrangement are clear up front. It will also be important that your schedules and personalities mesh well as you will be living together. You can easily free up a few hundred dollars a month to save, pay down debt, or to spend on a hobby if you’re willing to give up a little privacy.

I know these tips won’t work for everyone but challenging the norm is what has helped us succeed with finances.

The key to remember is that personal finance is personal. Maybe your house is so important to you that it is worth the 25%-35% of your income and you cut back somewhere else. That is fine, I just wanted to open your eyes to a new possibility.

Do you already practice some of these tips? If not, would you consider implementing them? I’d love to hear your thoughts!

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About the Author

By , on Jun 7, 2012
Lance is a mid-twenties financial professional that writes about personal finance and life in general at Money Life & More. Feel free to head over to his site and check it out after today's article.

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  1. @Shilipan – I agree completely, maybe we wouldn’t have had a housing bubble?

    @Michelle – You’re doing what you need to do stay where you want to. I don’t blame you at all but I’m glad you realized it is a choice. Suze Orman has an image to upkeep but I bet if you talked to her off the record and explained it all and are in good shape otherwise she’d say you’ll be fine. Key is that you’d have to be in good shape otherwsie.

  2. Michelle says:

    We absolutely know we could save a ton more money and be perfectly comfortable in a much smaller, cheaper home. We don’t want to, though! We sacrifice a lot (not eating out, no date funds, no brand name clothing) to live in this neighborhood. It’s a beautiful neighborhood with a good school district, nice families, mature trees, and walking distance to the neighborhood pool, tennis courts, and clubhouse. I know that if I called Suze Orman and told her the percentage we spent on our housing, she would blow a freaking gasket, though…(it’s really not that much, but she blows gaskets quite a bit.)

  3. Shilpan says:

    Wise thinking. Our world will be a different place if everyone starts spending much less on their house and cars.

  4. @Katie – That’s great! I bet there are lots of other things you can allocate the extra money to.

    @Michelle – Once you have one roommate there isn’t much difference in adding another. Glad you found a way to make some extra money to help you with your budget.

    @ShortRoadTo – I totally agree. A lot of people are very closed minded with housing but if you do some research and visit places first hand you can find some great deals.

    @TB – I do that all the time. I try to avoid calling in the experts unless it truly is a task too big for me to handle.

    @Daisy – I agree that things can change when you have kids but some of these alternatives are still available. Maybe your kids can share a room? My boss has 2 boys and 2 girls and they’re going to have to share rooms till they move out.

    @Well Heeled Blog – Sounds like you have it planned out so it shouldn’t be a problem 🙂

    @LifeInTransition – Sometimes that happens with roommates but it sounds like you have it in control the rest of the time!

    @Kathleen – I can understand being wary about roommates. Have you considered one of the other two tips?

    @Edward – Congrats on having a roommate! I’m sure they help your budget out a bit.

    @Modest Money – If you’re OK with spending the money it is OK to not have a roommate but if you want to save some money you can definitely get it done with a roommate. Split the utilities with them too for even more savings.

  5. Modest Money says:

    I should really think more about trying to find a roommate. Right now I’m just enjoying my privacy and freedom too much. It’s actually the first time I’ve gone without some kind of roommate. I definitely don’t like paying so much rent on my own though. It’s a high price to pay for privacy. I could also probably move to a less expensive area of town.

  6. Edward Antrobus says:

    We bought a mobile home this year instead of a traditional house. It was a fifth of the price as similarly sized houses. And, since it had a third bedroom which would have otherwise been empty, we did take on a roomate.

  7. I would love to find something that was less expensive, but I’m not really interested in roommates, unless they’re people I know.

  8. I always try to keep my housing costs as low as possible by having roommates. Though sometines housing eats 50% of my paycheck when I’m in between roommates, but usually that only lasts a month of the year, and I usually know ahead of time so that I can plan my budget accordingly

  9. Housing has always been under 15% of my gross income – except for the one stint when I was laid off. I hope to continue to keep housing costs low. Of course, I’m going back to school this fall and my income will be a big fat goose egg (or very close to it), but my rent is $550/month. Don’t want to think about that percentage!

  10. Daisy says:

    These are definitely all good tips (for those without kids). We live in a small apartment in a less expensive city than we used to, and it saves us a lot of money, but when we have kids we’re not going to be worried about a couple hundred extra dollars a month for a larger house in a nicer area that’s safe.

    • Joe Morgan says:

      My wife and I have 3 kids and I agree with you for the most part, certainly about roommates and a smaller house. But location is still a potentially big saver. I live 30-40 minutes from work, but my house is easily 1/4 less than it would be 30 minutes closer to my job. My coworkers think I’m crazy “living in the boondocks” but I think they’re crazy spending so much of their income on a housing payment.

  11. Another tip? DIY! Don’t reach for that phone and a serviceman the moment something goes wrong. Check it out, do an internet search, you very likely can do it yourself and save LOADS of money and LOADS of time!

  12. ShortRoadTo says:

    I live in a city in NH. It is amazing the difference in prices of rent from one section of the city to another. For example, a 2 BR apartment in the “nicer” part of the city is $1200. You can literally go two streets down and get the same apartment for $900 because the $900 apartment is on a street that is “seen” as a bad street in the city. Yet, that is not always the case. It definitely pays to do research when renting.

  13. Michelle says:

    We’re about to have 2 roommates. We’ve always lived by ourselves but now the extra money sounds nice!

  14. Katie says:

    Our mortgage is about 15% of our take home pay, I think that’s pretty reasonable. Right now there are so many deals on houses that you can get a lot more house for a lot less money.

  15. Thanks for hosting my post! I’ll be popping in and out throughout the day to answer any questions.

    • Andy says:

      Thanks for guest posting Lance! I really appreciate you taking the time to work up this post!

      I love the ideas and it seems you and I are certainly of like minds. My wife and I are considering downsizing our house here in the next few months; our hope is to get off of a 30-year mortgage and finally get on a 15-year note. We’re undoubtably make great financial progress but the move is definitely one that will take some adjusting to. We’re comfortable with some things in our life right now but at the end of the day it’s just stuff…

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