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.
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.
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.
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!
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!
Picture by FreeDigitalPhotos.net.
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