Skip to main content

Thrifty Thursday - Hack your Housing

Housing is an expense we all must deal with which can add up to a large portion of our income.  The US the Bureau of Labor Statistics last survey on Consumer Expenditure found housing to be the largest category for the average American at 33% of their spending.  The Pareto Principle would tell us this is an area ripe for action.  What are some ways we can reduce the amount we spend on housing?
  • Live at home for as long as you can.  Living with your parents is becoming a frequent stepping stone for college graduates.  Outside of America, multigenerational households are already much more common.  Not only is it more efficient to combine more family members under one roof, but younger generations living rent free is a great tax-free wealth transfer tool! Don’t forget about grandparents or close aunts and uncles living in areas you would like to work.
  • Chose a low cost of living area.  Include the cost of living in your calculations when choosing the next place you want to live.  Sometimes the job with the better salary will be more than offset by the expensive housing, high rents, high taxes, or high cost of goods in an area.  Rather than being yet another person complaining about the cost of living in your area, make your choice of location intentional by balancing the costs against the benefitsAccess to jobs, proximity to family, weather, etc. of the location.  With the expansion of work from home policies and positions in the last couple of years, you may even be able to practice geo-arbitrage by making your money in a high cost of living area but living somewhere more affordable.
  • House hack with multi-family rentals.  House hacking is a term for buying a duplex, triplex, or quadplexSpecifically, these all count as residential, 5 units or more is commercial with a slightly different set of rules but can also be done., then living in one unit and renting out the rest.  The idea is to have your tenants paying the expenses and mortgage so you are not only living for freeMaybe slightly less than free with only a duplex, or even turning a profit with more units., but building an asset at the same time.  When you eventually move out, you’ll have the choice to sell the property or fill your old unit to increase the cash flow.
  • Live with roommates.  In this old school, simplified version of the house hack, sharing a space and splitting the rent can drastically reduce your cost of living.  Adding roommates to a space you are already rentingJust make sure you are complying with the lease. may even offer an opportunity to live for free or turn a profit.

Multifamily homes like this duplex can offer attractive places to live while still being a cash flowing, wealth building asset instead of simply an expense.

Links to more information on house hacking from BiggerPockets:
Labels:

Comments

Post a Comment

Popular posts from this blog

Thrifty Thursday - Save Thousands on Your Phone Plan

Recurring expenses are insidious.  Companies love signing you up for subscription services as it means a consistent revenue stream by default.  The burden is on the consumer to take action, but momentum and inaction usually win out and the payments keep getting made. Taking a hard look at these subscriptions and other recurring payments can be very effective in reducing annual expenses, thereby lowering your Target FI Number and leaving more money for saving and investing .   Some expenses that don’t bring enough value can be eliminated.   Others can be greatly reduced with a little intentionality (just get a month or two of that streaming service to binge your favorite show, no need to leave it renewing for the whole year!)   However, there are some that are necessary but we can work on reducing their impact. One of my favorite hacks is switching to a low-cost cell phone plan offered by a Mobile Virtual Network Operator.    MVNOs lease ban...
Post a Comment
Read more

Intentional Spending

Your spending is an important factor in your financial independence journey. It effects the rate at which you can save and invest while in the accumulation phase and is also a critical factor in calculating your Target FI Number. When accumulating wealth, the amount you can save and invest is a simple calculation: what you make minus what you spend.  Like many of the levers we talk about, your spending has a non-liner effect on your FI journey.  Spending slightly less also means saving slightly more and both of those quantities are found in the formula for Stash Rate , leading to a multiplied effect. $$ Stash Rate = {Annual\ Savings \over Annual\ Expenses} $$ As we saw in the Stash Rate article, decreasing expenses leads to an exponentially increasing rate of wealth building. On the other side of financial independence, the level of spending in your drawdown phase directly determines your Target FI Number. $$ Target\ ...
Post a Comment
Read more

Thrifty Thursday - Upgrade to LED Bulbs

Here’s a hack with a high percentage return.  If you pay your own electricity bill, chances are your use is metered and charged by the Kilowatt hour (kWh) .  A Watt (W) is measure of power, or energy per second, so a Kilowatt hour is just using 1,000 Watts of power for one hour. For example, a common household incandescent light bulb uses 60W of power.  If you left this light bulb on for 3 hours a day for a year, it would use 65.7 Kilowatt hours: $$Total\ Energy = Power * Time$$ $$Total\ Energy = 60 W * {3\ h \over day} * {365\ days \over year}$$ $$Total\ Energy = {65,700\ Wh \over year} = {65.7 kWh \over year}$$ Since Thomas Edison invented the incandescent bulb in 1879, however, there have been some improvements to the technology.  The latest is the LED Light Emitting Diode bulb.  An LED bulb can create the same amount of light Typically measured in lumens. as an old incandescent light bulb using much less power.  For example, an L...
Post a Comment
Read more