Updated - March 2018
Crazy High Rents - A few years ago, an article went viral about a young man who worked for Google and lived in a box truck. He'd chosen to do that rather than continue to fork over $2000 per month for a shared room, which is what he was doing before he made the decision to take this dramatic step.
That's crazy high rent. And let's not forget that rent is money that's gone for good - essentially money out the window. It is not money that helps us build financial independence or security in any way.
But this, in very stark terms, is one of those dilemmas facing people looking for work:
If you move to the areas with good jobs, often the cost of living is sky high and downright unaffordable.
That's crazy high rent. And let's not forget that rent is money that's gone for good - essentially money out the window. It is not money that helps us build financial independence or security in any way.
But this, in very stark terms, is one of those dilemmas facing people looking for work:
If you move to the areas with good jobs, often the cost of living is sky high and downright unaffordable.
Here's a case that illustrates that. Years ago when I was practicing real estate, I had a client from the Midwest who had received an offer for a big promotion and pay increase for a move to the NYC area. However, the family ended up turning down the new job after they saw that the cost of living would eat up just about all the pay increase, in addition to involving a longer commute time and a worse overall quality of life.
They opted to return to what was then a far less economically vibrant area because it was so much more affordable.
That was the situation way back decades ago, and that client was a home buyer, not a renter. The situation for renters has become far, far worse since then, particularly in places like Silicon Valley, and many of the major metro areas.
But this housing situation brings up a point that I'd like to make about housing in general, and the significant role it plays in anyone's budget.
Housing as a Discretionary Expense?
Housing is, of course, an essential in our monthly budget. But despite the fact that budget worksheets and websites all too often treat housing as a fixed expense that we have no control over, we actually have far more choice in this matter than we often realize.
Although this young man's living arrangement is definitely a bit extreme and not for everyone, he has taken a very proactive approach to dealing with the absurdly high cost of living around him. I give him credit for that.
Here are some other approaches that might be worth exploring.
They opted to return to what was then a far less economically vibrant area because it was so much more affordable.
That was the situation way back decades ago, and that client was a home buyer, not a renter. The situation for renters has become far, far worse since then, particularly in places like Silicon Valley, and many of the major metro areas.
But this housing situation brings up a point that I'd like to make about housing in general, and the significant role it plays in anyone's budget.
Housing as a Discretionary Expense?
Housing is, of course, an essential in our monthly budget. But despite the fact that budget worksheets and websites all too often treat housing as a fixed expense that we have no control over, we actually have far more choice in this matter than we often realize.
Although this young man's living arrangement is definitely a bit extreme and not for everyone, he has taken a very proactive approach to dealing with the absurdly high cost of living around him. I give him credit for that.
Here are some other approaches that might be worth exploring.
Some Strategies to Save on Housing
Camp for Summer Jobs - I have friends who have used a similar tactic to this young man -- by camping all summer while working a seasonal job in a very expensive resort area. They were able to earn and save quite a bit of money doing that.
That may not be to everyone's taste, but sometimes you just have to do what you have to do when housing costs become prohibitive.
Tenting is not the only way to camp, of course. I have a friend who works as a travel nurse, and she lives in a camper she bought just for that purpose. Saving money that way, she's able to pocket quite a bit of the housing allowance she's given for each job.
There's also something known as workkamping, where you work for a few hours a week to pay for your campsite. Check out this website for more information on that approach.
For the adventurous types, camping or "glamping" may be an approach worth exploring while you get on your feet, pay off debt, or save for a particular goal.
This is also the idea behind the tiny house movement. Those are houses built on the frame of a trailer so that they can be hauled from place to place. I would urge caution in this approach, however, since the construction costs are actually very high per square foot compared to normal construction, and you need a big, expensive vehicle to move the tiny house.
Buying a used RV - check out these articles here and here - is probably a more practical, economical choice.
Camp for Summer Jobs - I have friends who have used a similar tactic to this young man -- by camping all summer while working a seasonal job in a very expensive resort area. They were able to earn and save quite a bit of money doing that.
That may not be to everyone's taste, but sometimes you just have to do what you have to do when housing costs become prohibitive.
Tenting is not the only way to camp, of course. I have a friend who works as a travel nurse, and she lives in a camper she bought just for that purpose. Saving money that way, she's able to pocket quite a bit of the housing allowance she's given for each job.
There's also something known as workkamping, where you work for a few hours a week to pay for your campsite. Check out this website for more information on that approach.
For the adventurous types, camping or "glamping" may be an approach worth exploring while you get on your feet, pay off debt, or save for a particular goal.
This is also the idea behind the tiny house movement. Those are houses built on the frame of a trailer so that they can be hauled from place to place. I would urge caution in this approach, however, since the construction costs are actually very high per square foot compared to normal construction, and you need a big, expensive vehicle to move the tiny house.
Buying a used RV - check out these articles here and here - is probably a more practical, economical choice.
Make Affordability a Priority When You Choose Your Neighborhood - In a more conventional approach to keeping housing costs within a set budget, try using this common, money-saving approach It's one that my husband and I employed when we were looking for an apartment in New York City in our early days of very low income.
We very deliberately picked a neighborhood in the borough of Brooklyn that -- at that time -- was far from the "cool" or trendy neighborhoods and the action of Manhattan. It also involved a fairly lengthy subway commute to my job. That is typically the trade-off if you want to live in housing market that offers more affordable rents.
Mind you, the rent was still awfully darned high relative to my income. But it was far more manageable than anything closer to Manhattan would have been. In the intervening years, Brooklyn has become a hipster haven, so rents in some areas of the borough are even higher than some areas of Manhattan. For me, that would be a signal to look elsewhere.
But at the time we lived there, the neighborhood we chose had other economic advantages beyond cheaper rent. It also provided more opportunities for free entertainment in the form of nearby parks, as well as larger and cheaper grocery stores. Even the washing machines and dryers at the local laundromats cost less to use than they did in the more expensive parts of the city.
So we were able to save money on several fronts. That's fairly common in less fashionable neighborhoods, which is definitely a factor worth considering.
Then when we moved to the suburbs, we picked the closest one to work that we could afford, and skipped the fancy ones in the surrounding area with higher rents.
After a short time, the savings meant we were actually able to buy a house (and then a second and a third one, as investments) and thus begin building equity and moving toward financial independence and security.
Below on the left is the building we lived in in Brooklyn, a modest, but clean and safe apartment complex. And on the right is our first house, a well-maintained 2-family that was nothing fancy at all, but comfortable and more than spacious enough for our needs.
We very deliberately picked a neighborhood in the borough of Brooklyn that -- at that time -- was far from the "cool" or trendy neighborhoods and the action of Manhattan. It also involved a fairly lengthy subway commute to my job. That is typically the trade-off if you want to live in housing market that offers more affordable rents.
Mind you, the rent was still awfully darned high relative to my income. But it was far more manageable than anything closer to Manhattan would have been. In the intervening years, Brooklyn has become a hipster haven, so rents in some areas of the borough are even higher than some areas of Manhattan. For me, that would be a signal to look elsewhere.
But at the time we lived there, the neighborhood we chose had other economic advantages beyond cheaper rent. It also provided more opportunities for free entertainment in the form of nearby parks, as well as larger and cheaper grocery stores. Even the washing machines and dryers at the local laundromats cost less to use than they did in the more expensive parts of the city.
So we were able to save money on several fronts. That's fairly common in less fashionable neighborhoods, which is definitely a factor worth considering.
Then when we moved to the suburbs, we picked the closest one to work that we could afford, and skipped the fancy ones in the surrounding area with higher rents.
After a short time, the savings meant we were actually able to buy a house (and then a second and a third one, as investments) and thus begin building equity and moving toward financial independence and security.
Below on the left is the building we lived in in Brooklyn, a modest, but clean and safe apartment complex. And on the right is our first house, a well-maintained 2-family that was nothing fancy at all, but comfortable and more than spacious enough for our needs.
Choose a Neighborhood Where You Can Save Money on Transportation - Another young couple I know chose to spend a little more in rent so that they could live near the town train station and bus stops.
The somewhat higher payment for housing was more than offset by the fact that they were able to get by without owning even one car.
Since cars are typically major expenses in most households, to the tune of thousands of dollars a year for each one, this couple ended up saving big in this area, as well as in others where they tightened their belts.
The result was they were able to buy a home with an income-producing "in-law" suite just a couple of years out of school.
Needless to say, they are off to a good start. The key, of course, was that they deposited the money into savings that they would have put toward a car payment. They did not just spend it on other things. It's crucial to remember that and follow through on it.
Live at Home to Save Money and/or Live with Roommates - One very savvy young person I know lived at home for a time after college graduation until he saved enough for the down payment on a very nice 3-bedroom home in a good neighborhood of a working class town.
He has roommates who rent 2 of the bedrooms from him, which entirely covers his monthly mortgage payment. He uses some of the extra income to invest in a small side business that he works on after his day job.
So he's created a bit of financial wiggle room for himself already, well before he's hit the age of 30, and is well situated to achieve real economic independence at some point in his life. Which is more than many of my generation will be able to do.
I encourage people of all ages and walks of life to consider for themselves the roommate and house or apartment share as a budget-wise living arrangement.
Use your social contacts, websites like Craigslist, VRBO, or Airbnb to list extra bedrooms in your own place, or to find apartment/house dwellers who are looking for someone to share their living space.
That's a solid money-saving option for housing.
The somewhat higher payment for housing was more than offset by the fact that they were able to get by without owning even one car.
Since cars are typically major expenses in most households, to the tune of thousands of dollars a year for each one, this couple ended up saving big in this area, as well as in others where they tightened their belts.
The result was they were able to buy a home with an income-producing "in-law" suite just a couple of years out of school.
Needless to say, they are off to a good start. The key, of course, was that they deposited the money into savings that they would have put toward a car payment. They did not just spend it on other things. It's crucial to remember that and follow through on it.
Live at Home to Save Money and/or Live with Roommates - One very savvy young person I know lived at home for a time after college graduation until he saved enough for the down payment on a very nice 3-bedroom home in a good neighborhood of a working class town.
He has roommates who rent 2 of the bedrooms from him, which entirely covers his monthly mortgage payment. He uses some of the extra income to invest in a small side business that he works on after his day job.
So he's created a bit of financial wiggle room for himself already, well before he's hit the age of 30, and is well situated to achieve real economic independence at some point in his life. Which is more than many of my generation will be able to do.
I encourage people of all ages and walks of life to consider for themselves the roommate and house or apartment share as a budget-wise living arrangement.
Use your social contacts, websites like Craigslist, VRBO, or Airbnb to list extra bedrooms in your own place, or to find apartment/house dwellers who are looking for someone to share their living space.
That's a solid money-saving option for housing.
Focus on Affordability When Looking at Available Housing - It's important in taking control of our housing costs not to acquire a taste or "need" for fancy amenities like club houses, pools, tennis courts, granite countertops, and fancy appliances, etc. that are often offered by high end rental developments,
These are typically high rise buildings, or large apartment complexes that are geared to the acquired tastes of today's young people and are marketed to get you to spend more money on rent than you probably should.
Don't give in to the siren call. Instead, look at older and/ or smaller apartment buildings, such as multi-family homes, and check out less trendy neighborhoods and buildings.
If the focus stays on safety, overall affordability, and decent, but not luxurious criteria, I think many people would be surprised by what they can find in terms of acceptable housing.
And if you are able to consider buying a home, the same guidelines apply as for rentals.
Safe neighborhoods; well-maintained housing stock that's not fancy or luxurious; and a manageable home size - that reduces tax and utility costs and makes cleaning and maintenance much easier - should be the major search factors.
When You Buy, Consider a Fixer Upper - Of course, one way to save when purchasing a home is to go the fixer upper route.
You can typically get a house in need of updating and work for very reasonable prices compared to new ones.
This approach is definitely not for everyone, but it's become much easier even for novices, thanks to the presence of TV shows and YouTube with their DIY shows.
I often think of the help all those instructional resources available now would have been for us when we were clueless newbie DYIers struggling to learn from books!
You can save hundreds of thousands of dollars and increase the value of all any house substantially if you're willing to put in some solid sweat equity. I am a firm believer in this approach because it has worked so well for us.
The key is to start small with a livable house that needs upgrades, and build up your skills and confidence as you take on more complex projects.
This fixer upper route is definitely a viable option for you if you are willing to live and work on a construction site for a while and learn the skills you need to get the work done.
These are typically high rise buildings, or large apartment complexes that are geared to the acquired tastes of today's young people and are marketed to get you to spend more money on rent than you probably should.
Don't give in to the siren call. Instead, look at older and/ or smaller apartment buildings, such as multi-family homes, and check out less trendy neighborhoods and buildings.
If the focus stays on safety, overall affordability, and decent, but not luxurious criteria, I think many people would be surprised by what they can find in terms of acceptable housing.
And if you are able to consider buying a home, the same guidelines apply as for rentals.
Safe neighborhoods; well-maintained housing stock that's not fancy or luxurious; and a manageable home size - that reduces tax and utility costs and makes cleaning and maintenance much easier - should be the major search factors.
When You Buy, Consider a Fixer Upper - Of course, one way to save when purchasing a home is to go the fixer upper route.
You can typically get a house in need of updating and work for very reasonable prices compared to new ones.
This approach is definitely not for everyone, but it's become much easier even for novices, thanks to the presence of TV shows and YouTube with their DIY shows.
I often think of the help all those instructional resources available now would have been for us when we were clueless newbie DYIers struggling to learn from books!
You can save hundreds of thousands of dollars and increase the value of all any house substantially if you're willing to put in some solid sweat equity. I am a firm believer in this approach because it has worked so well for us.
The key is to start small with a livable house that needs upgrades, and build up your skills and confidence as you take on more complex projects.
This fixer upper route is definitely a viable option for you if you are willing to live and work on a construction site for a while and learn the skills you need to get the work done.
Don't Develop Champagne Tastes - Compare that approach to some of the clients I had when I was a licensed real estate agent.
I encountered many a young, potential home buyer who had become accustomed to the types of posh rentals I mentioned earlier.
When they shopped for a home to buy, they simply could not accept the reality that the mortgage they qualified for did not allow for anywhere near the level of grandeur and amenities they were used to.
Many of them were unable to adjust their expectations and chose to continue renting and essentially losing out on opportunities to build equity. The spent years throwing their high rent payments out the window. To this day, some of them have never bought their own home.
I encountered many a young, potential home buyer who had become accustomed to the types of posh rentals I mentioned earlier.
When they shopped for a home to buy, they simply could not accept the reality that the mortgage they qualified for did not allow for anywhere near the level of grandeur and amenities they were used to.
Many of them were unable to adjust their expectations and chose to continue renting and essentially losing out on opportunities to build equity. The spent years throwing their high rent payments out the window. To this day, some of them have never bought their own home.
My point in all this is to make clear that there is a fairly wide range of possibilities in housing choices and costs.
Be mindful of that and the fact that it's always easier to scale up our tastes, but typically very hard to scale them back down.
It's better to keep your requirements and expectations simple so that you are making a wise -- and very conscious -- choice for your current and future circumstances.
As far as the young man in the article is concerned, his choice wouldn't work too well in our climate in the winter, but my hat is off to him for trying to get a handle on his finances, pay off his debt, and get some money in the bank.
His flexibility about his housing will in all likelihood enable him to be on solid financial ground in a very short time.
I suspect he'll do just fine.
Be mindful of that and the fact that it's always easier to scale up our tastes, but typically very hard to scale them back down.
It's better to keep your requirements and expectations simple so that you are making a wise -- and very conscious -- choice for your current and future circumstances.
As far as the young man in the article is concerned, his choice wouldn't work too well in our climate in the winter, but my hat is off to him for trying to get a handle on his finances, pay off his debt, and get some money in the bank.
His flexibility about his housing will in all likelihood enable him to be on solid financial ground in a very short time.
I suspect he'll do just fine.
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