What is the number one expense of most people in the United States? HOUSING. Most people are spending over 1/4th of their income on just having a roof over their head. What if you had the option to reduce this expense to less than 10% of your income or maybe even GET PAID to live in your home! There are many things that can be done to reduce expenses.
The first and easiest option to do this is get roommates. If your rent is $2000 per month and you have 4 roommates (including you) then each person likely pays $500 dollars per month. This is a pretty fun option, just make sure the people that you choose to be your roommates are good roommates. Just because somebody is your friend does not mean that you want them to live with you. Use your own judgement to make these decisions.
This is something I’ve been able to do multiple times, once living in a 4-bedroom house and once living in a 3-bedroom house. Both of which I paid less than $600 dollars per month after utilities! This is also in the city of Phoenix, so there are much cheaper and more expensive places to live. Location must be considered. The person with the master bedroom might pay a bit more. So, if you’re trying to save money while you’re young and while living with roommates is still appealing, consider not taking the master bedroom. People run into a problem when they don’t want to live with other people, or they only want a certain amount of roommates. Who wants to live with 3 other people? That could be a question you are asking. Is this a sacrifice worth making to pay off debt, or save extra money, or even allow you to travel a few extra weeks per year? Make a list of the pros and cons if this is an option you are on the fence about.
You may be asking, what if I have a family? Well, this does get more complicated and for many people roommates may not be an easy option. You can always consider finding somebody you trust, and you know is going to be respectful of your house and your family. But you can also rent out your garage. Depending on where you live, insulating and installing a bathroom into your garage can be a great way to make some money from that space. You do give up the storage, and some people still use their garage for cars. But for hundreds of dollars a month, this may be an additional option that has not yet been considered. Just make sure to check local laws so you do not run into issues.
The next option and a very powerful wealth building tool is house hacking. You will need to research before home buying, to ensure you make a smart financial decision. But if you are a homeowner you can rent your other rooms out to the price of your mortgage or MORE. So, if your mortgage is $1000 dollars per month, with two spare bedrooms you can find people that you don’t mind being around, are going to respect your property, and will rent out the two extra bedrooms for $500 dollars per month. That means that the two people living with you are the ones paying your mortgage in this situation. You will have that mortgage cost covered leaving you that money to invest, save or spend. If you have a $1200 dollar mortgage and 3 bedrooms spare you can still do $500 per month and have an extra $300 to save for home emergencies like a new roof or water heater or do with what you please. In both these cases this extra income is great. You will need to research local laws to ensure it is legal to rent in your area.
Now, what if you have a family and you are not interested in having other people pay your mortgage by living with you in the same house? Or if you’re just somebody who wants to live alone? Well, you can consider buying a duplex or triplex or larger. In this case you can charge full rent to somebody, have them pay their own utilities and still live in the other side of the duplex. For example, if you buy a duplex and the mortgage is $1500 but the rent for a duplex in the same area is about $1200 per month you will have to pay the other $300 but that is for the entire side of the duplex you live in. This option is one of the best for people who want their own space but still want to minimize their housing costs as well as build equity.
Another thing to consider with house hacking is that you are building equity in a house. So, not only are you living for “free” by not paying rent, the money to pay your mortgage that your renters give you is building in the equity of the house AND hopefully your house is going up in value meaning you are making money 3 different ways. Value, equity, and saving on rent/mortgage costs. This is once again something to investigate to make sure it makes financial sense for your situation.
Using one of these two options can be a very easy way to reduce your cost of living. With one of these two options, your savings could increase over $10,000 per year. That amount of savings alone is enough to make you a very wealthy person if it’s invested well. You also want to consider the pros and cons of using a VA loan. If you have enough money for a down payment, it may be better to not use a VA loan, it will take research to find out if that is the case for your situation. Also, if you decide to do the house hacking option. It might be a good option to have enough money to pay off your mortgage and any emergency bills for a few months in the case that a roommate decides not to move in, or if you’re left looking for roommates for months at a time, or even if something crazy happens with the house that ends up costing money you were not expecting to spend.
On some bases you can find a list of people looking for a place to stay in the housing offices, you can also sometimes get a list of names from the dorm office of people who are soon to be moving out. People in your same squadron/unit might be the best route if you trust them to treat your property with respect.
Reducing living expenses can be a major factor in saving money. Saving money in one’s youth can be worth MUCH MORE than saving as somebody gets older. This is due to compounding your money if it’s invested properly. If they save only $150 per month from 25 to 65 one could have $1,000,000 if invested well. If you cut your rent in half and save that extra money they might end up with MILLIONS of dollars if the money is invested correctly.
If one is not struggling with finances and are able to save at least 15% of your income and have no debt then it may be ok with paying more for living expenses because that person is doing better than many Americans and they are probably saving enough to be comfortable in retirement.
Please do your own research before buying a home and check local laws for renting out parts of your house. These are just options that can be perused, not guarantees you will make additional money. Always do enough research prior to making one of these large life decisions.