Updated on 09.09.14

Trimming the Average Budget: Housing and Shelter

Trent Hamm

Housing – shelter – $10,023/year

Keeping a roof over your head is the single biggest part of the budget of the average American, consuming over $10,000 per family per year – more than 20% of their take-home pay. Yet, quite often, shelter isn’t seen as a target for trimming spending. Many families simply view rent or the mortgage as requirements without stepping back and looking at the big picture.

Here are several ways – both easy and challenging – to reduce the money you spend each year on your housing bill.

Cutting Down Your Housing Budget


Downgrading is perhaps the most effective way to save money on shelter, as it immediately and directly reduces your bill. However, for many, this can seem like an impossible choice, especially if they’re established in a residence.

Move from a larger home to a smaller home

Quite often, people who live in homes have more space than they actually need. In fact, I’d argue that our current family – two adults and (soon to be) three children – has arguably more space than we need in our current home. Ask yourself if there are rooms that you rarely utilize in your home or rooms that could easily be combined to cause unused rooms. If this is the case, you’re probably appropriate for downgrading your home, which will reduce (and perhaps eliminate) your mortgage payment.

Move from a home to an apartment or other rental property

This is a worthwhile choice for people who are finding that the financial burden of owning a home is too much for them. In truth, homeownership has a lot of additional costs that you don’t see right off the bat, which can take new homeowners by surprise and stretch their money much tighter than expected. If you find yourself in this boat, look seriously into selling your home and moving into a rental, which is much easier in terms of managing costs on a limited budget.

Move from a larger apartment to a smaller one

This often works well in cities with many apartment options. If you’re finding that your apartment is stretching what you can afford, start hitting Craigslist and rental sites to see if you can’t downgrade into something smaller that still meets your needs. Quite often, singles and couples without children in city environments don’t spend significant amounts of time at home – and when they do, it’s often doing sedentary activities. Thus, you can often downgrade with much less discomfort than you expect.


An alternative option to downgrading is to simply share your housing with someone. Finding a roommate is a surprisingly effective way to reduce costs without giving up the place where you life, no matter what your situation. Here are some options to look at.

Get a roommate for your apartment

This often works best if you’re single, but can work well with married couples in apartments, too – I know of several married couples who have shared two bedroom apartments over the years. If you’re having a hard time meeting costs on your own and have a spare bedroom (or some spare space that can be so utilized), look into getting a roommate. One good place to start is via your own social network.

Rent out a portion of your home

If you live in a home and have rooms that are unused (perhaps the children have moved out), you can consider renting part of your room out to singles, couples, or families who are looking for low-cost housing over the short term. This works best if you have a floor of your home that you can rent.

Look into cohabitation arrangements for your home

Perhaps a family member of yours is in a unique situation after graduating from college or going through another life change. If this is your situation, look into cohabitating with them. Invite them to share your home with you for some portion of the monthly mortgage payment (perhaps have them pay half of the mortgage while you cover the full energy bill – after all, you’re the one whose name is on the mortgage, so you’ll gain asset value by their presence). Alternately, you may be the person that takes advantage of such a situation. My wife and I have actually discussed this option in the past.


Given the costs of home ownership (and even the monthly cost of a big, fat rent check), some preparation before you make a big leap can really help.

Rent instead of buying

In most (not all) situations, renting is more cost-effective than owning a home if you’re conservative with the difference in money. This is particularly true if you’re not confident you’ll be living in the same area in five years. Look at apartments and homes that meet your needs both on the rental and the ownership side of the coin and also consider the extra costs of owning a home – insurance, repairs, maintenance, and so on.

Save until you have at least 20% of a down payment before you even consider buying a home

If you rent with less than 20% down, you’ll either have to take out PMI (insurance against your lack of a down payment) or take out a secondary loan, often with a higher interest rate. Be patient and avoid those extra costs – keep saving until you have that 20% down payment.

Choose a place to buy/rent that’s smaller than you originally wanted

It’s easy, when you’re looking at apartments and homes, to fall in love with a living space that far exceeds the space you need. Be realistic and don’t push your money just so you can have more space to store all of your stuff. Speaking of all of your stuff…

Sell off all of the stuff you don’t use

Before you even consider moving, go through the items you own and get rid of the stuff you don’t actually want or use. Turn a critical eye to everything. Not only will this earn you a bit of cash, it might shock you when you realize that you really don’t need as much space as you initially thought you did.

I want your help! In the comments, please let me know which of the tips you find most useful for trimming these costs. I’ll include the top choices in a comprehensive budget trimming guide at the conclusion of the series.

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  1. Jill says:

    If you buy, do so with the idea that you can live in the house for a while. The transaction cost of selling a home is typically 10% of its value if you use a realtor. (realtor commission of 6-7% plus transaction taxes, seller-paid closing costs, moving expenses…)

    Buy a house where you can comfortably afford a 15 year mortgage. While the short term costs may be higher, a much bigger percentage of your payments go toward paying down the principle right off the bat. (almost half compared to around 90% of payments to interest the first couple years on a 30 year note)

  2. Chelsey says:

    I like the last tip about selling stuff off. My husband and I live in a 900 square foot apartment (and are about to be joined by our first child). We have sold/given to Goodwill so much stuff since we moved in, mostly because we felt like we didn’t have room for it. Now that we’ve gotten rid of all of the excess, we feel like our apartment is comfortable and spacious. In addition, it keeps us from the temptation to buy more stuff – because we really don’t have room for it.

  3. Johanna says:

    I must say, I’m shocked. I expected “move to Iowa” to be at the top of the list, and I was looking foward to arguing with you about that. :)

    Instead, I’ll argue this: “Home” simply means “the place where you live.” Rented accommodation can be a home. So phrases like “move from a home to an apartment” or “if you live in a home” don’t really make sense.

  4. Chris says:

    For apartment-dwellers, cost is very very rarely associated with the size of the space. It’s about neighborhoods: location, location, location.

    The smallest place I ever rented was the most expensive ($1250/mo for under 200 sq ft), and the largest was the cheapest ($400/mo for over 1600 sq ft). The difference? The first apartment was 20 feet from a subway stop in a hip neighborhood of a major city; the other was in a suburb 40 minutes outside that major city and serviced by a single commuter bus that came only every hour or two.

  5. Angie says:

    I think that this post, while logical, fails to discuss some of the non-economic, emotional impacts of several of the suggested solutions. There are also other ramifications, like uprooting the kids from school, different commutes, etc. Obviously this isn’t always the case but can definitely be another factor to consider.

    I just think overall this topic is mired in so much more than just economics – there’s a lot of emotion involved as well.

  6. Cara says:

    As a single, professional woman who owns her own house, I have had great success renting the two extra bedrooms in my house to other young professionals. It has really cut down on my costs, and I have found that I enjoy having other people in my home to share a meal or a movie now and again. We are all very busy and the truth is that we rarely even see each other, so renting out the extra rooms hasn’t been an inconvenience at all- the extra $ is so worth it! I know a lot of people worry about giving up their privacy, but this is a really good option to consider if money is tight.

  7. Michelle says:

    When we bought our house, we moved from one area to another with a group of people from the same employer. Everyone else was really caught up in the quality of the school district. We bought a house in a lesser quality school district, but closer to work, and the lesser house price allowed us to send our kids to private school for elementary and we can send them to a charter school for High School. And, once the kids are done with school, we’ll have a lower mortgage (if we still have one at all), whereas our friends who bought in better school districts will still be paying for schools they no longer use (we also get a tax break for private school tuition). So, in other words, don’t get caught up in making school quality your deciding factor, look at your options.

    And I disagree with saying that you should shoot for a 15 year mortgage. By that critera, my family would have had to find a house under $100,000. We live in a moderately sized city in Ohio (w/housing prices on average, lower than most of the country), and unless you want to live in the ghetto, houses under $100,000 are prohibitively small or in need of serious repair. I don’t see any problem with a 30 year mortgage, and making extra payments when possible (we save and make 2 extra payments a year). Also, having a longer mortgage gives us more flexibility, since we pay more each month than we have too, if needed, we could pull that money, use it for other needs and still make our mortgage payment.

  8. Shannon says:

    Angie – you’re so right! Trent naively assumes that other factors you mentioned aren’t considerations and it’s so easy to switch from Home A to Home B.

  9. Molly says:

    I wholeheartedly love renting at this point in my life. I don’t know how long I’ll be in this city, I like not having to worry about the housing market and selling at some point, and it’s fantastic to have maintenance so easily available (and free)!

    Favorite tip: Choose a place to buy/rent that’s smaller than you originally wanted.

    We actually made scale drawings (graph paper and all) of all of the belongings we wanted to keep and all of the apartments we looked at when we wanted to move. And then bought the “just right” size. Three years later? Still like it!

  10. Amanda says:

    My sister and her husband bought a house 2 years ago, he was out of work for 9 months before picking up a temp job. They can pay their bills on her salary (+) but not really save. Fortunately, they only have a mortgage and a siding bill that just came due. She was going to lower her 401k contributions if all else failed, but instead has been the halfway house for family.

    Our father got a job nearby and stayed with her a few months while settling into the new job and appartment hunting. My husband and I sold the townhouse he’d purchased with his ex-wife and are now living there as we househunt for a single family home. We currently have a bid on a small place. Just as much space as we need, and if we throw a huge party we’ll just drive the 1 mile and ‘host’ it at my sister’s.

    We plan on having a kid in the next year or two, so we didn’t want to wait much longer, so we’ll only have closer to 15% down. But we’re also saving up the money so when it does happen, we can live on 1 salary and the designated fund for a year.

  11. Steffie says:

    No matter if you rent or buy, the neighborhood can change. The traffic on the street and the neighbors behavior during the Open House on Sunday could be quite different from 10pm Saturday night. Take the time to visit the area at different times for at least a week to gauge the atmosphere. Your neighbor might go away every weekend but have the stereo blasting on the week nights till the wee hours. Also take a look for what is important for you within walking distance; public transportation ? a store for late night munchie attacks ? a park ? library ? hospital ?.

  12. Vicky says:

    I agree!

    My husband and I live in a 908 sq ft house. I share it with 3 dogs – a great dane, a german shepherd, and a corgi mix, a cat, 3 ferrets, and some fish.

    The house is 3 bedrooms, 1 bathroom. I have a bedroom, I have a computer room/guest room, and I have a room where my ferrets live.

    The positives is that I live in a decent area between to major cities at a fraction of the price. I have no children, so I didn’t need to worry about the school district.

    We picked this house because it had what we needed: at least 2 bedrooms and a fenced in yard. The small size hasn’t made me any less happy – our apartment before this was 1248 sq feet, and we had just the right amount of furniture to fit the house!

  13. Bill says:

    School districts are regularly redrawn.

    My high school redistricted between junior and senior year.

    Class size doubled, and 40% of the students were now drawn from the poorest, highest-crime inner-city neighborhoods.

    It was the most popular high school then, now no one attends if they can avoid it.

    We prefer living where we want and sending our kids to private school.

  14. Nick says:

    Selling extra stuff is extra important if you waste rent money on a storage space for the stuff you can’t fit in your place.

    Trent, got any tips for the best ways to sell stuff? I know you don’t like Craigslist that much, do you just do yard sales?

    Refinancing is an important option people should remember, too. Especially for someone who has a boom-era mortgage – recession interest rates are so good right now. I have a friend at work who still has an interest-only loan!

    There’s also the option of rent negotiation. Speaking with your landlord is another way to change your housing costs without moving.

  15. Gretchen says:

    #8 forgot that you also need someone to buy home A.

    I’m also interested in “stuff selling” tips. Usually I just donate it to Goodwill.

  16. Gretchen says:

    I’d like to see more data/back up reasoning on “In most (not all) situations, renting is more cost-effective than owning a home if you’re conservative with the difference in money.”

    I just don’t think that’s true in all regions of the country and in all (most?) situtions.

  17. Ms. Clear says:

    We rent a small apartment and planning on trying to make it work with our first child. If it has lead and the landlord implies he going to raise the rent a great deal, we’d move, but other than that, I’d like to try and stay.

    We’ve been here forever. It’s not a cheap place to live, but it’s a good deal for this area, which is more expensive than the national average.

    What I like about renting is that I have four monthly bills: rent, electricity, cable/internet and VOIP phone. That’s it. Yes, I have irregular costs, car and rental insurance, but there’s not the never ending parade of housing costs I associate with owning. We don’t even pay for heat. And if it breaks, I just report it and move on. It seems to work for my family. We’re not poor, but live on a modest income.

  18. Debbie M says:

    Here are some more ideas.

    * move to a place with a lower cost of living (as Johanna feared you would say!)
    * move to a cheaper part of town
    * move further out of town (the classic American strategy)
    * move from an apartment to a trailer
    * move to a fixer-upper; then fix it up

    * move in with family
    * move in with someone looking for a roommate
    * rent out parts of your property for other uses, such as storage, parking, or gardening

    * Tell your real estate agent the amount you’d like to pay, not the maximum amount you can afford to pay; you can always give a higher figure later
    * Shop around for a mortgage
    * Learn home maintenance skills by helping parents and friends, volunteering for Habitat for Humanity, and/or taking informal classes at community centers and home improvement stores

    Reduce costs
    * Re-negotiate your rent or refinance your house (as Nick said)
    * Use parts of your house to make money such as by having a home office or growing vegetables

    My favorite tips:
    * have a roommate (I generally like having company, and when my roommates aren’t my favorite, I focus more on hobbies that are outside the house.)
    * move to a cheaper area (I love my city, but I couldn’t afford to live exactly where I wanted to—I still live fairly centrally and have very good access to the freeway and a pretty good bus route, so I can to all those other places easily.)
    * move to a smaller place (My house is only 1000 square feet, which was fine with most of my roommates. My current roommate/boyfriend sure has a lot of stuff, though; I may be adding on.)

  19. George says:

    More proofreading before posting!

    Never knew that you needed a down payment when renting…

    Third paragraph from end says, “If you rent with less than 20% down, you’ll either have to take out PMI (insurance against your lack of a down payment) or take out a secondary loan, often with a higher interest rate.”

  20. Maureen says:

    We paid attention to the location of our house. We were fortunate to find a home in a pleasant residential neighbourhood that was a 10 minute walk from an elementary school, church, bank, 2 grocery stores, hardware store,restaurants and a pharmacy. It was a half hour walk to 3 different highschools. We are also walking distance to our dentist and doctor. It is also very close to public transportation for destinations further than walking distance. This made it very easy to live without a second car (we didn’t have ANY car till our 2ndchild was born). This saved us a lot of money!

    We also lived for 5 years in an apartment while we saved for a home and my dh completed his PhD.

    We also picked a home that we could afford on one salary, since we were planning to have me be a SAHM when we had children.

    After we had paid off our mortgage we eventually decided to expand our living space by building an addition. We didn’t want to move to a different home because we like the area so much!

  21. Debbie M says:

    PS, I’m quite surprised by the figure given for housing. It comes out to $835.25, which is almost exactly my mortgage payment, which I consider to be quite cheap.

    My house is valued at only half the median price in my city and I got a fixed mortgage on it 13 years ago (when it was valued at just over 1/3 of its current value). It’s small, it was built in 1955, and it’s sort of near an iffy part of town. I do live in a city, but it’s not one of the expensive cities.

    Also, I was under the impression that most people spend much more than 20% of their take-home pay on housing, more like 30% of their gross income.

  22. Amy B. says:

    I concur that sharing a living space can help a lot. I used this technique the year that I shed $12K in debt.

    There are costs associated with serial-renting, too. I have had landlords withhold from deposits needlessly, paid for transition cleaning (both inbound and outbound), and endless moving costs (some for help, some for replacing broken items).

    In some areas, 20% down payment isn’t completely realistic, and waiting to amass that kind of money can also have negative financial impacts. There are ways and programs to help buyer in these markets (VA, FHA, and some local programs). We just took advantage of these programs (and bought a home we could afford on one income), because we plan to use the money that we do have saved to increase our equity in other ways through improvements.

    I think home ownership has its merits – it’s not for everyone, but owning a place to live mortgage-free is one of the best hedges against escalating costs of living in retirement (although with property taxes, there are no guarantees!).

  23. J. says:

    My husband took a part-time maintenance job for a condo building that included a small apartment as part of the compensation. It was hard work getting up at 3 or 4 am to shovel snow plus hold down full time jobs, but after three years we were able to save enough money (15%) for a decent down payment on a property in a fantastic (but not exactly cheap) urban community. Not everyone can do this, but you’d be surprised what’s out there if you ask around. We originally found the job by word of mouth when we started telling folks we were looking to move to the area.

    When we started shopping for a property we looked at houses and condos, but decided to buy a 2-flat because we could rent out one apartment, which covers our mortgage payment, and live in the other (and get a owner-occupied property tax credit). The previous owners of our building bought at the height of the market and renovated the first floor apt (which is currently rented) but ran out of money before finishing the second floor. It is livable, but will eventually need a kitchen reno and partial bathroom reno. Because they were so underwater they were eager to sell, and it made it a better deal for us. We will save until we have enough cash to pay for the needed reno.

    I think it’s important to not rush into a housing choice–just because everyone else you know seems to be buying a house or renting in a certain neighborhood doesn’t mean you have to, too. We took our time and shopped around until we found a place where we felt we could live at least 5 years–i.e., it had enough bedrooms for when we start a family, and it would be possible to stay there on one income if we had a renter and one of us wanted to be a stay-at-home parent while the kids are young. Eventually, we may try to buy another place, move out of this one, and rent both apartments out.

    I think it’s important to remember that the first home you buy may not be your “forever” home. We know people who overspent on their first place and are now underwater and struggling to sell because the home no longer meets their needs. But you also have to honor what’s most important to you. The location of our home was very important to us, and we were willing to pay more for it than we would have in other nearby communities. Being in town known for good schools and good public transportation saves us money (no private tuition to pay, one car to maintain/insure) and attracts good renters for our property.

  24. Jane says:

    I agree with Amy that the 20% rule is hard to follow in certain parts of the country. I live in an area where it is possible to save 20%, but if you live in, say, San Francisco, it might take you decades to save that much. Perhaps Trent would say you should only rent in such a market, but I think there’s something really satisfying about home ownership. It is not for everyone, but even though we pay more for it, I wouldn’t go back to renting.

    I’m impressed by the small subset of people who save 100% for their home. I wouldn’t have had the discipline to do such a thing, but I admire it. It must be amazing to never pay interest.

  25. chacha1 says:

    I’m an outlier: DH & I pay $2400/mo for rent. This is, shockingly enough, mid-range for comparable apartments (ours is 2 BR, 2 BA, secure parking, secure entry, HVAC, pets allowed, quiet & safe neighborhood, nearly 1500 square feet including a semi-private fenced patio) in our area of West Los Angeles. There actually aren’t many apartments with that square footage; plenty of apartments with less square footage cost MORE.

    A comparable condo or house to purchase is in the $1,000,000+ range. Still. And always will be. Even with 20% down, on a 30-yr mortgage the monthly payments would be around $4200/mo. Which makes our $2400 look pretty economical.

    We *could* make a $4200/mo payment, but would be absolute slaves to it. Not to be considered. Plus, that requires saving up $200,000 first!

    Our plan is to pay off all debt, save up a 20% down payment for a modest retirement property, buy that and pay it off – then get the heck out of this wonderful, but expensive, city. (I wouldn’t advise anyone to retire while still paying a mortgage, although I guess people do.)

    I know we’ll be perfectly happy in a $300,000 house later on. For now we’re perfectly happy in our expensive, big apartment – and we can always choose to downsize (I like that better than “downgrade”! Smaller isn’t necessarily ickier.)

  26. Torrilin says:

    I don’t think most of these suggestions are realistic.

    We could certainly choose a smaller apartment, and in this city it could save us money. Most of the areas of town where it would save us money require a car tho, so it’s not very useful. It’s *very* hard to find a rental market where you can get rents under $1/sq ft and have sufficient transit access that you can live without a car. So… that’s not very helpful.

    In order for roommates to be viable, we’d need a larger place. 750 sq ft and one bathroom where it’s almost impossible to close the door is not very viable for two married couples. It’s awfully tight to have houseguests, mostly due to the bathroom issues.

    Tips you don’t include that *are* realistic… don’t just look at the space in an apartment. Does the building have heat included? What about water? Sewer? Internet service? In our area, it is very easy to rent an apartment the size of our place, pay more than we do, and have no utilities included. Our apartment rent includes water, sewer, and heat. It’s a *very* good deal given Upper Midwest winters. Most apartments this size are about $100 to heat each month, so the savings is substantial.

    Also look at renting a house rather than buying. If you truly need more than 1000 sq ft (perhaps you have children), a rented house can be a good deal. Again, look very closely at what is and isn’t included in the rent. People renting houses are not always experienced landlords, so the lease agreement may not be something that can hold up in court. That’s bad for you, since a careless landlord will often be bad about holding up their side of the deal.

  27. Susanne says:

    I completely agree with your suggestion of getting a 20% down payment saved up prior to purchasing a home. We didn’t, and that’s really hurting us in this down economy. We’ve lived in our place for almost two years… I now wish we’d either saved up a bigger down payment or simply rented. For us, renting would be MUCH more cost effective.

  28. Margaret Mary Myers says:

    We moved from a home to an apartment, and our greatest savings has been in not having to pay for maintenance and repairs. It’s great not having surprise bills for tens, hundreds, or thousands of dollars in repairs or basic maintenance (heating, roof, etc.).

  29. sewingirl says:

    I disagree with saving 20% for a downpayment, as a rule. My daughter and hubby bought a house this Summer using several government programs for first time home buyers, with nothing down, and got a GREAT deal. Housing is dirt cheap in Michigan’s terrible economy. They got a smaller, older house on a very large lot in town. It was formerly a rental, and needed some fixing, but nothing major. They can have this house paid for in 10 years, instead of 15, if they buckle down. And have plenty of room to add on, or even raze the whole thing and start over. If they had waited to save the 20%, they likely would never have found such a good deal. Every situation is unique.

  30. Sara says:

    Of the tips listed, I’d say that “Choose a place to buy/rent that’s smaller than you originally wanted” is the most useful. The downgrading tips may not be practical, because there are a lot of expenses associated with moving (especially if you already own a house and need to sell it), so it’s probably better to start with something modest in the first place. Plus, if you have a lot of extra space, you might be tempted to buy more stuff just to fill it.

  31. Bonnie says:

    @#21 Debbie-I noticed the same thing, but that’s the problem w/ averages. The statistics include retirees who’ve paid off their home and have no mortgage/rent, so it skews the numbers. It also includes those who share housing or rent out rooms in their house, so their housing costs would be lower than the average rent/mortgage in their city. Plus, some people may live with relatives and pay little to no rent at all.

  32. hattie combs says:

    In defense of Trent…his main focus is on finances, so I think he probably intended us to assume “all other considerations being equal,” i.e. the non-economic ones. Because there are so many that the post could have been endless! (Maybe some more posts dealing with these subjects?)

  33. Kacie says:

    Call it a “house” not a “home” if you’re referring to mortgage holders. A home can be anywhere. Following me?

    Here’s another idea for renters: Negotiate your rent! Even if you’ve already signed a contract, look around at apartments in your community. If there are some empty ones, the leasing company probably wants to work extra hard to keep you another year.

    Ask them what kind of deal they can offer you. It’s often cheaper for them to give you a rent discount than it is for your apartment to sit empty while they search for another tenant.

  34. Jules says:

    There’s a lot of emphasis on downsizing, but I think it’s also critical that you don’t mortgage a tiny house if you actually need the space.

    Also, location matters. If you can live just outside a major city, the rent prices drop astronomically. I bike 30 minutes to work every day, which isn’t much of a hardship, but in doing so I’ll be saving at least €100/month in rent for a similarly-sized apartment.

  35. deRuiter says:

    Please, use “house” or “condo”, they are NOT synonymous with “home” as Johannah mentions. Trent, You’re a great guy with a great concept for earning money, but you need more work on your English grammar, you need to use words which mean what you want them to mean. Try having someone proof read your stuff for mistakes, it’s hard to proof your own stuff, although running spell check would help. You’re a professional, make your work professional. We all enjoy your column, you’re making money doing what you like, now humor me and polish your product a bit before you publish. Thanks!

  36. I would also throw in there refinancing whenever it makes sense to do so.

    Paying off the closing costs within three years of doing so I know is a benchmark they give for you.

    And obviously, reducing your monthly payment substantially as well.

    Careful who you go with though–hopefully, its someone you know and trust.

  37. Tracy says:

    We live in upstate New York. When we were considering buying, we couldn’t find anything in our price range for 3 or 4 counties. We had to way up north. We had an accepted contract for sale and then ended up not being able to finalize the mortgage even though we had been preapproved. Then my hubby got a great job and thank goodness we hadn’t bought because the commute would have been impossible.

    We pay $1350 for 3 full floors of living, 3 bedrooms 1 1/2 baths, finished basement and an attic for storage. It doesn’t include any utilities or water, sewer or anything. So our expenses are rather high, but it still beats owning, especially in this area. We’d have a much higher mortgage payment and then we’d have the expenses surrounding owning the house. Since we moved here, the smoke detectors all needed to be replaced and the stove needed to be replaced. Neither of which we paid for. I love the idea of calling someone else when something breaks and not having it come out of my pocket.

    I’ve often thought of downsizing. But we just love this place and are happy with the school district.

    One thing Trent doesn’t mention is living in a rental where you have a lease. We have a lease until August so even if we wanted to, we really couldn’t move in the middle of it. Plus I have a teenager who will be in High School starting in September so I’m very sensitive to changing schools now. My hubby isn’t happy about it, but I am hard pressed to effect such a change at this juncture. I had my son change schools coming into 7th grade and it was hard enough. having him change on the way into High School isn’t something I’m willing to do.

  38. Jules says:

    One huge thing you forgot is to take into account what the rent on a place covers. In Europe, it’s not unusual for rent to include all of the utilities, and many landlords also throw Internet into the mix. While I looked for places in Philly, I’d often find that a great place at a reasonable price was often less reasonable once the electric, hot water, telephone/Internet, and trash disposal bills were considered.

  39. marta says:

    I will have to agree with Johanna and others about the use of “home” when you actually mean a mortgaged house. Home can be anywhere and there are condo buyers too — I am one.

    Anyway, lots of tips here, yes, but what are *you* (Trent) going to do to reduce expenses in *your* situation? Or there is no need, in your case?

    I mean, in my case, I don’t see where I can reduce my costs. I bought a condo (the right size) for a decent price, and got a pretty affordable mortgage — the monthly rent for a similar place would have cost around twice my mortgage payment. I live in the city, so I don’t need a car to get around, so that’s an expense I don’t have. :: shrugs ::

  40. Marle says:

    When my husband and I were house-hunting, about 2 years ago when the foreclosure crisis just started, prices were all over the place. Even though it’s just the two of us and we’re not planning on kids any time soon, we bought a 4 bedroom 3 bath house, because that was actually the best deal we could find (price/condition/neighborhood) even though it’s way too big for us. Also, the monthly payments with a 15-year fixed mortgage isn’t that much more than renting, and the rent payments are going to go up every year. So, oddly enough, buying smaller isn’t always more frugal. But we’ve done the roommate option, and that’s worked out well.

    BTW, Michelle comment #7, there’s nothing wrong with houses under $100,000 in Ohio. My house cost $72K, and it’s in a quiet suburb (of Cleveland) with decent schools and didn’t really need any repairs. Did you go housing shopping at the height of the housing boom, or is your area of Ohio just that much more expensive than Cleveland?

  41. Shelley says:

    My husband and I just closed on our downsizing of our living arrangements yesterday! In doing so we reduced our mortgage payment in half, only moved 2 miles from our previous home, will pay off all our other debt and free up the cash to pay our kids college costs. We loved our previous home and it was a great place to raise kids in the country and have acreage, but with them away at college, downsizing was the right thing to do, so now we are in-town dwellers though with an large acre lot so we can do a lot with it (just no more horses!) -they are a cash drain anyway! Property used to be Rural -so includes a Barn! so a party barn is in the works so kids are still happy. Just don’t have to clean stalls anymore…just need to be willing to be flexible and adapt to new adventures!

  42. Nancy says:

    *Down payment* When you’ve saved and have your 20% down payment, consider looking at a fixer-upper instead of a home that’s move-in ready. We bought a 1,500 sq. ft. home with cash (equivalent to perhaps a 20% down payment of homes in our neighborhood), and then put in the sweat equity. Now we have one of the nicest homes in the neighborhood. Yes, the materials were an additional cost–more than the house–but in 3 to 4 years we’ll have everything paid off. Best of all, the bank doesn’t own our home. We do.

    *School districts* We’re in the inner city, where the schools have a very bad reputation. Instead of believing the hype, we’ve looked into it on our own and found that many schools are actually very good. Some, however, aren’t. But the biggest factor in the schooling is the parenting. Parents should never forget that they are the single biggest influence on their child’s schooling. Parents should teach their children about life, and then the children can learn academics from any school.

  43. Michelle says:

    @ #41 Shelley, we live in Dayton and just bought our house in August 2009. We looked for about 3 months, and couldn’t find anything that would meet our needs for under 100K. Our criteria were, a safe neighborhood, less than a 15 minute commute for my husband, and no major renovations needed. I don’t think we were being overly picky, and the lowest priced house we could find was in the 130’s. I guess it all depends on the local RE market!

  44. JT says:

    I like the tip about selling stuff. Reduces clutter and I think most people that rent storage spaces would be better off just going through their existing stuff – everyone can find things they no longer use/need.

    I would love to see a post about how to sell stuff on eBay or Amazon as well.

  45. Christina says:

    I’ll keep it short and sweet! Loved this post. Most people just follow the “standard % of your pay” when looking for a house. That’s nuts. The hubby and I found a home that needed fresh paint and carpet, but was a great solid home. The lady selling it had been transfered for a job and didn’t want to do any repairs, just had to sell it. We walked in at 15k under market value (25k under appraisal = which means nothing to me) with 20% down. We had a month left on our rental lease, which we spent knocking out everything that needed fixed, cleaned, painted, etc. I also believe in living on one salary and saving the other, so our actual mortgage payment (10 yr mortgage @4.5%) is only 13% of our gross income. We bought just want we NEED, not WANT!

  46. Raghu Bilhana says:

    — Never buy a house more than 2 times your pre tax income. If you “want” to live in a more expensive house, just know that you cant afford it.

    — Dont buy a house if you are moving out of it in less than 7 years.(People say it is 5 yrs but I would give it 7 because of all the closing costs etc).

    — Rent an apartment not a house, if you can.

    — Rent in cheaper but secure part of town. The money saved living in high crime areas is not worth it.

  47. KC says:

    My suggestion for trimming costs in this category is to keep all household expenses (mortgage/rent, insurance, taxes, regular household expenses, and the like) to less than 30% o your take home income. Banks frequently recommend keeping your housing costs below 30%, but they are referring to your mortgage. If you can keep everything below 30% it’ll be much easier.

    And I agree with not having a lot of extra stuff. I used to live in a 1400 sq foot place and my husband and I had to really minimize what we had in order to not be cluttered. Now we live in a much larger home with plenty of storage, but I’ve maintained the “minimize” idea. We have more furniture now, but not excessive amounts. But the furniture isnt’ the problem – it’s the STUFF. Minimize the stuff – you’ll have less clutter in your home and save money by not buying “Stuff”.

  48. Karen says:

    None of these ideas really help me with reducing housing costs. We live in a 2100 sf old farm house. We own our own home (but paying mortgage, of course). We have 2 heated bedrooms for my husband, daughter, and myself. The storeroom is unheated, so it would not be very inviting, especially during these cold winter days. We are remodeling, so I would not want to invite someone else to live in our mess. However, in a couple years the daughter may be off to college and getting a renter may be feasible. We’ll see. I am trying the getting rid of excess stuff suggestion – and next summer we plan to tear off three rooms (store room, mud room and downstairs bath). This will decrease heated area, leave a smaller footprint, and allow us to save more money to build our dream house on our property in a few more years.

  49. Ward says:

    One way to save on the cost of housing is to build it yourself. You will need to be able to buy vacant land (most rural areas) and have the confidence in your skills to do the work, but by doing the building yourself, you can save about half the cost of hiring a builder. Even just doing the general contracting (organizing subtrades and ordering materials) can save a considerable amount. My wife and I did this and were able to get the house to the point of getting an occupancy permit in 8 months. We spent the next 5 years living in a construction site, but we were able to continue working on the house as we earned money for materials. By spreading the cost out, we were able to build mortgage free.

    The real advantages of building your own house are getting exactly what you wanted, knowing exactly how all the systems in the house are built, knowing where ever wire and pipe is located, and the pride in having built your own home.

  50. Stephanie says:

    Buying a house is a big decision. My rather obvious advice is to know what you are willing to pay BEFORE you start looking. And then don’t let the realtor talk you into looking at houses that are “just a little bit” more than what you are willing to pay. And if you give the realtor a broad price range, you will assuredly only be shown houses at the top of the price range.

    The best financial decison my husband and I ever made was to buy a modest house, that was well within what we could afford. The realtor really pushed for us to look at more expensive houses (she knew us and knew our income, saying it’s only XX% of your monthly income), but we had done the math ourselves and knew what we were comfortable spending. We felt we wanted a cushion between income and expenses. Buying a house can be an emotional process. I’ll admit to some initial envy of siblings and friends that bought bigger/newer homes. But, we tried to be pragmatic about our needs and not let our wants rule us.

    And then we stayed put through the years instead of upsizing when the kids were born. The benefits of owning the home weren’t apparent immediately, but over the years our income has grown and our mortgage was fixed. We put pay raises and other little windfalls toward the mortgage. A paid-off mortgage will make a major difference to our cash flow in retirement. My husband and I are looking forward to an early retirement, made possible because our housing costs are so low. Living in a small house also means lower property taxes, lower utilities, lower maintenance.

    BTW, the house that I consider small (and it IS), is no smaller than my grandmother’s house and she raised 5 kids in hers. We so often overestimate what we need, because we really, really WANT more. I think that may be even more true of housing than of other things.

    I completely agree with the comments about extra stuff. We don’t have room for extra stuff. I believe we are less focused on material things because of this. Maybe I’m just being a pollyanna. But IMO the lack of storage space had made us choosy about what we buy and that has made us less conspicuous consumers.

  51. stella says:

    Two bedrooms, two bath in LA for $2,400? Wow. That IS a deal. Something others who don’t live in a major city cannot appreciate.

    Housing is a complex issue even when you don’t factor in overall costs, or your income.

    But income is an issue and is often tied to where you live, and whether you rent or buy. Many people only live where they do because that is where they can get work in their profession, career, etc. And commuting is not always an option. Everyone who lives in the “heart” of a city isn’t doing it because it’s hip and trendy. It may have to do with legal requirements for their job or they literally have to be available within a certain period of time. It can be complex. (Not to mention some people aren’t healthy enough to make extensive commutes.)

    Buying is and always was, though people never understood it, risky in that a neighborhood could change for the worse, lose its appeal because of changes in the area or school changes, taxes going up, etc. Housing values were always theoretically subject to change. It’s only the greedy years that led some people to believe it could stay that way. And nobody has a crystal ball on how things will be. Witness the current mess. There are innocent people suffering who never imagined how much they could loose by investing in a house.

    You didn’t have to be over-spending a few years ago to now find yourself with a house that is worth far, far less and now you are trapped and cannot even sell.

    Location is really a key issue for most people based on where they work, how far they travel to work and activities and then a home’s proximity to local stores, etc. and to schools if they have children.

    Today, whether you rent or own, you are often limited in your choices due to income.

    In major cities, landlords, etc. have all sorts of formulas, etc. for how they determine if you can afford to rent. And many people no longer meet the requirements.

    The solution about sharing? Not always an option because of rental rules. And those rules dictate if you can have some non-family member in your place and if you can, how much you can charge.

    Do people try to get around that? Sure. Sometimes with very dire consequences, like eviction.

    In many cases, even if you can legally have a roommate, the economics really don’t save all that much. Plus there is the cost to your sanity.

    This idea that people are “not home very much.” Simply not the case. Most people ARE home a lot. Especially these days.

    With the cost of entertainment and activities today, most people are spending more and more time at home. Cooking more. Having people over. Because they can’t afford to go out.

    I have friends in their 30s and 40s who can no longer afford their apartments. After 20+ years, the increases have gotten them to a point where despite good jobs, rent is more than half of their take-home pay. Way more. In some cases, it’s closer to 75% and they are NOT in big places or luxury buildings. The cost of living continues to rise way ahead of the increases in salary.

    And the space is such that they can’t share. (You think two adults that are not in a relationship can share 400 square feet and a 6 by 6 bathroom and be home every night and on weekends? Good luck on that.)

    These adults are not moving back home and cannot even afford to move elsewhere if something they could afford was even available. It isn’t.

    One option that many people are looking for is trying to rent from folks with big houses who desperately need the money from renting to keep their homes. And again, you have local zoning and other issues that prohibit subletting and have rules for separate apartments that most homeowners can’t meet.

    So even though lots of people are looking for solutions and are willing to compromise (selling off stuff; giving it away, really streamlining; becoming a roommate or taking in one) in space and location and even sharing (try to contemplate the idea of being a single adult male or female and after 20 or 30 years of living alone, you now have to share. THINK. About. IT.) many are literally stuck with no workable options.

    the “system” of real estate is NOT designed to foster options that would work.

    And all those people desperately seeking roommates–whether in a house or apartment? How many are willing to make some changes and invest in say a second refrigerator? Or upgrade kitchen appliances, or add a second bathroom?

    If you can’t afford to make your space habitable by another human, then don’t be looking to pay your bills with THEIR money.

    More important, is the greediness of many people offering sublets, offering apartment sharing and home sharing. Some folks are asking MORE than they themselves are paying for a space each month, much more, and thinking that this is OK. Surprise. People are not stupid and when they are financially challenged, they are NOT looking to bail you out!

    It’s one thing if you are offering some luxurious place with special features, etc. but that’s not what we’re talking about for “real” people.

    I watch these HGTV shows with couples buying this outrageously large and expensive homes and huge mortgages and I’m thinking: How can you afford these places? What kinds of income do you have?

    Most people are struggeling on basics like housing and food. And it will only get worse.

    Meanwhile, we need ways to make it easy and worthwhile for home owners, those with big apartments (that could accommodate roommates) to share spaces so that each could ease their respective financial burdens.

    We have many resources in this society. It’s about finding ways to help each other.

    Everybody has to compromise so all can benefit.

    Even if one’s own home is safe, one should be concerned about the welfare of our fellow citizens. It is NOT acceptable that people who work hard should find it impossible to find a place to live.

    And for those who cannot work or have limited income, they still deserve a decent place to live.

    Yea, we all are guilty of over-estimating what we need. But there are plenty of folks who live with very little and are now threatened with having nothing.

  52. Molly says:

    At this point in my life, I wholeheartedly enjoy renting. Being able to get free maintenance when my sink breaks is a huge load off my shoulders. Plus, I’m not sure how long I’m going to be in this city, and I don’t want to deal with the hassle of the housing market and selling.

    Favorite tip: Choose a place to buy/rent that’s smaller than you originally wanted.

    My apartment is “just right” sized. :-)

  53. mary says:

    Found the comments about how “hard” this would be and that it involves more than just finances (meaning emotions) to be interesting. After all, that is a huge point about what Trent writes, that emotional choices are usually what gets us into debt or keeps us from saving. We “yearn” for a bigger house, better cars or private schools for the kids. We feel insecure if we don’t have the latest fashion. After all we don’t want to make our kids unhappy by buying thrift shop clothing, or not giving them a toy store at Xmas, etc.
    Moving is just one more place where we have to look carefully and insightfully into our own emotions and figure out what emotions are useful and what are harmful to our finances. Emotions are not the only consideration for making decisions. Especially if we want to be debt-free and/or financially independent (for me that means freedom and happier).

    An example, I have a friend who longs for the country life, who wants to live in a small town, who desperately wants out of her marriage, but won’t move because her child is still in school. She has been putting this off for more than 7 years. Millions of kids change schools every year, and even between semesters, and while some may not like it, many benefit from it.

    My husband and I downsized from a 2200 sq ft home to a 1200 sq ft rental. (same schools although this was not a consideration for us) After 18 months, we felt sure we could handle another downsize and moved to a 760 sq ft cabin. This is in Texas where housing is pretty cheap to begin with. Our house note/rental went from $1900 to $1200 to $400 a month including property taxes. We also decided to try to make do with a single car. Note that the way we handled our fear about downsizing and making do with one car was to do it in steps. When we sold our second car, we put the money aside in case we couldn’t manage with one car. But so far, no problem.

    Both my husband and I (before we met) were deeply in debt. We had worked that off by the time we met. One of our rules for living together and then marrying was that we never lived in a place that would take both of us working to pay for. So we used one of our salaries (the lowest paid in our case, but it could be the average) as the basis for figuring out how much we could afford. This gave us some security in case our relationship did not work out, one of us died or became incapacitated, layoffs, or changing careers, and also allowed us to save a lot! Just food for thought.

  54. Pat says:

    Actually, in this economic climate, moving from House A to House B is very hard to do. You may want to sell your home so you can move BUT with the huge glut of houses on the market right now (and very few buying) it will be a long wait unless you are willing to pretty much give it away. Many, many people I know have walked away from their homes because of the mortgage situation. Interesting article though.

  55. Lou says:

    Best tips: go small; get rid of stuff; be realistic about what you NEED, rather than want.

    Worst faux pas: equating house with home – not the same at all. My co-op apartment is a home, thank you very much, and I’ve been in many houses that were cold, unwelcoming and dysfunctional.

  56. J says:

    @Molly — renters often think they are insulated from maintenance costs, property taxes and any number of other things (heat, hot water, snow removal fees, condo fees, HOA fees, etc — whatever is “included in the rent”). It’s simply not true — you just pay for it in the rent, as well as providing profit/income for the landlord.

    Your point about the being able to move more easily is completely true, though, that is one of the major benefits of renting. The rent versus buy decision is a complex one, and there’s no “right” answer, it is very dependent on your situation and place in life.

  57. Johanna says:

    @J: I don’t think your description is quite accurate either. There are several advantages to renting when it comes to maintenance:

    – Economy of scale. If I were responsible for getting my own sink fixed, I’d have to either learn how to do it myself or seek out a competent plumber. Both of those things take time, and still leave me with a significant chance of getting ripped off and/or making the problem worse. My landlord, on the other hand, is responsible for getting 15-20 people’s sinks fixed, so he already knows a plumber who can do a good job for a reasonable price.

    – Simplicity of budgeting. I only have to write one check every month, and I know how much it’s going to be. Many (or even most) homeowners underestimate how much they’ll end up paying for maintenance, so they pay more for their homes than they can really afford. This is bad news for them, of course, but since it pushes all home prices up, it’s bad news for other homeowners as well.

    – Mitigation of risk. I don’t have to keep extra money in my emergency fund to cover irregular maintenance costs. So I can keep more of my money in stocks and get a higher average return. Plus, if a really, really big maintenance problem pops up that my rent doesn’t cover, it’s not my problem – my landlord can’t raise my rent until next year, and if I don’t like the increase, I can move out.

  58. J says:

    @Johanna – I never intended to say that I was offering an accurate or complete description. But it’s certainly true that maintenance isn’t “free” when you rent — it’s just part of the rent, like the other costs I mentioned.

    Risk isn’t entirely mitigated by being able to walk away at the end of your lease term. In better economic times, a number of my friends were forced to move because the landlord doubled the rent on their place (it was in a highly desirable downtown location). So they had to incur moving expenses because of this decision, which in many cases are non-trivial.

  59. Johanna says:

    @J: The word “free” is often used to mean “at no *extra* charge” or “included in costs already paid” – people talk about getting a free toothbrush at the dentist, a free continental breakfast at a hotel, etc. It didn’t sound to me like Molly was saying that she thinks maintenance on her apartment somehow magically costs nothing at all. That she described it as “a huge load off (her) shoulders” sounds to me like what she values is the peace of mind: not having to worry about finding the plumber herself or budgeting for the extra, irregular expense.

    By “risk,” I meant specifically the risk associated with unpredictable maintenance expenses – sorry if I didn’t make that clear. Of course renting still has other risks, but so does any other housing option.

  60. Jennifer says:

    I was surprised to see a couple typos here “life” instead of “live”, “rent” in place of “buy”.

    Moving is a pretty significant expense too. Unless you’re making a drastic change, moving costs could eat up all your savings. Having just moved, even the little things add up. We stayed in a 1 bedroom apartment after our 1st child was born because we knew we’d be relocating when she was ~1 year old and we didn’t want to pay to move twice. We saved a lot of money by not moving and living in a tighter space than we really needed/wanted for a year and half.

    Location is a major consideration. We pay a little more to live closer to my husband’s job but in doing so we live on public transit lines and can live with only one car. So our living expenses are higher but we save on car payments & insurance and come out ahead in the end.

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