The largest expense in your lifetime is going to be you’re living expenses. Where and how you will live will have the greatest impact on your wealth.
The traditional advice is to settle down and buy a house. But in this day and age we all know that is not always the best advice.
If you are changing job often or are retiring or want to try out different areas before you lock yourself into one place then renting is a better option for you and can also be more affordable and more enjoyable than owning a home.
My coworker just move into a new apartment near downtown Ft. Worth and it is SO nice. There are so many amenities in it that you just cannot get from a house. But the apartment is not that big and she is paying a fortune for it.
I have lived in so many different apartments in my lifetime. I have moved states, schools, jobs. All in an effort to improve my quality of life.
I see so many people that get caught up in the millionaire lifestyle on a thousandaire salary. They want to appear rich and live like the 1%. They want to show off their lifestyle on Instagram. But living that way is actually making you poor. That fancy apartment and leased car is keeping you from building wealth and saving more of your income that you could be investing for future gains.
Today I own a house, because I felt like it was time to start building equity and I had a partner that would help pay off the mortgage much more quickly. Today we own the house outright and paid off the mortgage in 4 year. But it took sacrifice to make that happen. Making triple payments some months and saying home most of the time.
Where you live can affect your mental health. You want to be somewhere that is going to motivate you to be better and take on the world. sometimes it is good to start small and upgrade your surroundings. Being a certain type of person can make you work harder and improve yourself.
If you own a home watch out for unexpected maintenance costs and just the cost of insurance, taxes, and upkeep. It can really add up.
But you also build equity and your property appreciates over time. Where as your car is not appreciating.
If you are young or going into retirement, look into house hacking. This is a relatively new term that I have discovered and have been practicing my whole life. Basically reduce costs by having roommates or just sharing living space with others.
Check out my blog entry on house hacking for more details.
I have had a thousand different roommates. Sometimes I have had 3 roommates, other times just one. Sometime I am the roommate and have just rented a room from someone else. It all depends on what is the best situation for you. You can dramatically reduce costs or even make money from sharing space.
Do not let your living expenses rob you of wealth.
As a rule your living expenses should not exceed more than 30% of your budget.
- Utilities: Water, gas, electric
- Trash sewage
- maintenance costs
You should spend a good amount of time deciding on your living options. You will spend the most of amount of time in your life in your living space.
Renting may be a better option for you than buying. The advantages of renting:
- No maintence costs
- Lower utility costs
- Easy to leave
- Explore different areas
Your living space should be a sanctuary that you enjoy.
If you currently spend more than 30% then you have two options:
- Increase your income
- Decrease your living expenses
I love a saying from Ramit Sethi: I will teach you to be rich. There is a limit to have much you can save, there is no limit to how much you can earn.
So if you want a bigger or better living situation focus on increasing your income through a raise, career change or side hustle/new business.
Check out my blogs about various side hustle ideas for ways to increase your income.
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