Housing is the biggest budget line item for everybody. The general recommendation is to not exceed 30% of your gross income, which is actually a much higher percentage of your take home pay. With affordability becoming an issue almost everywhere, here are some thoughts on managing this expense.
If you can cut on this single expense, it frees you to not worry about a bunch of other expenses and incidentals like entertainment and eating out. So, you can reward yourself multiple times with more fun activities by simply making one decision to reduce your rent or mortgage.
Ways to save on housing include downsizing or sharing costs. The key is to reduce the overall square footage that you pay for but under utilize. Living rooms and kitchens are common spaces where you and multiple roommates can hang out and enjoy together comfortably, while the bedroom and bathrooms can remain relatively private. I personally see roommates as a positive, especially if they’re friends.
Another way to cut housing expenses is to become a digital nomad and live comfortably in lower cost countries while working remotely. You can easily cut your daily housing expense by over 50% while traveling. However, to see these savings, you need to eliminate your housing expense back home, which means putting your stuff in storage and minimizing your possessions.
Reducing housing expenses enables us to realize many goals because money is fungible. If you’re able to free up money, you can use it to do other things like travel, save for retirement, and enjoy more time with friends. Instead of focusing on cutting out a bunch of those fun things, just focus on one, housing.