Quick House Keeping Note: It’s a busy time in our home. I refer to these two weeks as the “summer hole.” (I need to come up with a better name.) It’s the time when our kids are out of school and camps haven’t started yet. We’re in year two, so at least we were prepared this summer. We scheduled a little vacation and some other activities. In other words, expect the writing to be a little limited until the 18th or so.
I suspect that most of my readers are at least familiar with the title of a book called, Your Money or Your Life. It is widely considered the best personal finance book. (I haven’t finished reading it, but so far it hasn’t met my extremely high expectations. That’s not to say it is poor in any way.)
One of the main ideas of that book is that you trade your life for money. By limiting consumerism, your money goes further, you can retire early (if you choose) and get your life back. That’s really the core of the FIRE (Financial Independent/Retire Early) movement.
I’m going to piggyback on that to share a concept that I like to call, Your Home or Your Life. For most people, their home is their largest expense. So, by proxy, keeping housing expenses low will save you money to get you to FIRE quicker. In 2007, I called it Get Rich by Thinking Small. (I miss the days when a 350-word article and a well-placed George Carlin joke would get 26 comments.)
Today, there’s a lot more focus on tiny houses or even living in trailer. I get excited when I watch a tiny house television show because it seems like everything is amazingly efficient. I’m not sure how practical living in a tiny house would be. Sometimes things that sound great don’t pan out in real life and this may be one of those things.
Last month I picked up a free magazine, New England Home Life. The closet on the cover caught my attention. It is bigger than most best bedrooms and seems to have very few clothes. It was so ridiculously not like any normal closet that I had to pick it up. Surprisingly, there was an article in there that was the exact opposite of the cover, Tiny Home Living, by Mary Hullett. I wish I could share it with you, but it isn’t available online from what I can tell.
The article does a good job of painting a picture. In Japan the average apartment is 250-300 square feet, while the Americans move to bigger and bigger houses. It then explains that the tiny house movement began due to environmental and financial concerns. That’s where it gets interesting with this quote:
“For most Americans 1/3 to 1/2 of their income is dedicated to the roof over their heads; this translates to 15 years of working over your lifetime.
I was just about to start to go into all the math behind that, when I realized that it really isn’t that complicated. I think we can presume that a typical working career is typically 45 years (age 22 to 67). A lot of things vary, but that’s exiting college until retirement, which gets extended a couple of years as people live longer. So 1/3rd of your income is 15 years of working. If you spend half of your money on your home, it’s 22 years.
For me, that drove home the true cost of a home. Of course, the alternative of not having a home isn’t a good plan. That’s where a tiny house comes into the picture. I’ve seen them starting at around $40,000. That’s the kind of mortgage that many people could pay off in less than 10 years. It’s like getting a decade (or more) of financial freedom.
I ran some numbers on how much of our income our own regular-size house is. Because my income varies a lot from year to year, it’s impossible to get an exact number. It is around 20% and it would be less if we had a typical 30-year mortgage instead of a 15-year one. Look like we are in good shape.
There’s one more thing that I can’t help but think about. We have 3 rental properties (condos) that mostly pay for themselves. Two are them are very similar as they are in the same complex. They should be paid off by the time our kids are 15 years old. There’s a very real option that they’ll have the choice of a free home. (Or we may decide to keep it to support ourselves.) It’s hard to imagine the financial challenges more than 10 years from now, but I think that having that home will be the kindling for their own FIRE.
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