As
I mentioned in my last post, I wanted to start sharing strategies to help you keep your expenses in check. When attempting to build wealth, your gap between
income and expenses is going to be the engine that drives your wealth building
progression. Remember that it doesn't matter how much money you make; it
matters how much money you keep. Generally, the largest expense you will
have is housing, so let's start there. When my wife and I first started
out in 2005 we kept our housing expenses super cheap by living in a small 1-bedroom
apartment. Our rent in our first
year of our wealth building journey was $325 a month. The low rent helped us keep our overall monthly
expenses to a minimum and we were able to save $36,000 in our first year. In the graph below, you can see our total
housing costs from 2005 to present. The
total housing cost value I show here is the total of rent or mortgage plus the
property tax and homeowner’s insurance.
I didn’t include home maintenance cost or remodeling, but any of you
homeowner’s know that those costs can be significant at various points in your
homeowning experience.
In 2005 I didn’t think we could reduce our housing
costs much more. However, in 2006 an
opportunity came along for us to purchase a small 2-bedroom 1 bath 800 square
foot fixer upper. The price was $65,000. At this point, we’d saved enough money to
purchase the small house with cash, so we did.
The house was so cheap that the property taxes and insurance were very
low. The first full year we lived there (2007)
represented the lowest housing cost to date.
That year our average monthly spend on housing was $173. Now how did housing cost impact our ability
to save you ask? The graph below tells
the story.
When we had
very low housing expense between 2005 and 2008, we were able to save a really
nice chunk of change, despite our lower income.
However, in 2008 I started my first real job. We relocated and sold the little paid for
house and moved into a much bigger more expensive house. In 2009-2012 we saved less money even though
I made more money. Remember, its not how
much money you make, its how much money you keep. It took me 5 years (2008 to 2013) of steady
pay raises to get back to and exceed the level of savings that we had in the
first 4 years of our wealth building journey.
In 2008, we moved up in house too quickly and it negatively impacted our
ability to build wealth. We still live
in the same city but are now on our 3rd house in our current
location. So, what lessons can we glean
from my experience with housing expenses and strategies to keep them low.
1. Try to start out with very low
housing costs and save the money not spent on housing.
2. Use your savings to try to buy a very
small place with cash and live there for several years.
3. Slow and steady. Sell the small place when you outgrow it, but
don’t make a big jump up in housing. This didn’t stop us, but it did slow our
wealth building.
4. If you can pay cash or pay off your
house, this greatly increases monthly savings, even if you don’t make a lot of
money.
In the next
post, I’ll discuss most people’s second largest expense… cars. See you next time.
Wonderful post. your post about Housing Expenses is very well written and unique. Thank you for sharing this post here. furnished 2 bedroom apartment in central London
ReplyDeleteThis is a very much educated article which you have shared here about housing expense. This is an astoundingly edifying and significant article. Such an advice is nothing however hard to find thusly, thankful for this information. Sleigh Bed With Storage
ReplyDeleteThe content was really very interesting. I am really thankful to you for providing this unique information. Please keep sharing more and more information. homes for sale in the Bronx NY
ReplyDeleteI am very much obliged to you that you have shared this knowledge with us. I got some different kind of info from your web page, and it is really helpful for everyone. Thanks once again for sharing it. House for sale in Los Altos CA
ReplyDeleteI am glad that I came here and discovered lots of valuable data from your article. It is a beneficial and convenient article for us to increase knowledge.rental agencies vancouver Thanks for sharing an article like this.
ReplyDeleteThanks for publishing such great information. You are doing such a great job. This information is very helpful for everyone. Keep it up. Thanks. homes for sale in corbin ky 40701
ReplyDeleteVery well written article. It was an awesome article to read. Complete rich content and fully informative. I totally Loved it. Homes For Sale Saskatoon
ReplyDeleteVery well written article. It was an awesome article to read. Complete rich content and fully informative. I totally Loved it. Crown Isle home for sale
ReplyDeleteThese highlights come at an extra expense however ordered advertisements are the least expensive sorts of paper promotions accessible. Lofty and additionally costly houses for the most part work best as show promotions since this is the place where your objective purchaser is searching for these sorts of houses. defence housing authority peshawar
ReplyDeleteDecreasing expenses on your U.S. ventures is likewise a significant thought. When putting resources into U.S.Tajarat strives to be Pakistan's biggest real estate developer ever, guaranteeing the highest international standards, prompt execution, and lifetime customer loyalty. For further detail visit
ReplyDeleterudn enclave
You've provided quite good information here about homes for sale in palo alto ca. This is fantastic since it expands our knowledge and is also beneficial to us. Thank you for sharing this piece of writing.
ReplyDeleteShenZhen MaiJin Metal Works Co., Ltd. was founded in 2006. We have built up a good reputation for quality, service and reliability like cnc turning
ReplyDeleteI am pleased that this article provided me with some important information about Real Estate Valuation Dubai. Thank you so much for sharing it. Keep up the good work.
ReplyDeleteThe AC frameworks in homes are measured to meet the warmth gain and warmth misfortune upsides of the home. hermès los angeles
ReplyDeleteThanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information? It is extremely helpful for me. property developer
ReplyDeleteI am grateful that I was able to learn something useful from this article about bid estimate. After reading it, I believe you possess excellent expertise. Thank you for sharing that. Keep up the good work.
ReplyDeleteIndividuals of the Houses Who are individuals addressed by the houses? Everybody in your life is in that wheel some place. We will start with the four points and the procedure we will utilize is the subsidiary house framework for sure I call "wheeling the houses." home for lease
ReplyDeleteThe information which you have provided is very good and essential for everyone. Keep sharing this kind of information. Thank you. ballarat real estate agents
ReplyDeleteExcellent post. I really enjoy reading and also appreciate your work. This concept is a good way to enhance knowledge. Keep sharing this kind of articles, Thank you. house removals company in Camborne
ReplyDeleteI am attracted by the presentation of this article. This information about property management singaporeis really good. I really appreciate your work. It is a gainful article for us. Keep posting. Thank you.
ReplyDeleteA very delightful article that you have shared here.metal works production in Brooklyn Your blog is a valuable and engaging article for us, and also I will share it with my companions who need this info. Thankful to you for sharing an article like this.
ReplyDeleteYou have shared a lot of information in this article about Real Estate Agents in the Caribbean. I would like to express my gratitude to everyone who contributed to this useful article. Keep posting.
ReplyDeleteincredible article distributed here by you. i've for a long while been itching to adapt new things with respect to this subject, and i have unquestionably adapted new things today. bahria enclave islamabad apartments
ReplyDeleteThere is noticeably a bundle to know about this. I assume you made certain nice points in features also . bahria enclave plot for sale
ReplyDeleteoverseas employment agencies in pakistan
ReplyDeleteYou should observe how the spot looks. A couple of years prior I was engaged with property appraisals for a program helping deranged patients. One of the main things we would observe is whether there was grass filling in the breaks of the substantial. One more thing was the state of the arranging (was the grass cut, the shrubberies managed, Cash home buyer Phoenix
ReplyDeleteI read the above article and I got some knowledge from your article. It's actually great and useful data for us. Thanks for share it. sell my house fast manor tx
ReplyDeleteThanks for sharing the best information and suggestions, it is very nice and very useful to us. I appreciate the work that you have shared in this post. Keep sharing these types of articles here.Real Estate Rubbish cleaning service Fraser Coast
ReplyDeleteGreat things you’ve always shared with us. Just keep writing this kind of posts.The time which was wasted in traveling for tuition now it can be used for studies.Thanks Tinley Park IL realtors
ReplyDeleteThe information in the post you posted here is useful because it contains some of the best information available. Thanks for sharing about sell my house to a cash buyer. Keep up the good work.
ReplyDeleteI always check this type of advisory post and I found your article which is related to my interest.Inherited Home Solutions in Fort Worth This is a great way to increase knowledge for us. Thanks for sharing an article like this.
ReplyDeleteI will share it with my other friends as the information is really very useful. Read more info about real estate for sale Bronx. Keep sharing your excellent work.
ReplyDeleteI came to your blog hoping that I would learn something about housing expenses here. And now that I've read the blog, I'm compelled to say that I've learned so much from your blog that I feel I can now manage my housing expenses as well as Dissertation Writing Service.
ReplyDeleteThe information you've provided is useful because it provides a wealth of knowledge that will be highly beneficial to me. Thank you for sharing about Sicily Beach Villas for Rent. Keep up the good work.
ReplyDeleteThanks for this. I really like what you've posted here and wish you the best of luck with this blog and thanks for sharing.Best Mortgage Rates in Canada
ReplyDeleteHello, I truly enjoyed reading your post. I found your site from Bing. Will bookmark to return later. Thanks!Best Mortgage Rate in Aurora
ReplyDeleteGood post....thanks for sharing.. very useful for me i will bookmark this for my future needed.thanks for a great source.Best Mortgage Rate in Vaughan
ReplyDeleteNice post.I like the way you start and then conclude your thoughts. Thanks for this information .I really appreciate your work, keep it up.
ReplyDeleteBest Mortgage Rate in Mississauga
ReplyDeleteGood post....thanks for sharing.. very useful for me i will bookmark this for my future needed. thanks for a great source.Blended Mortgage
Very well written article. It was an awesome article to read. about Oshawa homes for sale Complete rich content and fully informative. I totally Loved it.
ReplyDeleteThis blog is really helpful to deliver updated affairs over internet which is really appraisable. Geelong Removalist
ReplyDelete