How I live Rent Free at 23
Strategically plan for financial success
Insane right? I would’ve never imagined that I was capable of living without paying anything for the roof over my head. Here are some ways you can do this too. Now, keep in mind that many people won’t have the mindset to make this happen and that’s okay. For those who do this will transform how you think about and manage your financial life.
Growing up I was a saver, and still am. Every job since I was allowed to work I constantly saved as much as possible in order to use it for something great. Basically if I didn’t really want or desire something I would avoid purchasing it. Just because everyone had the trendiest shoes, cars, and clothes did not mean I was going to jump on the bandwagon because I wanted to spend my hard earned money on something that had significant financial and personal value.
Savings Over Time
Throughout high school and college I worked over 30 hours a week and was mindful on how my money was being spent. I had the choice to work less, yes, but being financially independent was my biggest priority. In high school I was able to save around $8,000. After paying for rent, some tuition, and miscellaneous expenses I made around $30,000 in my 3.5 years of college. Fortunately I obtained a full-time job straight after graduation and made around $12,000 for the remaining 6 months of that year.
At 22 I had a net worth around $50,000. Now I’m naturally not an accumulator of material possessions, so there wasn’t anything shiny and new I NEEDED to have which made it a lot easier. I knew I didn’t want a chuck of money sitting in a bank getting 0.01% interest every month, so I began doing some research on purchases which would provide higher yields in the long run: Assets.
The freedom and clarity one can gain from financial independence allows your mind to focus on more meaningful endeavors.
Difference Between Assets and Liabilities
Assets are something you own that increases in value. They appreciate.
Liabilities are things you own that decrease in value. They depreciate.
Houses, stocks, precious metals, and land are examples of assets because once you make your initial investment they will appreciate over time. Cars, clothes, vacations, subscriptions, and more are liabilities because they take money from your pocket. After learning this differentiation I decided I wanted to invest in real estate and purchase a condo.
Let’s Talk Numbers
A three bedroom condo with 10% down was around $35,000. Seemed do-able for me. The monthly mortgage payments would be around ~$1,600 not including the HOA fees and utilities. My plan was to rent out the other two rooms and have the roommates cover my mortgage. Each of the two smaller rooms would be $800 a piece and IF I wanted to give the master to someone I would change $1,000 for it. Regardless of the combination of the rooms that would be occupied I would make either $1600 or $1800 per month. This means that my only costs would be one-off expenses for emergencies with the property, insurance, and the remaining of the HOA fees.
This changed my finances entirely. I no longer was spending the majority of my pay check for rent, but was saving it instead. The worry about not saving enough or going over my ‘fun’ budget was gone. Many people who were fresh out of college in their 20’s were worrying about how to increase their salary because they were living paycheck to paycheck; I never once had to think about that. The mental freedom and tranquility I felt was surreal.
Although it is nice to live rent/mortgage free there are a few aspects to keep in mind. If you don’t have the personality or patience to manage the property or deal with people this will not be a good option. Many of us don’t want roommates and rather someone else come and fix our appliances and bathrooms when they are broken. If you want to own your place you are in charge contacting the appropriate people for maintenance or learning to fix things yourself. If you want a stress free living situation where you rather pay more to not worry about the property then this is probably not for you. But, if your main objective is to save money and make money in the long term then owning a property and living in it is the way to go. Whether you live in the property and rent out rooms or rent out the entire place to a single entity, both have someone else paying the bulk of your mortgage. You reap the benefits as your asset appreciates
Which ever option you decide to go with study the financial and personal benefits before you jump into anything.
