Do You Want to Be “super Economical”? Consider Housing Costs
What separates “super-rescuers” from those of us who are just trying to save what we can?
It’s all about the cost of housing, according to a new study.
A new study by TD Ameritrade that looks at people who save 20% or more of their income, called “super savers,” shows they can do something: the single biggest difference between what super savers spent less on than others of us were housing. Super-savers spent only 14% of their income on housing, while ordinary people fell 23%.
I recently made two important decisions, in part aimed at reducing the amount of money I spent on housing:
- I moved from Seattle to Cedar Rapids, Iowa, which cut my rent in half.
- I chose to rent a studio rather than a one-room
Renting a one-bedroom apartment would increase my monthly rent from $ 650 to $ 750; I figured I’d be better off saving an extra $ 1,200 a year, not to mention the cost of furniture, artwork, and so forth needed to fill the extra space.
Right now, my rent is 11 percent of my expected freelancer gross income of $ 70,000 (or 15 percent of my expected adjusted gross income of $ 50,000).
On the other hand, my savings rate, based on the amount of money I put in retirement accounts and personal investment accounts, is 30 percent of my expected return of $ 70,000, or $ 1,791.67 a month.
There are a number of factors and privileges, many of which do not apply to everyone, that affect my ability to move to a Midwest city and live in a studio apartment. I am single, no children. I am a freelancer who can work from anywhere and have managed to retain the clients, contacts and income that I have earned while living in Seattle. My parents live near Cedar Rapids, so my goals of “saving money” and “getting closer to my family” were well aligned.
There are also options that I don’t – like living with roommates or living further out of town – that could lower my rent by another $ 100 or so. In those cases, the tradeoffs weren’t worth the extra $ 1200+ in savings per year.
I also know that not everyone can cut their housing costs down to 14% of their income – many of us would like to live in such affordable homes, but they are not always available.
However, if you’re prioritizing savings right now, whether it’s paying off debt, achieving financial independence, or saving for a big life purpose like travel or small business, it’s worth considering if you can simply cut back on your housing costs. little.
Because research shows that doing this will save you a lot more than trying to cut costs anywhere else.