Eliminate Your Housing Cost to Achieve Financial Independence

Housing is the single largest monthly expense for most people.

According to a recent Harvard study, 11.7 million Americans spend more than half their monthly income on rent.

Even if your housing costs are only 35% of your income, that still makes it really difficult to make the classic 50/30/20 budget rule of thumb work.

But I have a solution for you: Simply eliminate your current high housing cost.

You read that correctly. Just get rid of that expense. When your current lease expires, simply sell all your crap, and downsize. Downsize hard. Then, you’ll be able to afford to max out your IRA and 401k contributions, start saving for a down payment on a rental property, or take the risk on that startup you’ve been wanting to start.

If you own a car, then congratulations, you also own a place to sleep. For the mechanics on how that works, simply search #vanlife on YouTube. Bob Wells is one of my personal favorites. Thousands of people do this to save money, and they live just fine. Heck, it’s even cool now, so film yourself and put it on YouTube to make a few ad dollars.

In the past, whenever I’ve hit the skids financially, eliminating my housing cost was always one of the first moves I made. It was a default action for me.

When the Navy accidentally stopped paying me for six months, I simply lived in my car. During my first divorce, I moved into a really nice storage unit.

This van was the life of luxury compared to a four-door sedan.

When I lost my home to foreclosure and filed Chapter 7 bankruptcy during the 2007-08 Global Financial Crisis, it was back to living in a vehicle. Then some couchsurfing. Then an office. Then dirt cheap hostels in other countries. Then another office. Then more couchsurfing. Then another office space. Then a rental car.

OK, yeah, that extended version of things ran for too many years. But think of all that money I saved! In fact, the money I was able to put into savings during this six-year period is what enabled me to found a tech startup and start buying rental properties. Choosing alternative housing options enabled me to start building a nest egg and take bigger business risks.

When closing on my first rental property acquisition got extended due to some VA inspection issues, what did I do? For two months, I alternated between sleeping in my car and sleeping on a bean bag chair at a startup incubator in a downtown Seattle skyscraper.

Now, I know what many people are going to say. Stuff like, “It’s not fair that a person should have to live in their car to get ahead in life.” Well, yeah, life ain’t fair. The world doesn’t owe you anything merely because you exist. Get used to it, suck it up, and do what you gotta do to forge your path within the economic system that you were born into.

Or somebody will say, “I have kids, I can’t live in a car.” To which I reply, “My mom and I did when I was 5, it worked out fine.” And I’ll also add, “Figure something out. Think outside the box for cheaper housing options. Make it happen.”

One of my favorite quotes of all time comes from John C. Maxwell: “Successful people are willing to do things unsuccessful people will not do.”

If you want to achieve financial independence, and especially if you want to retire early (FIRE), you’re going to have to make some unconventional financial and lifestyle choices. This may not be the one you make, perhaps it will take another form for you, but this is the kind of thinking that you need to embrace in order to get there.

I’ll leave you with one more story. Have you ever heard of a man by the name of Arnold Schwarzenegger? He’s the former governor of California, and has also been in some moving picture stories.

Back in his bodybuilding days, long before he rose to Hollywood fame, he was a couchsurfer. While still in Austria, he crashed at his coach’s house. When he arrived in the US, he stayed with friends. He started a brick-laying business, because of course that’s what a bodybuilder would do, and when he eventually earned enough cash, he purchased a 6-unit apartment building, and lived in one of the units (today we call this “house hacking”). He eventually did a 1031 exchange out of that building and into a 12-unit, then a 36, then a 100-unit apartment building. He was a millionaire from his real estate investing by the time he was 25, a full decade before his breakout role in Conan the Barbarian.

Yes, times are different. They were different when Arnold was buying up cheap properties in Los Angeles. They were different when I was building a boutique tax practice after the GFC, different than when I started a tech startup, different than when I was buying new construction homes as rentals. Times are always different.

But there are people out there right now that are figuring it out, doing unconventional things, making alternative choices, and just generally making shit happen. Right now. Whenever now is for you when you’re reading this.

I’m not saying you have to go live in your car. If that’s what you got from this post, then you totally missed the point. If you want to make a different life for yourself than what you have, then you need to make choices that will get you there.