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TWELVE PERCENT. THIS is a pivotal number in my financial life.
What does it refer to? Is it the average annual return on my investments? I wish. Is it the percentage of my pre-tax income that I dedicate to retirement savings? No. That number, including pension and 403(b) contributions, is closer to 25%.
Instead, that 12% is the slice of my pre-tax income reserved for housing. When picking a place to live, I’m a cheapskate.
In the early 1990s, during my first few years in the workforce, I paid about $300 a month for a room in a house that I shared with a band in West Philadelphia. Having grown up in a small house in Erie, Pennsylvania, and never having developed a taste for big homes, I saw lifestyle creep fly by me like locusts, leaving me unscathed.
There have been only two years when my housing expenditures have exceeded 20% of my gross income. Conversely, for a few years, this percentage actually stood in the single digits. I currently pay $860 a month for a one-bedroom apartment. I’ve never shelled out more than about $1,000 a month for a pad.
My greatest triumph as a housing cheapskate came during my years in Roswell, New Mexico. In 2017, when I received a job offer, I flew down to the city of aliens. After scouting out a small one-bedroom apartment, I asked the property manager the price.
Her response shocked even me: $450 a month. I actually said, “Come on. I’m tired. How much is it, really?” She responded that the price was accurate and asked where I was coming from. “Pittsburgh,” I said.
She replied that Roswell was a very cheap housing market. English professors in Roswell don’t make much. By the time I left the Land of Enchantment in 2020, I was clearing about $60,000 a year, and my rent had increased to a whopping $470 a month, so I was spending 9.4% of my income on housing.
Why my obsession with low rent and my refusal to buy, even though I could easily afford to do so? There are four reasons.
First, paying so little for housing allowed me to survive debt-free when money was tight and to put away a high percentage of my income after things got better. I currently salt away about 32% of my take-home pay. I’ve never adjusted my lifestyle upward by much when my income has increased.
Second, you never know where a better job will be. In the profession I chose, that next position could be half a continent away. Since 2010, I’ve lived in Minneapolis, Orlando, Pittsburgh, Roswell and suburban Kansas City. In addition, I don’t plan on staying in Kansas when I’m finished with full-time work. I want to be able to quickly leave the sunflowers behind without having to sell a house or apartment.
Third, I generally spend in line with my values. An apartment or house will, for me, always be just a place to sleep and shelter from the weather. I know so many people who take what I see as inordinate pride in overpriced housing that pushes them to the brink of financial insolvency. Thanks, but no thanks. I place little value on the status that homeownership conveys. I generate meaning from what I do, not what I buy.
Some people, who know my housing situation and my net worth, have tried to convince me to purchase a house. I’m not swayed.
In the personal finance-focused composition course that I teach, I do an exercise with students that opens their eyes to the realities of homeownership. I tell students that my parents bought my childhood house for about $22,000 in 1968. I sold the house for $140,000 in 2006. On the face of it, my parents saw a return of more than 600% over 38 years, or $118,000. But if you back out mortgage interest, property taxes, a new roof, new siding, a new furnace, a new kitchen, air conditioning, new carpet and plumbing work, they cleared about $30,000. Students, who have been propagandized by well-meaning parents into believing that a house is the “best investment you can make,” are stunned by these numbers.
If you rent cheaply and invest the difference, the profits can be—and have been for me—quite nice.
Fourth, while I don’t value housing, I do cherish my lattes. The truth is, it’s not the little purchases that sabotage finances. It’s the big ones. In addition, by keeping housing costs low, I can not only invest, but also spend on the things that bring me pleasure. For instance, I recently attended the Kansas City Symphony’s performance of Mozart’s Requiem in a near front-row seat. I bought good parking and had a glass of beer while I gazed at the city lights from Helzberg Hall during intermission. The cost? About $100. The value? Priceless. I also indulge myself by seeing multiple independent movies each month, and I visit two great bookstores in the area: Rainy Day and Prospero’s.
I’d rather invest in the financial markets and spend my money on concerts, books and films—experiences I’ll remember for the rest of my life—than on furnaces, carpets, appliances and dubious status.
When you spend 12% of your income on housing, you can buy the experiences that make life grand. As Aldous Huxley said in the 1946 foreword to Brave New World, “You pays your money, you takes your choice.”
Douglas W. Texter is an associate professor of English at Johnson County Community College in Overland Park, Kansas. Doug teaches a composition I course that focuses on personal finance. His essays and fiction have appeared in venues such as the Chronicle of Higher Education, Utopian Studies, New English Review and The Writers of the Future Anthology. Check out Doug’s previous articles.
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”i don’t share my life, so i will never share my walls.”
or:
i’d own a single wide on a 100 acres before i’d ever rent again.”
It is interesting that you found cheaper than Pittsburgh. Do you mean the city or suburbs?
Our first apartment (2001) was technically in Shady side but a block from the train tracks and the rent was $680 or so which included water and heat.
We bought a house in Bloomfield for $43k (2002) and so the mortgage and taxes and PMI was $279, so it seemed like a no brainer to me. I think we moved in 2008? renting out original house for a few years, which just cleared a profit on its own by $10k or so, though the headaches of that are worth reconsidering…). And then sold for $90k in 2012. We did pay tax on that sale because we also sold our suburban house in the same year for a similar number, bought for $70k.
We moved back to the town where I grew up in NH and bought a house for $69k.
Mortgage was paid off in 2006 or so, though taxes are much higher here, though the rents are sky high (I think $1500 is the minimum for a single bedroom), and $2000 or $2500 for anything of any size. (We have a family of 10 so drastically different situation than you).
Being able to move easily is probably your best point and for those that want to move (we figure we are done moving, maybe one of the kids will take our huge house when we get older, maybe we move into the in-law apartment, who knows)
But, I 100% agree on people who spend hundreds of thousands of dollars on their house. We had friends who spent that kind of money in Pittsburgh at the same time. We never lived in a fixer upper – though I did consider the $20k houses in both Pittsburgh and NH that would have needed some work.
We have upgraded electrical and various projects in all of the houses we’ve lived in, though I also enjoy that work, so that isn’t entirely a downside.
People here like to think that renters don’t pay property taxes and don’t realize that the rents include those numbers.
And while our property taxes here ($6k) are high in my opinion (higher than my mortgage in Pittsburgh) I’ve heard of lots of worse off areas, though the $25k/student at the public school is hard to imagine that is being spent well ..