45 Housing: Housing Costs

For almost everyone, this by far is the biggest expense. The 2011 CES reports that housing expenses average $16,803 and represent about 38 percent of the annual household budget (not counting Social Security and pensions). To reduce your own outlays on this massive line item, try these strategies, most of which work for owners and renters alike. They’re arranged according to how much they disrupt your life, with the easiest changes appearing first.

45.1  Spend Less on Household Operations

Cut housing-related costs with these checklists:

Real Estate Taxes: Chapter 20
Home Energy: Chapter 22
Water: Chapter 23
Trash Collection: Chapter 24
Homeowners’ Insurance: Chapter 29
House Repairs and Remodels: Chapter 46

45.2  Do More at Home

Your house provides the room you need to save on many expenses.

   45.2.1  Host Weddings and Reunions
Why rent a hall or meeting space? Host events at home.

   45.2.2  Avoid Auto Expenses
Telecommute and shop online. It saves gasoline and reduces your vehicle’s wear and tear.

   45.2.3  Dine In
Use the kitchen to save on restaurants.

   45.2.4  Reduce Your Bar Tabs
Stock a home bar and drink in the friendliest of confines.

   45.2.5  Favor Entertainment at Home
Instead of visits to movie theaters, stay at home and watch DVDs. Host potlucks and family game nights.

   45.2.6  Skip Health Clubs
A home gym furnished with used equipment pays for itself fast.

45.3 Capture Tax Benefits

Important: consult your tax guru before you pursue these tactics.

   45.3.1  Take Deductions
If you itemize, deduct home-related expenses such as loan origination fees, mortgage interest, and property taxes.

   45.3.2  Operate Home Offices and Businesses
If you use certain areas exclusively for business purposes, consider whether you can deduct their costs on a square-footage basis. For details, read IRS Publication 587.

   45.3.3  Pursue Tax Incentives
Look for deductions and tax credits on home improvements that save energy.

45.4  Reduce Cramping

Regardless of whether you own or rent, whenever you feel crowded, pursue these tactics to live well in less space. They all cost less than a move to a bigger home.


   45.4.1  Create Multi-Use Rooms
Relieve space-cramping with rooms that serve several functions. Try these classic approaches.

  • Den/Guest Bedroom
  • Media Room/Home Gym
  • Laundry Room/Mud Room
  • Dining Room/Hobby Area
  • Kitchen /Dining Space
  • Garage/Work Bench Area

   45.4.2  Share
When you share bedrooms, bathrooms, and desks, you don’t need nearly as much space.

   45.4.3  Avoid Space Eaters
Large items eat away at your living space.

  • Pool Tables. Nothing consumes square footage like these behemoths. Visit friends with tables instead.
  • Beds. If spare beds see sporadic use only, buy sofa sleepers, bunk beds, Murphy beds, and convertible futons. To save even more room, store your guest beds in closets: air mattresses, fold up cots, and sleeping bags.
  • Oversized Vehicles. To gain extra garage space, switch to a smaller SUV.
  • Multiple Vehicles. Drop a car or two. Use freed-up garage bays for extra workspace and storage.
  • Furniture. Favor the moveable, foldable, collapsible, and stackable. Mount heavy items on sliders or casters so that you can push them aside whenever you need more room.
  • Desks and Office Chairs. A laptop or tablet lets you work at the dining room table.
  • Washers and Dryers. If your household is small, consider a stackable unit.

   45.4.4  Expand Outdoors
Increase your square footage with outside living spaces. The cost is miniscule when compared to interior build-outs. Consider these projects.

  • Gazebos and pagodas
  • Adirondack chairs
  • Tree houses
  • Play houses
  • Yurts and outbuildings
  • Hammocks
  • Patios
  • Porches
  • Decks
  • BBQ pits

   45.4.5  Expand Indoors
Finish basements and attics, close in porches, and repurpose garages.


Excess stuff cramps your living space. You have two options. First, you can sell, donate, or throw it out. Second, you can boost your storage space with these expansive—and inexpensive—solutions.

   45.4.6  Digitize
Convert your media into bytes.

  • Books into e-books
  • Photos into JPEGs
  • Records/CDs into MP3s
  • DVDs into internet streaming
  • Paper files into .pdfs
  • Magazines into websites
  • Guidebooks into websites

   45.4.7  Use Walls
Bare walls present storage opportunities.

  • Wall mounts for TVs
  • Bookcases
  • Shelves
  • Racks
  • Hooks
  • Brackets

  45.4.8  Use Ceilings
Suspended splendor awaits: hang pots and pans above kitchen islands, bikes in garages, and plants in the sunlight.

   45.4.9  Pick Furniture That Supplies Storage
A long chest doubles as a coffee table and as storage for blankets.

   45.4.10  Store Underneath Beds, Bureaus, and Other Furniture
Increase the available space with the use of sturdy risers.

   45.4.11  Attach Racks to Door Backs
Good for lightweight items.

   45.4.12  Go Vertical
Buy stackable plastic boxes; translucent ones show what’s inside. In closets, use “space saving hangers” (many types exist, search online).

   45.4.13  Fill Empty Suitcases
Use them to store spare linens or other rarely used items.

   45.4.14  Go Offsite
Borrow storage space from accommodating friends.

45.5  Cut Mortgage Costs 

   45.5.1  Get Educated
Mortgages are complicated beasts. Don’t make any changes without educating yourself first. Visit these sources:

  • HSH Associates. A comprehensive site. Visit HSH.com.
  • Mortgage Professor. Not as slick as HSH, but offers good guidance. Visit MtgProfessor.com.
  • Mortgage101. This source is more commercial, but still offers great information. Visit Mortgage101.com.

   45.5.2  Increase Your Down Payment
Whether you buy or refinance, the larger your down payment, the less you pay in interest over the life of the loan.

   45.5.3  Cancel Private Mortgage Insurance
Ask your lender whether you now pay for private mortgage insurance (PMI). If you do and the current principal balance on your loan is 80 percent or less of your home’s value, you can drop the coverage. According to the Federal Trade Commission (FTC), on a $100,000 loan with 10 percent down, ditching the PMI saves $480 annually. For details, read the the Consumer Financial Protection Bureau’s article “When Can I Remove Private Mortgage Insurance (PMI) from my Loan.”

   45.5.4  Refinance
At this writing, mortgage interest rates hover near historic lows. If you refinance, you can save thousands in interest expenses. For a detailed guide to this complicated process, visit HSH.com and work through the “Mortgage Refinancing Starter Kit.”

   45.5.5  Cut the Mortgage’s Length
Consider a mortgage that lasts fifteen instead of thirty years. To calculate the savings, visit Bankrate.com/calculators/mortgages/15-year-30-year-mortgage-calculator.aspx.

   45.5.6  Pay Off the Mortgage Early
If you can do it, this saves thousands. I paid mine off in 2003. Over the next decade, I saved $131,066.40 in pretax dollars (not that I was counting). To see what you might save, use a payoff calculator.

45.6  Hire Out Your House (or Part of it)

   45.6.1  Vacate and Rent
Whenever your town hosts special events, rent your house and skedaddle elsewhere. Visit VRBO.com.

   45.6.2  Rent Excess Space
If you have acreage or outbuildings to spare, rent them to others.

  45.6.3  Trade Vacations
Swap a week’s stay in your home for a week’s stay in someone else’s. Visit HomeExchange.com or HomeLink.org.

   45.6.4  Seek Short Term Roommates
Rent couches or spare rooms for overnight stays. Sign up at AirBNB.com, Roomorama.com, or similar sites.

   45.6.5  Seek Long Term Roommates
Roomies add rental income and reduce utility costs.

45.7  Relocate

   45.7.1  Downsize
If you no longer need as much space, move somewhere smaller.

   45.7.2  Live in an Income Producer
Buy a duplex or home with a rentable apartment.

   45.7.3  Relocate to Lands of Lower Living Costs—Domestic
In some parts of the country—many of them scenic—beautiful homes sell for less than luxury sedans. Financial magazines and their websites list the latest low-cost havens.

   45.7.4  Relocate to Lands of Lower Living Costs—Foreign
Join expatriates who live cheaper on distant shores. For popular destinations, look at financial magazines and their websites.

   45.7.5  Bypass the Broker
Borrow “for sale by owner” books at the library or visit these sites: ForSaleByOwner.com or FrontDoor.com.

45.8  Consider Alternatives to Ownership

   45.8.1  Rent
If you rent, the costs of ownership become someone else’s headache. But in the process, you also lose many benefits—including tax deductions, the freedom to remodel, and the accumulation of equity. For a calculator that weighs the merits of rentals versus home ownership, take a look at NYTimes.com/interactive/business/buy-rent-calculator.html.

   45.8.2  Flip
The current housing market makes this difficult, but if you’re a good carpenter, you can live for much less than the typical mortgage slave.

   45.8.3  Seek Jobs With Housing or Housing Subsidies
Look for employment with lodgings attached. Become a part-time caretaker or apartment super.

   45.8.4  Live Nomadically
You might live cheaper if you sell the house and replace it with a used RV or boat. Adventures await, but run the numbers first.

   45.8.5  Move Back Home
As Robert Frost wrote, “home is the place where, when you have to go there, they have to take you in.” If you’re of younger years, moving into your parents’ basement may be an option. But that doesn’t mean it’s anyone’s idea of permanent housing solution.

45.9  When Buying, Find the Right Size

Although the real estate bubble has burst, it’s still possible to buy excess housing. Mortgage rates have dipped to all-time lows. Apparent bargains exist on larger homes. But a McMansion socks you right away with higher brokerage commissions, points, and closing fees. This only begins the pain. As each month passes, you pay more for: (1) mortgage interest; (2) property taxes; (3) homeowners insurance; (4) utilities (bigger houses cost more to heat and cool); (5) furniture (more rooms means more beds, chairs, and lava-lamps); (6) decorations (more paint, pictures, and knick-knacks); (7) maintenance and repairs (the more the house, the more that breaks); and (8) cleaning expenses (3.5 baths means a lot of Tidy-Bowl, my friend). You can save yourself acres of headaches if you match the square footage of the house to the size of your true needs.


Hard times produce bold measures. Some pioneers have resized the American dream with moves into constricted spaces that deliver big savings (and low carbon footprints). I didn’t list this as a strategy because I believe few will be interested, but I’d be glad to be proven wrong when it comes to you. To learn more about micro houses, visit TheTinyLife.com or TinyHomeBuilders.com. To “roominate” over downtown apartments as small as 220 square feet, search the web for “micro apartments” and read the latest stories.

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