Sunday, June 13, 2010

Early Retirement Extreme Day 1: Finding a Place to Live

When you go to Las Vegas, do you pay for a nice luxurious suite or a minimalistic room with a bed & a sink? I opt for the latter {because we’re out partying 18 hours of the day ;) }. And it is this type of mentality we are going to use today in looking at options for finding a place to live. We will be discussing the first half of Day 1, up to ‘location’ and complete the rest later in the week.

If you are new here, we are exploring our options for reaching Financial Independence with the Early Extreme Retirement {21} Day Makeover.

I will be using my living situation to reference in this analysis. Thus, we are a family of 4 {pa, ma, & the two inklings}. Please map out your personal living situation to see what scenerios may work for you.
The Basic Necessity

Even thought the song does not have relation to money, the beginning lyrics to Ludacris come to mind, “How low can you go? how can you go? how low can go?”

Jacob recommends $200-$300/month/person for living arrangements. I can see why if you consider the true cost of your living arrangement.

To strive for Financial Independence (FI) at the upper limit of $300 for living arrangements you be required to save:

$300/month = $3600/year in living expenses. This needs $3600/0.04 = $90000.
Family Scenerio

We live in Southern California {cha-ching}, specifically in the Inland Empire. What does that mean? The family is located in the outskirts from major cities like Los Angeles and Orange County. Decreased housing costs.

* We pay $1100 month for a 4 bedroom 1277 sq. foot home
* We are bound by a mortgage
* The husband and I are responsible for our children’s living arrangements
* We have a boy and a girl {aka: need their own rooms due to gender}

We are living pretty low in costs on the So. Cal totem pole. Pretty dang good deal for us! That is $275/person/month – (but the children are not paying their rent – YET ;) ). So, $500/adult/month.

We are required to save (adult/month) :

$500/month = $6000/year in living expenses. This needs $6000/0.04 = $150,000.

If you share your expenses, then double the numbers. With these figures, it may explain why some say to financially prepare for children before having them.
Play Out Different Scenerios

Our mortgage costs are relatively equal, if not below that of an apartment rental in southern California (if you rent an apartment or house, what is your rent?). I was browsing apartment/housing costs on Craigslist and found rent to be $500 higher on the low end of the spectrum. Renting room(s) from someone is out of the question.

Potential Extreme options:

* Get a bigger house and live with another family or take on roommates only if the cost of living for us equates to less than $500/adult/month.
* Sell the house and rent a mobile home (I did locate one, but it was still the same price in rent that we pay for mortgage. The lot price alone is $600 per month)
* Live with our parents (maybe if we were a younger couple)
* Move to a different state with a lower rate of living (I have legal obligations that keep me in this area until one of my kids turns 18 – maybe in a couple years we can look at this suggestion)
* Have any suggestions?

Your exercise today, figure out how much you need to save for housing to meet the Financially Independent goal in the living arrangement category. Can you reduce your rent/mortgage rates to meet a $300/person/month? And think about different living arrangement options. Brain storm those crazy ideas. Write them all out. If you’d like to share, please comment below or try out the forum in the works (the latter offers more privacy). I have a category labeled ‘Early Retirement Extreme {21} Day Makeover’.


About This Blog

Was established since 20th Rejab 1430.
Just to educate myself.
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