FIRE Pillar 1: Drastically Reduce Housing Costs
Rent or mortgage payments swallow up a significant proportion of most people’s income. For followers of the FIRE Movement, dealing with housing expenditure is the number one priority on the ‘to do’ list. The good news is, that if you reduce housing costs, there are potentially some very big savings to be made.
Slashing your expenditure on your rent or mortgage could save you thousands of pounds a year, putting you well on the way to the goal of waving goodbye to your day job.
According to one charity, the average UK household spends 42% of their income on rent. This figure rises to 72% in London.
Homeowners are not far behind with nearly 30% of disposable income going towards mortgage repayments. This figure rises to over 44% in London!
How to cut housing costs
Downsize your living space
If you have a guest bedroom that you are not making use of or, a dining room that hasn’t been used since last Christmas, it is worth considering whether you really need all that space?
Moving to a smaller property should not only reduce what you pay in rent or mortgage repayments every month, but also help you to trim your household bills.
Have a garden with empty flowerbeds or an unkempt lawn? These are all signs that your outdoor space may be too big for your needs. A property with a small garden or no garden at all could help shave pounds off your monthly housing costs.
Research how much you could save in your area by living somewhere more modest.
Move to a cheaper area
Are you paying a premium for being next to a sought-after secondary school when you have no children? Do you live within walking distance of shops you rarely use? Living somewhere with fewer facilities, or outside of prime school catchment areas, could save you money on how much you pay for a property.
Find a flatmate
Renting a room in a house with other people will work out much cheaper than stumping up for all the bills by yourself. You will probably have to share kitchen and bathroom facilities, but it may be worth it for all the money you could put into your savings account.
Negotiate with your landlord
Rent is negotiable. If you have been the perfect tenant and always pay your rent on time, why not try to arrange a more attractive rental package with your landlord? If you’re reliable and are looking after the property, your landlord won’t want to lose you. You don’t get if you don’t ask.
Check you’re on the best mortgage deal
A lower interest rate or a different type of mortgage could save you some serious cash. Take your time to find out whether refinancing could reap rewards.
Consider The tiny house movement
Tiny houses are a growing social movement spurring people all over the world to move into smaller homes and simplify the way they live.
What is a tiny house? In the UK, the average house size is 85 sq m. While there are no hard and fast rules about tiny home sizes, normally it would be between 9 sq m and 37 sq m. Your mini home could be bought or rented, on wheels or on foundations, adapted from a van or purchased in kit form. The most important thing is that it enables you to live more efficiently and save money.
More ways to cut housing costs
Rent out a room
If you don’t want to downsize, you could rent out a room to try and recoup some of your rental or mortgage costs. Online platforms like Airbnb make advertising your property easier than ever before. If you’re renting a property, always check your tenancy agreement first.
Rent out your parking space
Are you paying a premium for a car parking space you don’t use? Do you live in a city and rarely use a car? Instead of moving somewhere without a parking space, you could try and offset your living costs by renting out your parking space to holidaymakers or commuters. This works best if you live in a city where places to park are few and far between.
Summary: Reducing housing costs
Reducing housing costs may take some effort and compromise, but don’t lose sight of the long term objective – Financial independence and early retirement. If you feel you could be paying less for your home and make better use of your money, take a hard look at your situation to see what opportunities you have.
The FIRE philosophy is about saving as much as you can now so that you can retire in your 30s or 40s. There are big savings to be had when it comes to your accommodation, making rethinking the roof over your head the perfect place to start.