Why You Should Rent a Super Cheap Apartment
Low housing costs can make you the equivalent of rich
I like to brag about how cheap my rent is — $1,342.72. I used to be sort of embarrassed about it. Not sure why. Because cheap rent brings a whole host of money-related benefits. I can enjoy this lifestyle upside thanks to two of the most critical elements of sound personal finance:
- Making compromises.
- Backwards budgeting.
In this article, I briefly define these points, illustrate why they matter, and discuss how applying them to your housing situation can make you — for all intents and purposes — some flavor of rich.
We talk a lot about compromise:
Compromise isn’t a bad word.
It’s just a choice you make in one area to get something you want more in another.
The longer I live in my apartment, and surrounding neighborhood, the less opting for cheap rent feels like a compromise. It never felt like a sacrifice. Because, through it all, I’m getting something — a lot, actually — in return for what I’m giving up.
When you make a money-saving compromise like this, you effectively give yourself a cash cushion. You provide wiggle room in your budget to execute the things you get in return for giving something up.
You can do this with rent. You can do this with a mortgage payment. You can do this by driving a less expensive car. You can do this by not owning a car at all. It’s about finding ways to decrease your expenses or maintain your already low monthly outlay.
For example, I almost made a dumb money decision a few months ago. I came close to doubling my rent payment. Thankfully, I recanted. Because I would have wiped away $1,300 worth of disposable income from my budget. I would have been spending $1,300 more money on rent rather than doing all of the other things cheap rent permits.
It’s this concept of backwards budgeting.
It’s financially intuitive to us to say, okay, I make this much money, so now I am going to spend/allocate it to butt right up against that number. When you budget backwards, you — wait for it — do the opposite.
On the ground example — you live in Los Angeles. You work in the middle of Melrose Avenue. In the immediate vicinity and to the west of your workplace, rent is markedly higher than it is the farther east you go along Melrose. It’s a big difference. The studio apartment you can rent for $1,342.72 on the eastern section of the street goes for upwards of $2,000 just a few miles to the west.
This is one way to create disposable income, irrespective of how much money you make. It also makes for less stress in months when you don’t make as much as you normally do (particularly for freelancers) or if some unexpected expense comes up.
Practically speaking, committing to cheap rent allows for splurges.
This might seem weird, but I love these candles they use at my favorite Italian restaurant. I remember the scent and aura they create throughout the space. So I looked them up. Depending on Amazon’s mood, they cost anywhere from $28.49 to $47.16. To me, this is a lot of money for a candle. But I buy them anyway.
By a similar token, small spaces are all the rage these days. I suck at interior design. My visual-spatial skills stink. However, I’ve gotten pretty good, if I may say so myself, at designing and decorating my small space. I’d rather have a killer few hundred square feet worth of space rather than a sparsely appointed several thousand square feet worth of space. So I — comfortably — spend some money on this.
You know people who nickel and dime their way through budgeting. For some, it’s a pure cash flow problem. They keep a modest budget but just don’t make enough money. For others, they’re just not backwards budgeting. They took on the maximum rent payment the “experts” tell them they can “afford” based on their income. When you do this, you say goodbye to cash cushions and wiggle room. The only way to create a surplus is to make more money (or readjust your budget).
When the time comes to spend money on a latte or a relatively expensive candle (though I have seen others that cost even more!), they go back and forth. Spending $5 or $30 or $50 is a big deal. Conventional personal finance responds to this with bull shit advice such as the latte effect. I love how the great Ben Le Fort talks about this, so you can read his take here.
The answer isn’t you’re financially irresponsible if you spend $5 a day on a latte, so don’t do it. The answer ought to be more wide-ranging, structural, and thoughtful.
Find ways so you can literally wake up in the morning and burn five bucks and not even think twice about it. But, I mean, why burn it? Take someone you really like on a coffee walk. You might have to spend $10, however you have situated your personal financial situation so this is perfectly feasible.
To me, this is the American dream. It’s being rich in the figurative sense.
It’s not a house or a car. It’s making purposeful compromises so you can go out and do stuff with people. Ideally, you find people to do stuff with who live simply, but like nice things. So it’s not an expensive dinner every night. It’s more about the company than the money you’re spending or exactly what you’re doing.
And, if you really want to buy a house, good on you. Just don’t buy the biggest, most expensive one on the block. Aim to make a cash cushion part of your budget. Pretty straightforward. This should not be backwards logic.
This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
