# The Elephant in the Room: Housing

## By Mr. Money Mustache

## Wed, 11 May 2011 14:30:29 +0000

So far, I’ve complained about the excessive spending we do on cars, driving, gifts, cable TV, electricity.. all without even mentioning housing. Why?

Housing is the biggest expense for most people, and there are some retirement/frugality/simple living blogs out there that advise you to live in an absolutely minimal house or even an RV.

It is true that there are big savings to be had there – with the ongoing housing market party, if you live in a neighborhood with healthy real estate sales right now, you could probably pick up a foreclosed house from a bank somewhere else in your town for less than half-price. Or you could buy a used RV for $20k and cut your housing costs down by 90% for life.

But I wouldn’t do it, so I can’t tell you to do it. The Mr. Money Mustache way is not about living on the cheap. It’s about living the GOOD LIFE on the cheap. The fundamental lesson of this blog is that there is plenty of money to go around in this country, so you don’t have to eliminate your spending on everything to become financially independent. You just have to cut out your waste. And for the most part, buying yourself a home is not a waste.

I live in one of the nicer houses in my town’s nicest (to me) neighborhood*. I love the four bedrooms and four bathrooms and the nice renovations I’ve done throughout this place over the past five years. It’s not the cheapest place to live, but to me it’s the best value of living pleasure to the dollar I could create. A house to me is the home base of your spirit, and when you’re living a frugal and natural life, you spend a lot of time at home. As a result, when I compare the sunk cost of my housing to that of other people, I come out behind.

But by having a comfortable house, you can be happy and entertained at home without having to go out. You can have friends over and maybe even feel less of a need for vacations – enjoying Staycations instead. All of us in my family feel more confident and productive in a good house, so on an income basis, it might even be paying for itself.

The only caveat to all of this feel-good housing talk is to realize that it is still a luxury you are buying yourself. A house is not an asset (unless it is a cash-producing rental property), it’s an expense. The best you can statistically expect is for your house value to keep up with inflation: 2% per year or so. Any more than this is just luck, and it can go either direction as we’ve learned since 2005.

So before treating yourself to a house, I’d suggest you go about it the old-fashioned way: save up a 20% down payment, then make it a priority to pay the rest of the balance off much sooner than the 30-year period implied by modern mortgages. The idea of having a house mortgage-free might shock some youngsters who have been conditioned by marketing to think that debt is normal, but seriously – give it a try. The challenge of thinking about saving larger amounts of money – a $50,000 downpayment on a house – is exactly the type of exercise you need as a new MMM reader. If I could do it as a 24-year-old bachelor fresh off the boat after arriving in America, you can too!

On the other hand, if having an upscale house is less important to you, and you get more pleasure from doing a major trip to the mountains each weekend with your friends, then by all means you should outdo Mr. Money Mustache and live at half-price compared to me! When you live in a country with plenty to go around, you DO get to splurge on the things that are important to you. You just have to choose the splurging carefully and keep the total spending down to only 25-50% of what you earn, so you can get ahead and have the opportunity for more luxury in the future.

* Of course, this happens to be in Longmont, Colorado, not exactly a happening metropolis.. but for living a frugal life and having a great environment for a kid to grow up, it’s hard to beat.