I had an interesting chat with my other new roommate two nights ago. We were discussing my philosophy which isn't really new to me. Many people believe in living simply and saving for the future unfortunately here in Mexico and apparently in most of Latin America (this roommate is from Venezuela), the habit of saving is only for very short term savings typical reasons for saving money were for a party, for vacation, and for home electronics. Only about 8% of Mexicans according to the survey I read in a newspaper actually are saving anything for their retirement even though over 50% say they have the habit of saving.
Let me get back to the conversation. My roommate mentioned how its possible to die soon and not be able to enjoy your savings and early retirement. That is true but I think the odds are much higher that I'll live to be at least 50 and since all my grandparents ( I believe) were mid-80s or older when they died, unless I get sick or die from an accident I'll most likely live to my mid-seventies or older.
I guess it comes down to two things, how long you expect to live and if you believe that pleasure today is more important than pleasure tomorrow and the day after. In other words, is it worth it to sacrifice the car or the apartment in an expensive area and the restaurant meals in favor of simple living in a cheap apartment sharing with roommates so that you'll be able to cover emergencies and if there aren't any emergencies in the next 6-10 years be able to retire early?
Only you can answer that question for yourself. Like him, I also think that life is too short. I think it is very possible that I could die before I'm 67 or whatever the government's retirement age happens to be. I would like to be able to be financially free and do whatever I want for years before that time. I'd like to travel the world and make destination photo books to sell online. I'd like to meet new people, try new food, and learn new languages. I'd like to have time to take lessons to improve my manual art skills. If I didn't have to work everyday to live, I'd have a lot more time for those activities especially travel.
It is difficult to say if I'll be able to reach the goal since I'm averaging about 50% savings even with my frugal lifestyle. My income isn't high enough to save more. I do know that even a little makes a big difference over time.
Are you one of the 92% who leaves your normal-old-age retirement to God or your children? It is time to wake up because you might not die young as you planned and your children might be spending their money on your grandchildren instead of you. What does life is short mean to you? Does it mean to forget the future and be irresponsible or does it mean to plan for tomorrow?
Thursday, July 19, 2012
Sunday, July 15, 2012
"Quality of life" and therefore happiness seems to be defined very differently by the early retirement or financial independence people and regular spend-what-they-earn people.
I've been trying to show by example to my new roommates the concepts I live by since one clearly doesn't understand but I didn't get it when I was 20 either.
We were talking about what we'd do when (or if) we find a high paying job. Many know that I haven't actually looked for a job for several years. I've been freelancing for several years. I did poorly when the economy was bad and relatively well in the last and first year. (although compared to most people in the USA, I'm dirt poor in income)
The roommate that just doesn't get my perspective said he'd rent an apartment in an expensive neighborhood and get a nice car when he gets a high paying job.
I commented how I wouldn't do that because I'd just be spending all the extra money I'd be earning (I wouldn't get ahead). He gave me a shocked look and said that I'd be living a better quality of life. Obviously to him, living alone (or with his partner) in an expensive apartment paying for an expensive car is a better quality of life. Personally I don't see how quality of life improves by living somewhere expensive. Sure, it might be prettier or closer to work, but is that really a better quality of life?
I have nothing against those things, I just would rather have my future covered and live simply. I still spend too much on food, but very little on everything else. I replied that if you change (increase) your expenses and later lose your job, you'd have no way to keep paying for those things.
He paused and said that it would be better to buy a house. I can agree on that.
What do you think? How do you define quality of life and happiness? Are you happier living in someplace expensive than someplace that is inexpensive? What about long term happiness? Would you still be happy if you lost that high income and had to move to a small cheap place or live with your family because you didn't have enough savings? Does paying for an expensive car really make you happier than taking public transportation or having an affordable car?
Wednesday, July 11, 2012
Follow through and follow up on your new Budget
In the last two posts I introduced budgeting and how I normally create a budget. To get ahead you need to know where your money is going, plan for the future, and carry out that plan.
Once you have your fresh budget created you need to actually implement the budget by reaching or exceeding your savings, spending, and investment goals. Here are some important things to consider:
Even a perfect spending plan will frequently change because circumstances change. If you lose your job, get a second job, get or lose a roommate, or decide to buy a new car, guess what? your budget will have to be updated. You are responsible for your personal finances regardless of whose fault it is.
If you put your expenses before saving and investing you might discover that you didn't save as much as was in your budget. Really of all your spending plan, your savings and investments are the most crucial to get ahead financially. Since you didn't meet your goals, check to see what the problem was and next month deposit the percent of income you have budgeted into your savings and investment accounts as soon as you get paid! Instead of saving and investing with the left over money, use the left over money for non-essentials.
Once you have your fresh budget created you need to actually implement the budget by reaching or exceeding your savings, spending, and investment goals. Here are some important things to consider:
1. Follow up on expenses.
Make sure they are accurate. Did you forget to add your monthly haircut or your personal care products to your budget? Perhaps you forgot to include your monthly gym membership? You might have spent more than planned so you'll either need to save less or spend less in other areas. Make changes to your budget to reflect reality THEN change reality by reducing what you spend. As you modify your spending habits, you'll see the change on your spreadsheet where you register expenses and income.2. Review your goals
Once a month, reconsider your goals, their priority, and timeframe. Are you saving enough? Are your investments earning as much as you predicted? You might have to increase savings or change the start date for your new projects. However without your budget you wouldn't have realized it.3. Have circumstances changed?
Even a perfect spending plan will frequently change because circumstances change. If you lose your job, get a second job, get or lose a roommate, or decide to buy a new car, guess what? your budget will have to be updated. You are responsible for your personal finances regardless of whose fault it is.
4. Did you pay yourself first?
If you put your expenses before saving and investing you might discover that you didn't save as much as was in your budget. Really of all your spending plan, your savings and investments are the most crucial to get ahead financially. Since you didn't meet your goals, check to see what the problem was and next month deposit the percent of income you have budgeted into your savings and investment accounts as soon as you get paid! Instead of saving and investing with the left over money, use the left over money for non-essentials.
Tuesday, July 10, 2012
The Budget or Spending Plan that I Follow
For many years I struggled to find a way to budget that would work for my personality and time constraints. I know that having a precise record of spending and spending per category is useful, but I can't keep it up over the long term. If you can that's great.
Then one day over a year ago, I was reading an article on MSN Money about the 60% solution. I would have linked the original article, but it is no longer available on MSN. I searched for it and the link in their own search results is bad so I guess they pulled the article. It is too bad because it is the best budget method I've been able to find.
Take your total income and multiply it by .6 to get 60% (and add a line in your budget to calculate it and to compare it with your current planned expenses)
Lets say you get paid $500 twice a month. 60% would be $600 for the month.
60% is the most you can spend on ALL of your normal expenses. Yes, thats everything you normally spend money on even your month's credit card expenses, food, housing, transportation, cable, insurance, telephone, cell phone, etc.)
The remaining 40% is for entertainment (10%) and Savings (30%). That means that you can't spend more than 10% of your income on Entertainment (not 40%!).
If I remember correctly the 30% is divided into 3. 10% for irregular expenses like vacations, weddings, gifts or when something expensive breaks and you need to fix them. 10% for long term saving like for a new car, buy a house, etc. 10% for retirement.
It is a good system for most people since it will cover almost anything that comes up. That 30% savings every month will quickly grow an emergency fund and later investments or you could be strict and really put 10% in different accounts.
What about debt? If you are in debt, you can spend 20% from Savings and 10% from Entertainment to pay the debt down. Obviously if your current expenses are below 60% don't increase them! any additional money that can go towards debt payment and investing is great.
I have an irregular income instead of a paycheck so my 60% is different every month. That means that I can't set up any automatic process of moving $x to 3 different saving and investment accounts on the 16th and 1st. I calculate what I should make every month based on what I expect and as classes get canceled, I reduce the number and update the income field for the month.
If I'm having a really bad month I'll save only 30%. If I'm having a good or normal month I'll deposit 50% of the money I receive twice a month (since I charge twice a month). Yeah, I know 50% is much higher than the 30% in the plan, but you never know when a month will arrive that won't let me save anything so it will probably average down to 40% this year.
My goals include buying a condo, house, or land outside of the city for building a small house. 30% savings won't get me there! Therefore I've been slowly adjusting my expenses down from a 60% solution to a 40% solution. 40% solution would therefore be to limit regular expenses to 40%, consider 10% for irregular expenses and entertainment and put the other 50% toward savings and investing.
If I were to divide up the 50% up into groups, it would depend on age. I'm 36 now and I don't own my own home or even some place to camp on if I needed to so my first goal is to have enough savings for emergencies and to buy some place to call my own. If I save 50% the next 4 years, I should have enough money for a deposit on a tiny condominium here in Mexico City or pay for half of a house out on the edge of the city (about 2 hours in public transportation from where I live now!) That money would probably pay for an undeveloped lot outside of the city about 3 hours away from here. They all have pros and cons.
My next goal is to have money for retirement or semi-retirement. Until I buy my own place, I'm putting all the money that isn't emergency fund into a special account for retirement savings. There are no fees for taking money out before I'm old. If I don't see the money grow there, I might move it to a brokerage account.
If you are new to budgeting, you are probably thinking "60% or 40%? you've got to be kidding me!" No, I'm not. I make less money than you'd make on minimum wage in the United States. I share an apartment in a relatively poor area. I don't have a car. I don't buy a lot of stuff. I only pay for services that I really want. I don't have movie channels. I don't have a television either. I pay for internet and an inexpensive cell phone plan. I don't have a home telephone right now either. I don't buy a lot of clothes and none of it is name brand. I'm currently only struggling with my food expenses. It is easy to buy fast food or a taco going to or from work. If I cooked and packed all my meals I'm sure I'd have 50% saved every month as long as I keep working and sharing the apartment.
If you can't save 30% every month, start by reducing the biggest expenses: housing, transportation, and food. Then go after extras that you pay for every month. Finally go after the entertainment related expenses until you can reach your savings goal at 30%, 50%, or more!
Then one day over a year ago, I was reading an article on MSN Money about the 60% solution. I would have linked the original article, but it is no longer available on MSN. I searched for it and the link in their own search results is bad so I guess they pulled the article. It is too bad because it is the best budget method I've been able to find.
Here's how it works (at least how I remember it!)
Take your total income and multiply it by .6 to get 60% (and add a line in your budget to calculate it and to compare it with your current planned expenses)
Lets say you get paid $500 twice a month. 60% would be $600 for the month.
60% is the most you can spend on ALL of your normal expenses. Yes, thats everything you normally spend money on even your month's credit card expenses, food, housing, transportation, cable, insurance, telephone, cell phone, etc.)
The remaining 40% is for entertainment (10%) and Savings (30%). That means that you can't spend more than 10% of your income on Entertainment (not 40%!).
If I remember correctly the 30% is divided into 3. 10% for irregular expenses like vacations, weddings, gifts or when something expensive breaks and you need to fix them. 10% for long term saving like for a new car, buy a house, etc. 10% for retirement.
It is a good system for most people since it will cover almost anything that comes up. That 30% savings every month will quickly grow an emergency fund and later investments or you could be strict and really put 10% in different accounts.
What about debt? If you are in debt, you can spend 20% from Savings and 10% from Entertainment to pay the debt down. Obviously if your current expenses are below 60% don't increase them! any additional money that can go towards debt payment and investing is great.
What I'm doing differently from the 60% solution
I have an irregular income instead of a paycheck so my 60% is different every month. That means that I can't set up any automatic process of moving $x to 3 different saving and investment accounts on the 16th and 1st. I calculate what I should make every month based on what I expect and as classes get canceled, I reduce the number and update the income field for the month.
If I'm having a really bad month I'll save only 30%. If I'm having a good or normal month I'll deposit 50% of the money I receive twice a month (since I charge twice a month). Yeah, I know 50% is much higher than the 30% in the plan, but you never know when a month will arrive that won't let me save anything so it will probably average down to 40% this year.
My goals include buying a condo, house, or land outside of the city for building a small house. 30% savings won't get me there! Therefore I've been slowly adjusting my expenses down from a 60% solution to a 40% solution. 40% solution would therefore be to limit regular expenses to 40%, consider 10% for irregular expenses and entertainment and put the other 50% toward savings and investing.
If I were to divide up the 50% up into groups, it would depend on age. I'm 36 now and I don't own my own home or even some place to camp on if I needed to so my first goal is to have enough savings for emergencies and to buy some place to call my own. If I save 50% the next 4 years, I should have enough money for a deposit on a tiny condominium here in Mexico City or pay for half of a house out on the edge of the city (about 2 hours in public transportation from where I live now!) That money would probably pay for an undeveloped lot outside of the city about 3 hours away from here. They all have pros and cons.
My next goal is to have money for retirement or semi-retirement. Until I buy my own place, I'm putting all the money that isn't emergency fund into a special account for retirement savings. There are no fees for taking money out before I'm old. If I don't see the money grow there, I might move it to a brokerage account.
If you are new to budgeting, you are probably thinking "60% or 40%? you've got to be kidding me!" No, I'm not. I make less money than you'd make on minimum wage in the United States. I share an apartment in a relatively poor area. I don't have a car. I don't buy a lot of stuff. I only pay for services that I really want. I don't have movie channels. I don't have a television either. I pay for internet and an inexpensive cell phone plan. I don't have a home telephone right now either. I don't buy a lot of clothes and none of it is name brand. I'm currently only struggling with my food expenses. It is easy to buy fast food or a taco going to or from work. If I cooked and packed all my meals I'm sure I'd have 50% saved every month as long as I keep working and sharing the apartment.
If you can't save 30% every month, start by reducing the biggest expenses: housing, transportation, and food. Then go after extras that you pay for every month. Finally go after the entertainment related expenses until you can reach your savings goal at 30%, 50%, or more!
Monday, July 9, 2012
Introduction to Budgeting (creating a spending plan)
This post is for those who are new to the concepts of managing your money.
What is a budget and why is it important?
A budget is a spending plan. In its most essential form, a budget is a list of income and expenses for a specific period of time. You could have a budget for your vacation, a budget for a business trip, or a personal finance budget. I'm referring to the last one in this blog since it is about my personal finance journey.
What do I need to create a personal finance budget for me (or my household)?
To create a budget you need to decide how often you'll update your budget (typically every 15 days) , how long of a period it will cover (typically one month), and some place to write down all the numbers and make calculations. You also need to know how you spend your money. It is good to have a pile of bills from the last month and the last of the bills that come every other month or longer like the utility bills or car insurance. If you earn a paycheck take out the last month's pay stubs. If you work freelance, look at your client payment register and look at checks and deposits to your account.
The period of a budget and the level of detail in a budget really depends on you, but since most regular bills come every month, it is much simpler to do a monthly budget and update it as you go even if you are paid every week, every two weeks, or twice a month.
The frequency you use to update your budget is a matter of personality and dedication. If you like to micromanage and you have free time everyday, you could update your expenses and categorize each one and then compare the end of the month with your plan. It can be great to see how you think you spend your money is different from how you really spend it!
Personally, I think of a budget as a guide. I don't really care where every last cent or peso got spent during the month as long as I'm making the desired progress toward my goals. As soon as I start to fall short I'll make an adjustment. I do however pay special attention to repeating, regular expenses since those need to be reduced, cut, or replaced when my income drops.
Since I don't like to worry about every peso that leaves my pocket I consider my money as going to the following categories:
1. Basic Expense
2. Entertainment/ going out
3. Irregular Expense
4. Savings and Investments
No, I don't actually make those categories on my budget spreadsheet, but that's how I think about expenses for budgeting.
On my actual budget spreadsheet I group them as follows:
1. Expenses (with a list of regular expenses and approx. costs)
2. Savings and Investments (divided by account I deposit the money to)
Basically, on my budget it is:
1. Money I plan to spend
2. Money I have saved
3. Money I end up spending on Entertainment or other misc. irregular expenses.
If you control every peso/dollar that you have then you just have:
1. Money you spend
2. Money you save
What is important when creating a budget?
The most important things to consider when creating a budget are your goals, and to live below your means. That means that all your expenses planed and unplanned need to be well below 100%. (no, 90% isn't well below). If you spend 100% of your money every month, you are not going to have money for anything else and you'll either have to go without or go into debt (credit card!)
Your budget should reflect your goals. If you have no goals then make a list of what is important to you and what isn't important. What makes you happy? What would make you happy? Where do you see yourself in 5 or 10 years according to your current spending and where would you like to be?
Most people want to change or improve their finances, but they are afraid or they don't have established goals. Without goals, it is too easy to just spend money on whatever you feel like and usually end up in debt. Another big problem is that with credit cards and debit cards it is very easy to spend money as long as you have one or the other in your billfold so to actually carry out a budget it is often important to keep those locked away at home most days or get used to having small quantities for cash for spending that day or week. You'll have to find what works best for you.
Where should you create your budget?
You only really need a notebook, a pen or pencil, and a calculator, but I think it is much better to do a budget on a computer since it can calculate percents and averages. It is important to keep a monthly log of spending and/or saving along with income to get a better idea of your progress that you can compare with your general spending plan and your goals.
I know that for USA and Canada there is a service called Mint.com that is useful for making a budget and tracking spending with reports, but that isn't available to someone outside of those countries. There is also special software like Quicken that you can buy, but then you are stuck updating when you are on the computer it is installed on. I tried some budgeting software, but it was more tedious and of course if the hard drive crashed or the system became corrupt, I'd sometimes lose my data and configuration. The best option (at least for those of us who don't have Mint) is to use a spreadsheet stored online (and a backup on your computer). My favorite service is Google Docs (now part of Google Drive). I can create/edit/update my budget anywhere I can find a computer with an internet connection. I don't need to worry about software purchases or upgrades that way.
I recommend that after you set up your basic categories of income, spending, and savings, and of course the subcategories for the level of detail you want, add special calculations that will help you with your goals for example:
Make fields for % saved and % spent (including savings & investment) If the number is over 100%, you messed up or you have unspent money from last month that you forgot to deposit!
A column for total spent and average spent in each category is also very useful. Over time, you'll know your average income, expenses, and savings either as approximate or precise depending on how regular you update it. I'm more careful updating income and savings and less worried about the rest.
A spreadsheet page for calculating your net worth (assets vs. liabilities) over time is also very useful, but it is your spreadsheet so you should adapt it to your needs.
In the next post, I'll write about the spending plan I currently use.
Saturday, July 7, 2012
Ten Lifestyle Rules for Financial Independence and Early Retirement.
Financial Independence and very early retirement seem almost impossible to people who are not used to budgeting and/or living simply. Most people just believe the illusion that they can spend almost all of their money or 100% of it and that somehow their employer funded retirement account or the government will manage to take care of them while they pray they'll be healthy and have work to pay for their expenses from now until their official retirement date.
Unfortunately, that isn't true for most people. People lose their jobs and in short order they lose their extremely meager savings (perhaps enough to survive a month!) and then they lose their home that they were making mortgage payments on or they get kicked out of their apartment (which they couldn't afford either!) because they stopped paying their rent.
We all need to budget our personal spending because there is no reason why we can't lose our income before the official retirement age or lose our ability to work before that age.
Most importantly, one needs to change his or her attitudes toward money. Money isn't a right and we aren't entitled to any specific lifestyle or spending. Those who have the money can spend it as they can see fit.
Rule #1:
If you take home $1000 a month, NEVER spend 100% of it. Make a point of keeping your regular expenses at or below 60% or $600. You probably won't make early retirement with only 40% for irregular expenses, debt repayment, and savings, but it at least your savings will cover real irregular expenses and you should be able to grow a decent emergency fund between personal finance disasters.
If you want to retire early and truly be financially independent you need to save and invest at least half of your after-tax income. The greater the percentage that you save and invest every month, the faster you'll see the benefits.
At first you'll see that in an emergency you can pay your bills without using a credit card or having to ask for a loan.
Your money needs to make you more money. Eventually your investments will be large enough to pay your bills then you will be able to quit your job, retire, change jobs, go from full-time to part-time, or make your hobby your new profession.
Rule #2
It is great to believe your regular expenses are less than 60% of your take home pay, but you need to either track all expenses or periodically track them and be pretty consistent with your spending. An easy way to verify is to add up money put in savings and investments and debt reduction (monthly credit card and mortgage payments are not debt reduction) If the total is at least 30% of your take home that leaves about 10% spending for irregular and entertainment. if it is less than you need to be more careful at planning and tracking your expenses.
Be specially careful with bank and credit card fees. Below minimum balance, late payment, and missed payment fees can be huge! There are also account maintenance fees on some bank accounts. Credit cards often have annual fees. These should be covered in your REGULAR expenses until you get rid of them.
Rule #3
Ok, you spent a lot of money at a night out with friends. Accept that it happened and it was a mistake if it was over budget. Just don't give up your budget. Track your expenses better and stay home some other night you normally go out so it balances out to an acceptable level. Making a mistake doesn't mean it is time to throw in the towel. This month you had a setback. Next month you'll make progress!
Rule #4
If you are used to living beyond your means, you will have to reevaluate what is really important to you. Do those expensive nights out at the disco and the daily taxi drives or the expensive SUV really make you happy? I really doubt it makes you happy beyond a few days.
Reduce or eliminate expenses that don't make you happier or healthier. Downsize your lifestyle. Cook at home more, eat out less. Rent or own a home that is big enough for you and your family. Share your apartment or rent out extra rooms. Make coffee at home instead of going to an expensive coffee shop every day. Don't buy new trendy clothing every season if conservative timeless styles will do. Buy used clothing and shop at garage sales or online for used goods in good condition.
Not everything good will cost you money. Libraries have books, museums often have a free day, parks are generally free.
Limit your consumption when you go to expensive places. Buy one drink instead of 4. Buy the daily special instead of a regular menu item at the restaurant when you go out on a date or with friends.
Rule #5
A simple lifestyle gives you freedom. Cutting from your budget services you never or rarely use makes sense. If you only watch one movie per month, why pay more than the cost of a visit to a movie theater for those movie channels? If you don't use internet on your cell phone, why pay for the service? If you don't use it or rarely use it, reduce it then cancel it. For example start with your cable and internet bill. Start by reducing from the full package to a package without movie channels and wait a month. Did you miss them? Probably not if you are like most people. The next month go to a more basic package or go to just what you actually used the previous month. Do you always watch TV online? Cancel the television service and just pay for internet. Do you always use the internet on your breaks at the office, cancel your internet service at home. The same goes for magazine and newspaper subscriptions. If you don't read half of the magazines, then it makes more sense to just buy one at the news stand when an issue has an article you want to keep. Better yet, go to the local library to read magazines and newspapers!
Can you walk, ride your bike, or take a bus to work instead of driving your car?
The biggest expenses are normally rent, transportation, food, and utilities. Reducing those will make the biggest dent in your monthly expenses.
Rule #6
You need to make a budget, but recording your general spending or every single expense will keep you honest and on track. Personally I don't record every expense, but I do make a point of saving 40-50% of my income as much as possible. Yes that means sharing the apartment, not using a car, etc. You need to decide what you value until you have substantial investments paying your bills.
Today, tracking your expenses compared to your budget is easier than ever since you can use Google Docs spreadsheets and update your figures anywhere you can find a safe internet connection.
Rule #7
What you don't spend once you are living below your means, can go to your emergency fund and investments. Start investing right away. Inflation eats the buying power of cash savings, so it is important to take some risk by investing. Certificates of Deposit are probably the safest, but they generate little income. Stocks are high risk, but they'll normally grow faster than inflation or pay dividends. Rental property can make regular income for minimal effort, but you need a big up-front investment as a down payment and there are of course property taxes, mortgage payments, and home owner fees. Find a balance that is right for you, but invest in assets instead of spending money on liabilities. Assets generate income and/or grow in value. Liabilities cost you money.
Rule #8
Every time you get your paycheck or get paid for a service you provide or a product you sell, put a % of the payment in your savings and investments. It should be equal to or greater than the % you decided in your budget. No, 10-15% is NOT sufficient. That won't cover real emergencies nor your retirement unless you started saving when you were 20.
If you have a regular salaried job, you know how much money you make every paycheck so you can regularly have money transferred to your savings and brokerage accounts. A freelancer should just deposit a % with each payment received.
Why pay yourself first? It is too easy to see money unspent and buy something that you want (but probably don't need). Once the money is invested, it isn't so easy to spend it on something trendy, or cool. Once you have time to think about it you probably will decide that you didn't really want it that much or it can wait another month or two until the price drops.
Although a 10-15% savings rate is not enough for financial independence or even a decent retirement if you are new to budgeting and saving, it is a very good start if you aren't used to living on less than 100% of their paycheck.
Rule #9
When you go shopping you see most things at the supermarket are processed ready to heat and eat. Unfortunately most have added sugar, salt, and fat. If you are busy it is nice to have something to eat quick, but eating mostly processed food will increase your food expenses. Natural oatmeal is easy to prepare and much cheaper than processed cereals. Potatoes can easily be sliced on a cutting board (carefully!) and fried in canola oil for much less than a bag of precooked french fries. Fried rice is extremely easy to cook and of course it is much cheaper than precooked fried rice. Tea is cheaper than soda and much healthier too.
Rule #10
Couponing is one example. Yeah, you'll save money with coupons, but you'll notice that coupons are not available for unprocessed natural goods. Eggs, oatmeal, fresh fruit and vegetables, are already cheap. Processing adds costs and makes them expensive therefore the coupons. If you buy basic goods then coupons don't make sense. If there is a promotion on your shampoo then you're probably safe, but if you live alone you probably won't eat 2 kilograms of tomatoes before they spoil. It is hard to guess how much you'll consume, but if you know you don't eat more than 500 grams of something every week and normally less, then don't buy more if it will spoil. I know I never eat more than 2 kilograms of carrots in a week. Sometimes I eat only one so I try to plan according to my average consumption.
Unfortunately, that isn't true for most people. People lose their jobs and in short order they lose their extremely meager savings (perhaps enough to survive a month!) and then they lose their home that they were making mortgage payments on or they get kicked out of their apartment (which they couldn't afford either!) because they stopped paying their rent.
We all need to budget our personal spending because there is no reason why we can't lose our income before the official retirement age or lose our ability to work before that age.
Most importantly, one needs to change his or her attitudes toward money. Money isn't a right and we aren't entitled to any specific lifestyle or spending. Those who have the money can spend it as they can see fit.
Rule #1:
Live BELOW your means.
If you take home $1000 a month, NEVER spend 100% of it. Make a point of keeping your regular expenses at or below 60% or $600. You probably won't make early retirement with only 40% for irregular expenses, debt repayment, and savings, but it at least your savings will cover real irregular expenses and you should be able to grow a decent emergency fund between personal finance disasters.
If you want to retire early and truly be financially independent you need to save and invest at least half of your after-tax income. The greater the percentage that you save and invest every month, the faster you'll see the benefits.
At first you'll see that in an emergency you can pay your bills without using a credit card or having to ask for a loan.
Your money needs to make you more money. Eventually your investments will be large enough to pay your bills then you will be able to quit your job, retire, change jobs, go from full-time to part-time, or make your hobby your new profession.
Rule #2
KNOW where your money goes.
It is great to believe your regular expenses are less than 60% of your take home pay, but you need to either track all expenses or periodically track them and be pretty consistent with your spending. An easy way to verify is to add up money put in savings and investments and debt reduction (monthly credit card and mortgage payments are not debt reduction) If the total is at least 30% of your take home that leaves about 10% spending for irregular and entertainment. if it is less than you need to be more careful at planning and tracking your expenses.
Be specially careful with bank and credit card fees. Below minimum balance, late payment, and missed payment fees can be huge! There are also account maintenance fees on some bank accounts. Credit cards often have annual fees. These should be covered in your REGULAR expenses until you get rid of them.
Rule #3
Don't give up after making a mistake.
Ok, you spent a lot of money at a night out with friends. Accept that it happened and it was a mistake if it was over budget. Just don't give up your budget. Track your expenses better and stay home some other night you normally go out so it balances out to an acceptable level. Making a mistake doesn't mean it is time to throw in the towel. This month you had a setback. Next month you'll make progress!
Rule #4
Make lifestyle changes
If you are used to living beyond your means, you will have to reevaluate what is really important to you. Do those expensive nights out at the disco and the daily taxi drives or the expensive SUV really make you happy? I really doubt it makes you happy beyond a few days.
Reduce or eliminate expenses that don't make you happier or healthier. Downsize your lifestyle. Cook at home more, eat out less. Rent or own a home that is big enough for you and your family. Share your apartment or rent out extra rooms. Make coffee at home instead of going to an expensive coffee shop every day. Don't buy new trendy clothing every season if conservative timeless styles will do. Buy used clothing and shop at garage sales or online for used goods in good condition.
Not everything good will cost you money. Libraries have books, museums often have a free day, parks are generally free.
Limit your consumption when you go to expensive places. Buy one drink instead of 4. Buy the daily special instead of a regular menu item at the restaurant when you go out on a date or with friends.
Rule #5
Focus on big expenses, subscriptions, and simplicity.
A simple lifestyle gives you freedom. Cutting from your budget services you never or rarely use makes sense. If you only watch one movie per month, why pay more than the cost of a visit to a movie theater for those movie channels? If you don't use internet on your cell phone, why pay for the service? If you don't use it or rarely use it, reduce it then cancel it. For example start with your cable and internet bill. Start by reducing from the full package to a package without movie channels and wait a month. Did you miss them? Probably not if you are like most people. The next month go to a more basic package or go to just what you actually used the previous month. Do you always watch TV online? Cancel the television service and just pay for internet. Do you always use the internet on your breaks at the office, cancel your internet service at home. The same goes for magazine and newspaper subscriptions. If you don't read half of the magazines, then it makes more sense to just buy one at the news stand when an issue has an article you want to keep. Better yet, go to the local library to read magazines and newspapers!
Can you walk, ride your bike, or take a bus to work instead of driving your car?
The biggest expenses are normally rent, transportation, food, and utilities. Reducing those will make the biggest dent in your monthly expenses.
Rule #6
Record your income, savings, and investing in a spreadsheet.
You need to make a budget, but recording your general spending or every single expense will keep you honest and on track. Personally I don't record every expense, but I do make a point of saving 40-50% of my income as much as possible. Yes that means sharing the apartment, not using a car, etc. You need to decide what you value until you have substantial investments paying your bills.
Today, tracking your expenses compared to your budget is easier than ever since you can use Google Docs spreadsheets and update your figures anywhere you can find a safe internet connection.
Rule #7
Learn the difference between an asset and a liability and start investing your savings in a variety of assets.
What you don't spend once you are living below your means, can go to your emergency fund and investments. Start investing right away. Inflation eats the buying power of cash savings, so it is important to take some risk by investing. Certificates of Deposit are probably the safest, but they generate little income. Stocks are high risk, but they'll normally grow faster than inflation or pay dividends. Rental property can make regular income for minimal effort, but you need a big up-front investment as a down payment and there are of course property taxes, mortgage payments, and home owner fees. Find a balance that is right for you, but invest in assets instead of spending money on liabilities. Assets generate income and/or grow in value. Liabilities cost you money.
Rule #8
Pay yourself first.
Every time you get your paycheck or get paid for a service you provide or a product you sell, put a % of the payment in your savings and investments. It should be equal to or greater than the % you decided in your budget. No, 10-15% is NOT sufficient. That won't cover real emergencies nor your retirement unless you started saving when you were 20.
If you have a regular salaried job, you know how much money you make every paycheck so you can regularly have money transferred to your savings and brokerage accounts. A freelancer should just deposit a % with each payment received.
Why pay yourself first? It is too easy to see money unspent and buy something that you want (but probably don't need). Once the money is invested, it isn't so easy to spend it on something trendy, or cool. Once you have time to think about it you probably will decide that you didn't really want it that much or it can wait another month or two until the price drops.
Although a 10-15% savings rate is not enough for financial independence or even a decent retirement if you are new to budgeting and saving, it is a very good start if you aren't used to living on less than 100% of their paycheck.
Rule #9
Buy basic goods more than processed goods at the supermarket.
When you go shopping you see most things at the supermarket are processed ready to heat and eat. Unfortunately most have added sugar, salt, and fat. If you are busy it is nice to have something to eat quick, but eating mostly processed food will increase your food expenses. Natural oatmeal is easy to prepare and much cheaper than processed cereals. Potatoes can easily be sliced on a cutting board (carefully!) and fried in canola oil for much less than a bag of precooked french fries. Fried rice is extremely easy to cook and of course it is much cheaper than precooked fried rice. Tea is cheaper than soda and much healthier too.
Rule #10
Only buy deals for things that you'll actually use before they go bad.
Couponing is one example. Yeah, you'll save money with coupons, but you'll notice that coupons are not available for unprocessed natural goods. Eggs, oatmeal, fresh fruit and vegetables, are already cheap. Processing adds costs and makes them expensive therefore the coupons. If you buy basic goods then coupons don't make sense. If there is a promotion on your shampoo then you're probably safe, but if you live alone you probably won't eat 2 kilograms of tomatoes before they spoil. It is hard to guess how much you'll consume, but if you know you don't eat more than 500 grams of something every week and normally less, then don't buy more if it will spoil. I know I never eat more than 2 kilograms of carrots in a week. Sometimes I eat only one so I try to plan according to my average consumption.
Tuesday, July 3, 2012
More thoughts about having roommates and Financial Independence
In my previous post I explained how much of a financial difference it can be to rent your spare bedrooms using my own real life example.
I wasn't sure when I wrote it if it would be worth it to share a bedroom, but now that I've had a day to think about it I'm sure. Would it be worth it for you to share your bedroom too? It depends on your income and how expensive your apartment or house is.
It doesn't matter if you own your own home paying a mortgage or if it is paid off or if you are renting. Sharing your home is a great way to save money. I would say that if you don't have a stable regular income then it is essential for you to reduce your fixed expenses. Your fixed expenses are those that are always there and rarely change. You can't just cancel them when times are tough or you have a contract or they're something necessary for you. Variable expenses could also be necessary, but they normally change a lot due to consumption.
For financial freedom or early retirement it is more important to reduce the large bills than eliminate the small bills. Yes, all expenses are important, but a 25% reduction of a large bill has a greater effect than 25% off a small one.
Housing, food, and transportation are the biggest expenses although not necessarily in that order! Focus on reducing those first then worry about the $4 coffee. I like to think about it this way.
Housing bills can be reduced by moving to a smaller place, moving to a more basic place of the same size, moving to a cheaper area of town, or sharing what you have. If you own your own home, it makes more sense to look for roommates than to move. It is your place and you really should be there to take care of it! If you are renting then you have to consider overall cost, safety, schools (if you have children), and how much people will pay to share a room and what kind of person would be willing to share in the neighborhood you will live in. Cheaper places mean cheaper rent for you and potential roommates, but people who like nice neighborhoods might have the higher income to pay for the more expensive room or they might not and you'll have a more expensive rent to pay by yourself.
Make sure that where ever you decide to live that it is a place that you could pay by yourself if you had to. Don't plan on an expensive place expecting to have roommates. That would not be smart! The idea is to save money and be financially free or retire early not lock yourself into somewhere that you couldn't pay today!
Currently my rent in a relatively poor area of the city that is a short walk to a supermarket and also a short walk to a subway station is 3,800 pesos per month. It has 3 bedrooms. This is considered an inexpensive apartment for this area of the city. Typically 3 bedroom apartments in this area are 4,000 or 4,500 pesos. I moved here with two other roommates who both abandoned the apartment. I almost left too because they were not good people, but I stayed because I couldn't find anything better without paying much more.
3800/3 = approx. 1267 so if three people equally paid their share of rent that is how much it would be per person. That's not bad! A one bedroom apartment in the area would cost a little over the cost of paying two bedrooms by myself. If I think about it in terms of work, I'd need to teach a little over 5 hours of classes to pay for one room or 16 hours of classes to pay for the entire apartment's rent. No, that isn't a big deal, but when I save those 10 hours of class income, I'll make money in interest or have it for an emergency or my vacation!
What if I have people in the other two rooms and I share my bedroom? I'd only have to teach 3 classes to pay my share of the rent. I'd lose a little more privacy, but I'd reduce my housing cost to that of my bus and subway ticket expenses. (you didn't think I had a car, did you?) Another advantage would be if someone moved out of one of the other two rooms, the person sharing with me might decide to rent that room. My expense would go back to that of one room, but that's better than going from paying one to two. In the case that the person who shares with me doesn't want to be alone, I'd then go to paying for 1.5 rooms. Again not a big deal.
I wasn't sure when I wrote it if it would be worth it to share a bedroom, but now that I've had a day to think about it I'm sure. Would it be worth it for you to share your bedroom too? It depends on your income and how expensive your apartment or house is.
It doesn't matter if you own your own home paying a mortgage or if it is paid off or if you are renting. Sharing your home is a great way to save money. I would say that if you don't have a stable regular income then it is essential for you to reduce your fixed expenses. Your fixed expenses are those that are always there and rarely change. You can't just cancel them when times are tough or you have a contract or they're something necessary for you. Variable expenses could also be necessary, but they normally change a lot due to consumption.
For financial freedom or early retirement it is more important to reduce the large bills than eliminate the small bills. Yes, all expenses are important, but a 25% reduction of a large bill has a greater effect than 25% off a small one.
Housing, food, and transportation are the biggest expenses although not necessarily in that order! Focus on reducing those first then worry about the $4 coffee. I like to think about it this way.
Housing bills can be reduced by moving to a smaller place, moving to a more basic place of the same size, moving to a cheaper area of town, or sharing what you have. If you own your own home, it makes more sense to look for roommates than to move. It is your place and you really should be there to take care of it! If you are renting then you have to consider overall cost, safety, schools (if you have children), and how much people will pay to share a room and what kind of person would be willing to share in the neighborhood you will live in. Cheaper places mean cheaper rent for you and potential roommates, but people who like nice neighborhoods might have the higher income to pay for the more expensive room or they might not and you'll have a more expensive rent to pay by yourself.
Make sure that where ever you decide to live that it is a place that you could pay by yourself if you had to. Don't plan on an expensive place expecting to have roommates. That would not be smart! The idea is to save money and be financially free or retire early not lock yourself into somewhere that you couldn't pay today!
Currently my rent in a relatively poor area of the city that is a short walk to a supermarket and also a short walk to a subway station is 3,800 pesos per month. It has 3 bedrooms. This is considered an inexpensive apartment for this area of the city. Typically 3 bedroom apartments in this area are 4,000 or 4,500 pesos. I moved here with two other roommates who both abandoned the apartment. I almost left too because they were not good people, but I stayed because I couldn't find anything better without paying much more.
3800/3 = approx. 1267 so if three people equally paid their share of rent that is how much it would be per person. That's not bad! A one bedroom apartment in the area would cost a little over the cost of paying two bedrooms by myself. If I think about it in terms of work, I'd need to teach a little over 5 hours of classes to pay for one room or 16 hours of classes to pay for the entire apartment's rent. No, that isn't a big deal, but when I save those 10 hours of class income, I'll make money in interest or have it for an emergency or my vacation!
What if I have people in the other two rooms and I share my bedroom? I'd only have to teach 3 classes to pay my share of the rent. I'd lose a little more privacy, but I'd reduce my housing cost to that of my bus and subway ticket expenses. (you didn't think I had a car, did you?) Another advantage would be if someone moved out of one of the other two rooms, the person sharing with me might decide to rent that room. My expense would go back to that of one room, but that's better than going from paying one to two. In the case that the person who shares with me doesn't want to be alone, I'd then go to paying for 1.5 rooms. Again not a big deal.
Sunday, July 1, 2012
Having Roommates makes a big difference! Reduce your housing costs for Financial Independence.
The last 7 month's have been a little crazy for me. Before mid-December of 2011 I was in a stable roommate situation in a very cheap and very tiny town home very far out in the suburbs. I wasn't happy with my roommate due to his financial decisions (always broke do to poor judgement) and due to his occasional tantrums (even though he is one year older than me, he seemed more like a grade school student when he didn't get his way). Obviously, I wanted to change my situation because happiness is more important than money and if you are not happy at home, you won't be truly happy elsewhere.
I was offered the opportunity to share a 3 bedroom apartment in a slightly poor area 30 minutes in transportation north of downtown just a few minutes walk from a subway station. My cut of the expenses was much more than I was paying way out in the suburbs, but I had poor neighbors and I knew that I didn't want to rent alone due to the expense and of course rents are much higher in the city proper than on the outskirts of the metropolitan area. I accepted and the drama quickly started. I discovered I replaced one bad roommate with two. These were very dishonest and noisy. They loved having loud parties every holiday and all night. I tried again to find a room to rent in a decent place for a good price, but I didn't find one.
As luck would have it one bad roommate moved out in March about half way through a month he didn't pay. He owed me some money too. I paid more to cover half of his room's cost that month. I was happy that he left because I learned to despise him during the few months we shared the apartment.
In May, I discovered that the OTHER roommate, who did find someone to rent the other room the next month, had lied to me and the new (better roommate) about needing to pay an extra month of deposit. It wasn't true. Last month (May) that roommate left leaving his stuff and owing money for the electricty and water bill which he said he'd pay but never did. He of course owed money to the landlady and to me for the last month's rent and the "extra deposit" money I had given him. Thankfully a mutual friend was able to pressure him to give money for (most of ) his outstanding bills at the apartment.
Now starting July, I discover that I'm the one in charge of the roommate situation here but also in charge of paying the rent and the basic bills (internet, water, gas, electricity). I didn't imagine it would turn out like this, but life does that to you. You think everything will be just right and then everything changes!
What's different? Well I'll be signing a one year contract for renting here. It doesn't bother me because it isn't expensive and it is a good location. There was one problem. for June, I still hadn't found a roommate for the extra room so I paid 2 of the 3 rooms here. I got 1 month back from the money they got from the roommate who left in May, but that money went from my pocket back out as rent.
How does it feel to pay 2/3 of the apartment instead of 1/3? It felt horrible because my housing cost doubled. Double rent means 1267 pesos less in savings or for other expenses like clothing or whatever else I could use.
In an ideal world I'd be able to find good honest and responsible roommates from the start, but it seems you don't really know what someone's like until you live with them for a few months!
What if I had rented this apartment by myself from the start like many people? I would have saved 2533 pesos less each month for the months I have had paying roommates. That is a huge amount! People who rent a house or an apartment with more than one bedroom and don't rent out the other room are wasting money every single month. Yes, you can have bad roommates, but you can also find good ones eventually. Every month you share the cost of your home, you can save money for other things you need or for your retirement.
Lets say you don't care about retirement, but you are renting a 2 bedroom apartment alone. If you can find someone to pay 50% of your rent to stay in the other room, you could save the other half for emergencies, for a vacation (instead of using the credit card), to buy your own place in cash eventually, or perhaps for that large screen 3D LED/LCD TV you've been drooling over. Sure it might take a few months or more to pay for that television in savings, but the point is that sharing makes financial sense.
I am happy to report that two days ago after a month of asking friends in Facebook, MSN, etc. if they know of anyone who wants to share, a friend let me know of two best friends needing a place to stay. They'd prefer separate rooms, but for the moment they can share. I gave a price of rent plus general expenses to cover bills plus cleaning supplies, toilet paper, and stuff like that. NO, I won't make any profit on this. Any extra money after paying bills and other general apartment expenses I'll set aside for things requested.
Last night after their first night here, one suggested getting a washing machine. That really wouldn't be a bad expense since I hate washing by hand and a washing machine would pay for its self in 12-15 months including the extra cost of electricity, water and detergent. I didn't want to get one because I didn't know if I'd even still be living here in 2-3 months, but since I'll be signing a contract for a year and finally have people in the other room, I might just go for it if I can find a machine that isn't more than 4000 pesos. It would eat my extra savings the first month, but I'd save about 350 pesos each month by not dropping of my clothes to be washed every week. How much would I save with a full house of roommates using a washer? Probably not much, but if each pays 100 pesos more in their rent, that would cover the extra utilities and everyone would be happy. They'd save money and so would I.
What's next for me? I know I spend too much on food, but what I'd really like right now is to find a roommate to share my bedroom with. I'd probably spend 1 or two month's in savings just getting my essential stuff organized to make room for someone else, but later I'd have an extra 633 pesos each month for saving or again for whatever I want. Plus, I really like sharing with others as long as they are not noisy and are responsible. I'm really not sure if I'll put up an advertisement for sharing my room, but if anyone asks I'll be sure to mention the opportunity!
How is my financial freedom situation different from others online? I make very little money compared to most I see in forums online. I'm not an engineer or physicist or any other high paying occupation. I work freelance so my income is irregular, I just need to sacrifice more in spending. What someone in USA considers bare-essentials seems very luxurious to me with their car, whole apartment and budget that includes clothing and other extras. I'm a shy extrovert. I like being with good people so even sharing my own room would be good. If you are introverted, find another introvert for your OTHER bedrooms. Since both of you will need more alone time, you'll discover you'll chat for a few minutes and be in your bedrooms most of the time you're at home!
If you are lucky enough to have a good steady income, take advantage of the opportunity to have roommates and save money for your future. If your extra rooms and garage are full of stuff you haven't touched for at least a year, plan a garage sale, sell it on E-bay, or just donate that stuff to Goodwill!
I was offered the opportunity to share a 3 bedroom apartment in a slightly poor area 30 minutes in transportation north of downtown just a few minutes walk from a subway station. My cut of the expenses was much more than I was paying way out in the suburbs, but I had poor neighbors and I knew that I didn't want to rent alone due to the expense and of course rents are much higher in the city proper than on the outskirts of the metropolitan area. I accepted and the drama quickly started. I discovered I replaced one bad roommate with two. These were very dishonest and noisy. They loved having loud parties every holiday and all night. I tried again to find a room to rent in a decent place for a good price, but I didn't find one.
As luck would have it one bad roommate moved out in March about half way through a month he didn't pay. He owed me some money too. I paid more to cover half of his room's cost that month. I was happy that he left because I learned to despise him during the few months we shared the apartment.
In May, I discovered that the OTHER roommate, who did find someone to rent the other room the next month, had lied to me and the new (better roommate) about needing to pay an extra month of deposit. It wasn't true. Last month (May) that roommate left leaving his stuff and owing money for the electricty and water bill which he said he'd pay but never did. He of course owed money to the landlady and to me for the last month's rent and the "extra deposit" money I had given him. Thankfully a mutual friend was able to pressure him to give money for (most of ) his outstanding bills at the apartment.
Now starting July, I discover that I'm the one in charge of the roommate situation here but also in charge of paying the rent and the basic bills (internet, water, gas, electricity). I didn't imagine it would turn out like this, but life does that to you. You think everything will be just right and then everything changes!
What's different? Well I'll be signing a one year contract for renting here. It doesn't bother me because it isn't expensive and it is a good location. There was one problem. for June, I still hadn't found a roommate for the extra room so I paid 2 of the 3 rooms here. I got 1 month back from the money they got from the roommate who left in May, but that money went from my pocket back out as rent.
How does it feel to pay 2/3 of the apartment instead of 1/3? It felt horrible because my housing cost doubled. Double rent means 1267 pesos less in savings or for other expenses like clothing or whatever else I could use.
In an ideal world I'd be able to find good honest and responsible roommates from the start, but it seems you don't really know what someone's like until you live with them for a few months!
What if I had rented this apartment by myself from the start like many people? I would have saved 2533 pesos less each month for the months I have had paying roommates. That is a huge amount! People who rent a house or an apartment with more than one bedroom and don't rent out the other room are wasting money every single month. Yes, you can have bad roommates, but you can also find good ones eventually. Every month you share the cost of your home, you can save money for other things you need or for your retirement.
Lets say you don't care about retirement, but you are renting a 2 bedroom apartment alone. If you can find someone to pay 50% of your rent to stay in the other room, you could save the other half for emergencies, for a vacation (instead of using the credit card), to buy your own place in cash eventually, or perhaps for that large screen 3D LED/LCD TV you've been drooling over. Sure it might take a few months or more to pay for that television in savings, but the point is that sharing makes financial sense.
I am happy to report that two days ago after a month of asking friends in Facebook, MSN, etc. if they know of anyone who wants to share, a friend let me know of two best friends needing a place to stay. They'd prefer separate rooms, but for the moment they can share. I gave a price of rent plus general expenses to cover bills plus cleaning supplies, toilet paper, and stuff like that. NO, I won't make any profit on this. Any extra money after paying bills and other general apartment expenses I'll set aside for things requested.
Last night after their first night here, one suggested getting a washing machine. That really wouldn't be a bad expense since I hate washing by hand and a washing machine would pay for its self in 12-15 months including the extra cost of electricity, water and detergent. I didn't want to get one because I didn't know if I'd even still be living here in 2-3 months, but since I'll be signing a contract for a year and finally have people in the other room, I might just go for it if I can find a machine that isn't more than 4000 pesos. It would eat my extra savings the first month, but I'd save about 350 pesos each month by not dropping of my clothes to be washed every week. How much would I save with a full house of roommates using a washer? Probably not much, but if each pays 100 pesos more in their rent, that would cover the extra utilities and everyone would be happy. They'd save money and so would I.
What's next for me? I know I spend too much on food, but what I'd really like right now is to find a roommate to share my bedroom with. I'd probably spend 1 or two month's in savings just getting my essential stuff organized to make room for someone else, but later I'd have an extra 633 pesos each month for saving or again for whatever I want. Plus, I really like sharing with others as long as they are not noisy and are responsible. I'm really not sure if I'll put up an advertisement for sharing my room, but if anyone asks I'll be sure to mention the opportunity!
How is my financial freedom situation different from others online? I make very little money compared to most I see in forums online. I'm not an engineer or physicist or any other high paying occupation. I work freelance so my income is irregular, I just need to sacrifice more in spending. What someone in USA considers bare-essentials seems very luxurious to me with their car, whole apartment and budget that includes clothing and other extras. I'm a shy extrovert. I like being with good people so even sharing my own room would be good. If you are introverted, find another introvert for your OTHER bedrooms. Since both of you will need more alone time, you'll discover you'll chat for a few minutes and be in your bedrooms most of the time you're at home!
If you are lucky enough to have a good steady income, take advantage of the opportunity to have roommates and save money for your future. If your extra rooms and garage are full of stuff you haven't touched for at least a year, plan a garage sale, sell it on E-bay, or just donate that stuff to Goodwill!
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