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.