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!

The Joy of using cash for spending

When I look back on the last 12 years of my life I see that many things I didn't need were bought with a debit card and some where bought with a credit card.  You might not find that to be significant, but it really is.

Everytime I wanted something and had a debit or credit card available, I could purchase without thinking and then I'd have something that would make me happy for a few days to a few weeks or perhaps it was something I consumed in the moment otherwise it would end up in the clutter with all the other stuff I had accumulated.

I wouldn't want to get rid of it right away because I just spent money on it.  That's how it usually works for most of us. It made us happy in the moment, but now we need to find a space to put it, something to put it in, or we have to take time to clean or maintain it.

Yeah, it seems the more stuff we have, the less money we have and the more money we spend.  That's why living on cash is easier when you have a budget.

How do I do it?  First you have to keep a budget. I recommend following something like the 60% solution on MSN (basically no more than 60% regular expenses, 10% entertainment, and 30% savings (10% short term, 10% long term, 10% retirement).   Once that gets easy you can start increasing your savings to a decent level. 50% savings would be good for most people, but if you haven't kept and followed a budget before, 30% will seem huge and impossible at first.  I lived on the 60% budget for almost a year before deciding to start my extreme retirement or financial independence journey.

Once you have your budget and cash your check, separate into envelops or piles the money for that month's rent (or better yet the next month's rent), entertainment, and daily spending money for that period.  If you are paid weekly then separate daily expenses and entertainment for that week only.  Before you leave work or the night before separate the money you need to survive that day and put it in your billfold.  If you spend less, you can keep it for another day. If you spend less everyday, adjust your daily expenses down a little in the budget and put the rest back into savings. Don't spend more than you budgeted + left over funds from other days. If your budget is $10 a day in transportation, food, and misc. don't spend more. In fact, don't put more than your daily allowance in your pocket.  Keep the rest locked away in a safe place where it won't get stolen.

Don't make a point of spending it all either.  When you make a purchase ask yourself if you really need it or if there is an alternative.  Could you cook at home today instead of going to the restaurant? Could you cook one day and bring the left overs to work the next day or two for lunch?

Once you get used to using cash for every day expenses using this method, you'll break the debit & credit hard habit, you'll spend less on things, food, and bank fees!

Decluttering can save you time and money

I have always been a collector. I remember in elementary school I collected stickers, In junior high, I had my cassette tape collection (yeah I'm showing my age. CDs were expensive when I was in high school! and my first CD Player was stolen at school though I never reported it).  Anyway, although not an extreme pack rat, I know that I've always had the tendency to collect and keep stuff.

I'd always justify keeping something when I'd do my spring cleaning. I'd say, "but I 'm sure I'll use it later." and surprise the next year I'd say the same think even though I never used it all that year.  

I'm trying to improve, but it is hard to go against nature. I really believe that the collecting tendency or desire is genetic like so many other behaviors.  I remember my Mom still had her old record collection in her bedroom.  I can't remember her ever playing them when growing up.

Unfortunately if you have a lot of stuff, you need a house or room big enough to store it all. You also need the storage supplies (shelving, book cases, boxes, etc.) to put everything in. Additionally you need some kind of organizational system and labeling so when you actually need something you know where to find it or your spend hours or even days looking for it. How many middle class family garages are full of storage while the cars are parked on the street? That's serious clutter!

Another thing I've learned about myself over the years is that I'm very much out-of-sight, out-of-mind.  What I mean is that if something is stored in a box or some other container I can't look into without opening, I forget I have it. Perhaps I would have used it sometime during the year, but I didn't because at the time I had forgotten I had it. 

Since I share an apartment, I try to keep most of my stuff in my bedroom. That means that I have my large plastic containers stacked and on top of other things. One container is on top of my file cabinet. Another box is on top of my armoire/wardrobe, and I have two stacks (3 and 2) along the back wall of my room. 

I have my desk, a tall book case, and another piece of furniture (about the size of a dresser but with shelves instead of drawers) for storing stuff.  Most, but not all of my clothes fit in my wardrobe when folded correctly.  My wardrobe isn't very big. I have quite a few small boxes with CDs (games and backups)

When I moved in December 2011, I stared my efforts to remove the clutter. I realized that in just the last few years my collection of stuff had expanded out of control.  I got rid of half my clothes (mostly worn out stuff) and at least half of my books. 

I was quite proud of myself to have gotten rid of all that, but I still needed to rent a moving truck mostly for boxes of stuff. I really don't have that much furniture.

Now, only a few months later, I got the bug to remove more clutter. I guess you'd say that my clutter is pretty normal, but I'm in a small space so my room always looks like a mess.  

This weekend I went through my file cabinet and got rid of some papers and at least one small box worth (probably 2) of stuff. There was an old wireless router, a bunch of cables, wires and adapters for only God knows what, and misc. stuff that I'll never use again like two checkbook holders. I haven't had checks for at least 5 years, but I brought the holders with me on the last two moves. No, they don't take up much room, but you could say that about a lot of stuff. Believe me, I've used that same excuse many times.

I then went on to boxes of stuff. In my CD boxes I found many old software application install CDs for some very old versions. I'll never use those again. The shoe box I keep them in was almost full. Now it is half empty!

One of my large plastic containers had my extra hanging folders for my file cabinet.  With the extra room I got by throwing out the junk from the file cabinet, I found the space to keep the extra folder boxes in one of the drawers. Now that large plastic container is empty.

I found quite a few books that were out-of-date or warn out. They'll go in the trash if I can't find a way to recycle them.  I decided to keep almost half of my books and now they are all on ONE shelf of my book case.  Just last year they would have taken almost the entire bookcase. 

I later went through my other boxes and shelves. I didn't do a 100% job, perhaps next weekend I'll finish, but I was able to put some tote bags of stuff that were on the floor on a shelf that was completely packed and disorganized. 

I've rediscovered a few binders and notebooks that were almost unused or had stuff I don't want anymore so I got rid of what they contained. I just need to decide if I want to keep or give away the binders. Just a year or two ago I went to the store to buy a binder because I thought I didn't have any! 

How does this incredibly long post relate to early retirement and financial independence?  Well, if I had remembered that I had binders with junk in a box I could have saved the time and money I had spent on a new one. 

Additionally, things that are improperly stored are more likely to wear out or break. Of course if things are packed away you lose time trying to find them if you even remember you had them at all. Time is money. If you are efficient, you get more done!

Most importantly, the less stuff you have, the less space you require to live. That means you could live in a smaller house or smaller apartment or share an apartment before all your clutter took up the extra room.  If you want to go really extreme, share your bedroom with a friend that you can trust.  The cost of bunk beds or a loft for one or both beds will probably be less than what you save in two months. Rent is the largest fixed monthly expense for most people. Save a lot of money by downsizing to a smaller home and put that money toward saving and debt reduction.

Even if you prefer living alone in a one bedroom apartment, you'll save more on moving costs (smaller truck), and you'll save time packing and unpacking.  

Sometimes you need to increase income to reach very early retirement

Being frugal is sometimes not enough for extremely early retirement (or financial independence) 

Extremely early retirement is possible through frugal living, but it is also important to have a decent come to let you save up fast. If you only make what counts for minimum wage in your country, even a high percentage isn't much money and who wants to live on a completely bare-bones depression budget?  We should live off of the basics, but not suffer to get by.

To me frugal is to only spend on what you need to be healthy, happy, and comfortable over the long term. I don't need to have a night at the cinema to be happy. At least I don't need that more than once a month (or perhaps once every two months.

I do however need to eat a variety of vegetables on a regular basis. If I don't eat my veggies, I feel bad and lethargic. I know that if I only ate the cheapest vegetables I'd spent a little less on food, but it would cause a large decrease in happiness compared to the savings of perhaps 30-40 pesos per week.

Being frugal is also not buying on impulse or getting something just because it is cool, trendy, or what all your friends have. It is living without spending a lot of money on entertainment.

Having said that, we all have to eat, pay for a place to live, and clothes to wear. Unless you have a several thousand dollar a month income or live for free with your parents, it will be difficult for you to save the 80% of income needed to retire in about 6 years.  saving 80% spending 20% withdrawing 4% annually 6.25 =25/(0.8/0.2).


The less you save the longer it will take you to reach your very early retirement savings goal. I was a little disappointed to see that at my current 50% savings  (about 40% more than your typical earthling), It will take me about 25 years according to the formula. 25 =25/(0.5/0.5) If I were in my early 20s that would be fine, but I'm almost 36 years old and I want to retire in my mid 40s so I need to make a plan to increase that percent!


If I go from 50% to 60% (which would either mean packing my sandwich or rice with vegetables or eating at home everyday and perhaps washing my clothes by hand), It will take me about 17 years. That's still too long for me.


The only solution is to live frugally and increase income. The more I make while maintaining my expenses at the current (frugal, but no suffering) level, the more I will save (the higher the percent for savings).


At 70% savings, I can retire at almost 11 years. That's not bad. It is one year more than I'd like, but I am actually planning on working on my artwork so I could sell a few paintings and digital artwork and sell some graphic design. I very much doubt that Print-on-Demand websites will go away so I won't have to live 100% off my savings. I might go into semi-retirement after 8 years if I can build a small or tiny house in the country and have a garden, internet, and a solar water heater. It is hard to say since I only recently thought of the idea. It would be fun to have a couple years dedicated to creating art and design to survive on and live simply. Sometimes being a teacher with a full schedule can be stressful.


Now that I know I need to increase my income and live simply to reach my retirement goal, the next step is to find ways to increase that income. Do I want to find another job? Perhaps I could blog for someone else or write a book? I could put extra time into creating great graphic design. I could try to find more translation work. It is stressful, but a long translation could mean a lot of income if I could find someone who needs that help. I could also raise prices for English classes, but that also will increase the possibility that people will cancel when they have unplanned expenses.

Personal expenses Spring 2012

Here is a glimpse at my current expenses while working and my thoughts regarding current spending levels in each area. It will vary a lot, but you'll notice that compared to the typical person from the USA, I live in extreme poverty, yet for here, I'd probably be considered lower middle class. If I only lived with a working significant other I'd live better. Single without children living is more expensive than married without children because of having to find a roommate and you can't expect them to share all the costs only rent and basic utilities. You also never know when they'll move out and you'll have to pay more and find someone else or move to another place. Remember everything is in pesos!

I can adapt pretty easily and when I make nothing I'm good at cooking at home and walking everywhere and washing clothes by hand.  When I work a lot my expenses go up a lot, but at least I can save money when I work.

 I've saved 20,000 in the bank for emergency living expenses and put half in a certificate of deposit to get some interest for 90 days. Interest bearing accounts have really high minimum balances here. So now I'm starting my investing phase. I'm depositing money to my AFORE which is an independent retirement account that invests mostly in bonds and gets around 6-7%. I can't select investments the bank decides based on age groups. I can only withdraw money (any voluntary contributions) once every 6 months so it is good place to put medium to long term investments.

Rent 1267

 (sharing 3 bedroom cheap apartment with 2 others) I don't think I could find cheaper near a subway station without moving to a neighborhood known for armed robbery.

Food 3000

This is one I'm working on because when I don't work this drops down to 1000 pesos. (when I don't work I cook and people think I'm vegetarian since I cut back on meat then too.)
I'm trying to get it down to 2000 while working a lot.  3000 a month is basically 100 a day (9 dollars a day +/- goes by so fast even buying food sold on the street and a soda.) I'm going home to eat between classes now twice a week and other days perhaps I can pack sandwiches or something)

Transport 1500
I teach in 3 different places right now. Atizapan (Northwest), Polanco (west-central), and Roma Norte. (almost central) I can't move near classes because 1. those areas have MUCH higer rent (perhaps 8,000 in Roma Norte, perhaps 16,000 in Polanco, and 3,500 in Atizapan) and in anycase if I lived near one I'd be far from the others and who knows when someone will ask for classes in some other part of the city.)
I take the metro (subway) and buses everywhere. It averages out to about 50 pesos a day mostly bus cost since the subway is partially funded by the state and the bus to Atizapan where I currently teach most classes is full price. If I stopped working I probably would not go there very often.

Internet 210

It is a good connection and I use it everyday when at home. I use it to communicate with family and friends and of course to check the sites where I upload artwork and designs.
When I'm financially independent I plan on just doing art and graphic design.

Cell 300
I'm on a two year contract. It is one of the cheapest plans I could find that would give me enough text messages and internet. I only get one hour call time, but I normally use its internet to send messages on facebook or whatapp. I had canceled the telephone service here since the roommates didn't want to help with the bill like they had agreed.

Laundry 400
I could wash by hand. I was working on decluttering this weekend, but we'll see. I notice that clothes wear out faster when I wash by hand even though I save on cleaning cost.

Supplies 500

stuff for creating artwork, personal care products, DVDs for backing up artwork, etc. normally 300-600 pesos.

Electricity 100
approx. it is actually a bill that comes every other month and split three ways. Electricity costs vary by usage and neighborhood. Poor areas pay less. Expensive areas like Polanco pay full cost. One of my roommates has the bill and he hasn't shown it too me and he's been at his parents' house all week. I'm worried that he's going to move back home.

Natural Gas 100
Here you buy tanks of gas of different sizes and it depends on how often you cook and if you keep your water heater on hot, warm, or off between baths.
We actually don't have a tank connected to the water heater so I've been showering in cold water. I've done that off and on for years. It isn't enjoyable at all, but it is tolerable.
If I had my own house I'd install a solar water heater and panels, but you can't do that when you rent.

In total I am currently spending about 7,500 pesos a month on the basics + laundry, cell, and internet.

Since I want to retire or be financially independent, saving 10-20% of my income isn't enough. It is essential that I reduce costs as much as possible while working. Ideally, I'd save at least 50% every month.

Reduce Transport Costs and Invest more money

The next important expense to reduce so you'll have more money to save is transportation. Transportation like housing and food is very important, but there are several things you can do.

You could move close to your office. If you are only a kilometer or two away from the office you could walk to and from work. Not only will you save money, you'll increase your fitness and probably lose a little weight.

If you are not quite that close you might be able to go to work by bicycle. Biking to work is also great exercise.

If you have a car, consider carpooling with those you work with. Either take turns driving or give gas money.

If you don't have children sell your car. If you are married just have one car for both of you to use. One car per person is a very recent concept that you don't have to follow.

Living in a large city often means long commutes however it also means the option of taking a bus or taking the subway.  Do a cost comparison between driving, carpooling, and taking public transportation when it is too cold to walk or bike to work.