Saving Money on Your Apartment

My top goal is saving money for the mortgage down payment on my first home. I’m currently renting and there are many reasons I want to own my own home. Two of the top reasons include building up equity in an appreciating asset and also upgrading my quality of life with a nicer and larger place than I am renting. Saving up a down payment is a large exercise in savings and I have found that while every little bit helps, it’s much quicker to focus on the large levers if I want to save my down payment quickly. The topic of this article is perhaps the largest savings lever for someone interested in owning their own home or other large savings goal: monthly apartment rent.

What Is Apartment Rent?

So we all start on the same page, let’s start by defining apartment rent with all its nuances. Apartment rent is the monthly check that you pay your landlord, whether you are renting a unit in a large apartment complex, a room in someone’s house, or a condo from a private owner. Rent is money that goes out of your pocket each month towards putting a roof over your head. The key take away from this definition is that money flows out of your pocket each month that you never see again.

Why Is Renting Bad?

The main reason I dislike renting is my hard earned money is going to somebody else in very large intervals instead of building up my own financial security. My monthly rent is my single largest expense and long term I have nothing to show for this money. Moreover, I am making somebody else rich, my landlord. Apartment complexes are businesses. The owners are charging rents such that rent is higher than their own mortgage payments on the complex in addition to recurring management fees. In other words, they are making a profit, often times a very large one.

Build Your Own Asset

The sooner I am able to stop renting, the sooner I will stop giving my money to somebody else. By owning my own house, I will participate in 100 percent of my home’s appreciation in value (a tremendous long term investment and hedge against inflation), in addition to paying down the loan over time to build up equity in the original purchase price of the house. I still will be making others rich in the sense that my mortgage interest will be going to a bank. However, my top goal is to save up a large down payment to lower my mortgage amount and also continue to save money over the long term to pay off my mortgage quickly. The sooner my mortgage is paid off, the sooner I will achieve financial freedom.

Downgrade Your Apartment

Now that we have discussed the difference between renting and owning and the clear benefits of owning, let’s delve into strategies for saving money on rent to save a down payment sooner. One of the easiest strategies is to simply downgrade. Do you really need the two bedroom apartment you are renting? Maybe you can downgrade to a one bedroom or studio. Do you need to live in a brand new luxury apartment building? Perhaps an older apartment in a less trendy area will do just fine. The key in downgrading is to remember that you are saving money. Sure, you are making sacrifices in the short term but long term you will own your own place which will be far nicer. It’s a question of short term sacrificing for delayed gratification.

Look For Clever Housing Options

Saving money is often a game of thinking outside the box. If you currently live by yourself in an apartment, perhaps you could take on a roommate. This will cut your costs in half. Alternately, maybe somebody you know is looking for a roommate and you can leave your current apartment but move in with somebody else for much cheaper rent. Also don’t forget to look for condos for rent and also people renting out a room in their house. Private owners who are renting out their condo or room are likely to charge more competitive rates than apartment owners because they have less leverage and are not a corporation. As an extreme case, maybe you could move back in with mom and dad. I have friends who are doing this and saving a ton of money. I am personally not following this advice because you need to enjoy the journey in addition the goal. Saving for a down payment is something that takes time and you want to enjoy that period of life too.

Avoid Expensive Moving Costs

If you do choose to downgrade your apartment to save money, you will want to be careful to avoid expensive moving costs. Rather than hiring movers, can you do the move yourself? Perhaps you could hire some friends to help you and pay them back with a free dinner. If you spend too much money on moving, it could totally wipe out the savings of downgrading.

When Is Renting Good?

I can think of a few cases in which renting is good. The top one is you don’t know where you want to settle down. Owning a home is a long term investment. You cannot expect to earn a profit in a few years like many did during the recent housing bubble. Therefore, if you are not certain where you want to live and are not committed to that area for the long term, you will want to give yourself time. There is nothing wrong with renting while you are giving yourself time to evaluate your long term goals. Another reason to rent is short term financial security. Owning a place is more expensive than renting. Monthly payments are higher. You don’t want to own a house and then live paycheck to paycheck. Giving yourself time to master your savings strategies and earn more income is a very smart decision.

To conclude, one of the greatest investments and enjoyments in life is owning your own home. There are clear benefits in owning versus renting, both financially and also in quality of life. In saving for your own place, the greatest lever to quickly save money is reducing your apartment rent. Think outside the box on your rent and be willing to make compromises and you will be rewarded handsomely over the long term.

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