Housing: Your Biggest Expense (And Biggest Opportunity)

Let's Talk Numbers

Housing is almost certainly your biggest expense. The average American spends about 33% of their income on housing, but I've seen people spending anywhere from 10% to 70%. That range represents the difference between financial freedom and financial doom.

Here's why housing matters so much for your FI journey: every $100 you reduce in monthly housing costs cuts $30,000 from your FI number (remember that 25x rule?).

Let me say that again. Reduce your housing costs by $100/month, and you need $30,000 less to reach financial independence. That could represent 2-5 years less of working, depending on your savings rate.

Today we're going to explore every possible way to optimize your housing costs, from the simple stuff you can do this weekend to the bigger moves that could transform your finances.

Category 1: Easy

Shop Your Insurance

This is more impactful if you own a home, but you can shop renter’s insurance too. You should do this every single year. Obtain a minimum of three different home insurance companies and get quotes. Best case, you save hundreds of dollars for the same coverage. Worst case, you confirm that you already have the best rates. This takes about an hour of your time. I can create a deeper post on insurance in the future, but just know that insurance companies use a “frog in boiling water” approach to gradually increase your rate over time. Get off autopilot and shop around!

Shop Your Utilities

This does not apply to most states, but if you’re in CA, CT, DE, GA, IL, ME, MD, MA, MI, NH, NJ, NY, OH, PA, TX, or DC, check and see if you are in a “choice” area or a “monopoly” area. As an example, in Texas right now, your electricity rate can range from ~13c/kwh to ~43c/kwh. That means you could be paying 3x what your neighbor pays for the same electricity. (If you’re in Texas, the state has a website to help you.)

Bonus idea: explore a time-of-use electricity plan if available. (Example) I am not recommending TXU specifically, but they do offer free electricity at night. Of course, they make up for this by charging more during the day. However, if you are away from home all day, you can beat them at their own game! Be careful with these plans because the rates can be punishing during non-promotional times.

Appeal Your Property Taxes

This won’t apply if you’re renting, but homeowners in high tax states can save thousands. For example, Illinois has very high property taxes. There are many companies who specialize in property tax protests and will do all the work for free upfront. If they are successful in reducing your bill, they take a cut. There is no downside to you. This is another example where staying on autopilot and paying the higher bill every year can really hurt you!

Reduce Your Utility Usage

I don’t mean using a stopwatch in the shower and rationing toilet water. I do mean you need to fix the faucet that has been leaking for months. It’s the same as your cash going down the drain!

A few ideas that pay off fast:

• Switch to LED bulbs. It’s 2025. LEDs are now superior in every way. They even come in warm glow color. They are 5x-10x more efficient and lighting is usually around 15% of your electricity usage.

• Get a programmable thermostat. This doesn’t mean you need to buy the latest smart thermostat that syncs to your phone. It does mean you need to stop cooling or heating your house when you aren’t home. Easy money!

• Seal leaky windows and doors. When I lived in Colorado, the city offered free pressurization tests. They would come to your house and identify where the leaks were. All that insulation in your walls isn’t very useful if the air can escape through openings. Your city probably doesn’t offer free services, but it doesn’t mean you can’t caulk the window where you feel a breeze!

• Preventative maintenance. It is always cheaper to service your home in advance than pay repair bills later. Was there a windstorm recently? Check the roof! Otherwise three months later you might find mold has infested the entire attic and insurance usually refuses to cover homeowner neglect! The same approach applies to vents, water heaters, AC units, furnaces, etc. Change the filters, clean the vents, check for leaks, etc. Many items are an annual check, so it’s not a large time investment.

Refinance Your Mortgage

Honestly, this isn’t really an option in 2025 for the vast majority of people. I’ll come back to it in the future if mortgage rates change because it can be a major source of savings. In fact, I’ll even explain how I was able to have the mortgage lender pay me for the privilege of originating my new mortgage! For now, just know that you usually need rates to fall by at least 50 basis points (0.5%) for refinancing to make sense after taking closing costs into account. If the Federal Reserve cuts interest rates in the future, start watching mortgage rates to see if it could make sense for you.

Okay, I just gave you a few immediately actionable ideas that don’t even require you to leave the house. I realize if you rent (like most people) those tips were less helpful because you don’t have property insurance, don’t perform your own maintenance, don’t have a mortgage, and may not be able to select your own utility provider. Don’t worry. Renting actually makes it easier to save money because you have far more flexibility!

Category 2: Medium

Downsize

The size of the average home built in the United States increases every year. Meanwhile, our fertility rate decreases every year, resulting in smaller families. My grandparents raised three children in a 3bed/2bath 1500sqft 1950s ranch home and never even considered “upgrading” to a larger home. We’ll do a more detailed post on space usage, but remember, your body can only be physically present in a small space. Are you really using that extra bedroom or second bathroom? This is your single fastest way to save money on rent and it’s pretty obvious. A one bedroom apartment costs less than a two bedroom apartment in the same building. At one point, I downsized from 850sqft to 600sqft and cut hundreds off my rent.

Roommates

Rent out a room, the basement, or a separate unit. This can reduce your effective housing cost by 30-50%. Yes, you'll have a roommate or tenant, but you'll also have a much shorter path to FI. No, this is not a new idea, but the savings are enormous. Sharing a two-bedroom with a roommate cuts your housing cost in half! Sharing a one-bedroom with a partner does the same thing. Remember, it’s not about whether living alone is preferable to living with someone else. It’s whether living alone is worth paying double and extending financial independence by years!

Move to a Less Expensive Neighborhood

I know you know this, but the results can be drastic. Sometimes moving 10-15 minutes further out can cut your housing costs by 20-30%. Is it really worth living right in the middle of the action or can you move ten blocks away and still get there? Don’t move 90 minutes from your job and ruin your quality of life with commuting time and gasoline expense. Do run the numbers and see if it makes sense. Personally, I do not live in the most desirable neighborhood. I often wish I did and then I remind myself that I’m perfectly fine saving 50% and visiting those areas when I want.

Buy Instead of Rent (Or Vice Versa)

Oh boy. This is a big one. I can write multiple posts on this topic alone (and probably will!) The summary is this: the rent-vs-buy calculation depends on your local market and how long you'll stay. In some markets, buying is dramatically cheaper. In others, renting wins. You can’t assume. The New York Times has a calculator that shows all the variables that go into this. It’s not a straightforward decision and then there are intangibles to consider. We’ll come back to this later, but for now, check what the other side would cost. A super rough guide is this: in July 2025, renting is usually cheaper on the coasts. Buying is usually better in the South and Midwest. Stay tuned for a super long post explaining all this!

Negotiate Your Rent

This is no different than shopping your insurance. If you're a good tenant, your landlord might prefer keeping you at a slightly lower rent rather than dealing with vacancy and finding new tenants. If you have been there for at least two years, give it a shot. Worst case, they say no. Best case, free money for asking! This works better with small landlords, but sometimes property managers at large buildings have discretion. When you do this, bring in the rent for a competitor property you would consider moving to. Make sure it’s comparable. It’s easier to make a case when they know you have a better option available.

Eliminate Private Mortgage Insurance (PMI)

This is a niche one, but if you purchased a home with less than a 20% down payment, your lender probably required you to obtain private mortgage insurance. If your home went up in value (and most did over the past five years) you may be able to eliminate it by getting a new appraisal. Alternatively, if you’re close to 20% equity you can pay down your mortgage.

Category 3: Major

Geographic Arbitrage

Move to a lower cost-of-living area. This works especially well if you can work remotely, but also applies to jobs where the wages are similar in different areas. For a software developer, moving from San Francisco to Austin might cut your housing costs in half while barely impacting your income.

Note that there are two factors to this one. First, the destination needs a lower cost of living overall. That means you can’t look at housing prices alone. Second, you need to factor in your future income. If your job is portable, that’s easy. If you would be changing employers, make sure your salary wouldn’t also decrease or you might be no better off.

Be aware that generally (but not always), cost-of-living increases alongside local incomes. Many of the least expensive areas have reasons why they are inexpensive and it typically involves a lack of jobs.

We’ll do a deeper investigation of this in a later post because there are some great lesser known options out there.

Multi-Generational Living

This is a fancy way of saying move in with family. While you may scoff at the idea, this is the norm in most countries around the world! It’s only a relatively recent development that families own separate dwellings. It’s an incredible cost savings. While your friends might laugh at first, they won’t be laughing when you’re saving five figures annually by not paying rent. (Also, if they don’t support you saving money, perhaps they aren’t good friends?)

Alternative Living Situations

• Co-housing: Share a larger house with friends or like-minded people

• House sitting: Free housing in exchange for taking care of someone's home

• Caretaking: Live rent-free while maintaining properties or caring for elderly

I met a woman who found an elderly snowbirding couple. They spent summers in Michigan and winters in Florida. This meant worrying about burst pipes in the winter and hurricane damage in the summer. She agreed to maintain their offseason home in exchange for free rent. She paid the utilities and looked after whichever house they were not living. Sure, that meant hot summers and freezing winters, but it was free!

The Nuclear Option: Van Life/Tiny Homes

I won’t spend much time here because it has been covered relentlessly elsewhere. Also, it’s probably not the right option for you. That said, if you’re flexible, van life/tiny homes/RV living/etc can reduce housing costs to almost zero. I’ll even share my personal experience with the lifestyle later on!

Rent Arbitrage

Note: your landlord almost certainly prohibits this and it wouldn’t be my first choice. Still, it’s possible to rent an apartment and sublet rooms or spaces to others. They won’t be on the lease and you’re responsible for any damage they cause. Additionally, your landlord could evict you if they find out. However, done correctly, you may be able to rent for free!

International Living (with remote work)

We’ll discuss expat life later. Just know if you can work remotely and keep your US salary, there are countries with much lower costs-of-living like Mexico, Portugal, or Thailand.

Category 4: Extreme Ideas

Live at Work

I know multiple people who rented a PO Box for mail, got a gym membership for showers, and slept at the office. It violates zoning codes and your boss won’t approve, but are they going to argue with you “working late” frequently?

Live in your Car

Same as the above, but sleep in a parking lot instead of a conference room.

Corporate Housing

If your job involves frequent travel, many companies pay for your hotels and flights. However, some employers allow you to stay extra nights in the hotel if you give up the flight. In other words, instead of flying home for the weekend, you stay at the worksite. If you do this every week, you can live for free in a hotel.

Free Apartment

Large landlords often offer discounts to employees who live on site. It makes sense for them because you’re more likely to be a good employee and show up on time. Sometimes the housing is even free. If you are flexible with your career, large (and nice) apartment buildings can pay well and provide free housing.

Short Seasonal Leases

Death Valley isn’t very popular in the summer. Bar Harbor isn’t very popular in the winter. There are areas (usually tourist locations) where the offseason is extremely cheap. Some people migrate between areas with seasonal housing and take advantage of landlords who would otherwise have vacant units. Note that this means you have to move frequently and there is always a reason these units are empty.

“Max! Too Many Options!”

Yeah, that was a lot to think about. Remember, you don’t need to do everything at once. Go shop for insurance and call it a day.

There is a reason the tiers were labeled. I've included some unconventional options (van life, international living) not because everyone should do them, but because they exist. Knowing your options helps you make informed decisions about what trade-offs you're willing to make for faster FI. I know the extreme options aren’t right for most people. Maybe you’re someone who needs to spend more on housing and less somewhere else. That’s okay. However, there are other people who realize they don’t care as much about the most expensive category. If you’re never home anyway, why spend so much on housing?

The Psychology of Housing Decisions

Here's what I've learned: most people's housing costs are based on emotion, not math.

We choose housing based on:

• What we think we "deserve"

• What our friends and family expect

• What feels "normal" for our income level

• Status and lifestyle signaling

Be honest. Why did you “upgrade” from your last place? Did you have three children and run out of space? Or did you get a raise at work? Or did your friend move into a nice place and you felt jealous?

Very few people actually calculate what their housing choice means for their financial independence timeline.

Let me give you a framework: every extra $500/month you spend on housing delays your FI by about 3-5 years.

Is that extra space/location/luxury worth 3-5 more years of mandatory work? Sometimes yes, often no. Again, for some people, it’s worth it. Just make sure you’re intentionally spending the extra money.

A Personal Example

When I first started optimizing housing, I was spending $2,450/month on a one-bedroom apartment in a trendy area. It was "normal" for my income and what my coworkers were doing.

The next year I moved into a $600/month one-bedroom apartment in a not-so-trendy area in a way worse building. That means I saved $1,850/month. That’s $22,200 annually. That’s $550,000 (yes, you read that right) off my FI number

The funny part? My life barely changed. My apartment had carpet instead of hardwood floors. I had a view of a parking lot instead of a skyline. The appliances were black instead of stainless steel. My neighbors wore coveralls to work instead of suits. I wasn’t any less happy. In fact, I was ecstatic at the money pouring into my bank account! Why did I spend $22,200 pampering myself the previous year?!

$600/month apartment Max

The Bottom Line

Housing is the single biggest lever for reaching FI faster. Unlike investment returns or even income increases, you have direct control over your housing costs.

The goal isn't to live in the cheapest possible place. It's to be intentional about the trade-offs. Every housing dollar you spend should be advancing your life in a meaningful way, not just meeting social expectations.

Next time, we'll tackle transportation - the second biggest expense for most people and another area where small changes create massive long-term impacts.

Until then, your homework: Calculate what percentage of your income goes to housing. If it's over 30%, you have a major opportunity. If it's over 40%, you have an emergency. (caveat: if you walk to work and have no transportation expenses, you can spend more on housing)

Here's to paying for housing, not lifestyle signaling,

Max