The tropes abound, and they’re strangely specific.

Rich people drive Camrys! They make coffee at home! They wear secondhand clothes! They don’t enjoy their money, they simply hoard it for ~generational wealth~. 

The most quintessential depiction of this phenomenon is the way people love pointing out that Warren Buffett still eats at McDonald’s and owns the same home in Omaha he bought in 1958. Quirky fun facts, sure, but it would be a mistake to suggest these have literally any causal relationship with his financial status. 

The sometimes implicit (but often explicit) suggestion is that this intense frugality and self-denial is what made someone rich in the first place. Much of this myth-making is almost certainly derived from the book The Millionaire Next Door, which minted this persistent generality.

And hey, to be fair, I think there’s something beautiful about a simple life—I’m not trying to suggest frugality is a bad thing, or that it should be avoided. Just that it usually has very little to do with how people amass vast fortunes.

The rich, they’re…just like us? Not quite.

Not to rely too heavily on anecdotal evidence, but this type of proselytizing has always struck me as discordant because the (very few) wealthy people I know (as in, “multi-8-figure net worth”) live in multimillion-dollar homes, drive luxury vehicles, and fly first class (or private) to their expensive vacations (a sentence that physically pains me to type). 

I’m not sure where all these unassuming pauper zillionaires are, but they seem to exist only in the imaginations of the thinkboiz who use them as virality fodder.

A Rolex? A “Lambo”? Have these people ever seen a single movie about investment bankers?! 

It all drives at this insidious implication that massive wealth should be achievable by anyone, if they’re sufficiently able to just sleep a little less and make love to a 15-year-old Toyota regularly.

To be fair, I also know a few people who became millionaires after 40 years of hard work and sacrifice. They accumulated $1 million in the same slow-and-steady way I’d walk a marathon. But it’s worth explicitly distinguishing between these types of people—who genuinely did scrimp and save for an entire lifetime—and Warren Buffett. 

It doesn’t even feel appropriate to use the same word to describe them. $1 million in retirement is enough to support a $40,000/year lifestyle, assuming you ascribe to the 4% rule. Warren Buffett earns more than that in two minutes.

I don’t think anyone would logically group these two levels of wealth together if pressed, but “the rich,” “millionaires,” and someone like Warren Buffett are used surprisingly interchangeably in this type of clickbait, and it’s worth highlighting just how cosmic the gap is.

But who cares?

While it’s not inherently harmful to suggest someone should be frugal, it does expressly miss the point, if its intention is to create a how-to manual for becoming wealthy.

Although there are certainly notable exceptions (like corner store owner Leonard Gigowski, who supposedly left a $13 million endowment to his former school, assuming this story passes the fact check), most people don’t become wealthy because they’re driving an old car. 

None of this is to suggest that someone can’t become independently wealthy through their own decisions—just that much of our online fantasizing about morning routines, old beater cars, and coupon clipping is a sideshow. Here are a few more, for good measure:

Trying to project middle class habits onto rich people and then extrapolate backwards (“See? Just live like this and you’ll get there, too…”) is a logical fallacy.

The people who become really wealthy do it through earning or inheriting a high income and investing it

Using your income to buy (or build) cash-producing assets over time is how people become wealthier, and yes, that’s only possible if you’re earning more than you’re spending (or ahem, inheriting money). The laser focus on frugality is ultimately a distraction from the truth, because it directs the lion’s share of the attention to the less-important side of the wealth-building equation. 

Graham Stephan, who “saves 99% of his income,” comes to mind, as does Invest with Ace, who enjoys “8-figure frugality.” Both make lifestyle choices that are right for them, and are careful to suggest these preferences for frugality are not why they’re rich (they both got rich from real estate investing and content creation). Graham in particular is often heralded for his ultra-frugal habits and his $7m net worth, but again, these two plot points are mostly uncorrelated: He reportedly earns $120,000 per month from his YouTube channel, affiliate links, and real estate classes alone. His income is the reason he’s wealthy, not because he never orders takeout. 

But it’s much harder to create a YouTube channel that generates as much as $3m per year in ad revenue than it is to buy generic brands at the grocery store, so we tend to focus on the latter when we talk about the “habits of the rich and successful” worth mimicking.

Much like we’ve all learned from the SBF-ad nauseam news cycle, being super frugal is merely an eccentric personality trait that—in the vast majority of cases—is not causally linked at all to impressive wealth. 

This fantasy—that only people without financial security have nice things—is simply not grounded in objective reality, and it casts a shameful hue on anyone who does choose to indulge in the fruits of their labor. 

It’s just a lifestyle choice that some rich people make. It’s not the reason wealthy people are wealthy. 

It’d be like if LeBron James said he eats Pop-Tarts every morning for breakfast. Mimicking this choice will not improve your basketball proficiency, but that probably wouldn’t stop Wealth With Chad from writing a thread about why bagels are trash. 

LeBron’s car collection is reportedly worth $3 million. He must’ve missed the memo about Camrys. And sure, Buffett still owns the home he bought in 1958, but he also has a private jet—that tidbit is typically left out of the threads about his Big Mac habit.

Luxury is relative

Today, I love this house and I’m thoroughly enjoying living my life in it. Rent day sucks a little bit more than I’d like it to, and I know we could’ve rented an “inexpensive” townhome for $2,400 instead and saved $600 per month, but I love our tree-lined street, damnit!

Weirdly enough, though, something interesting happened a few months in:

It stopped feeling like a beach house palace with more rooms than people.

It just started feeling like my house.

My mind and body normalized to the surroundings, much like they had normalized to my 2BR apartment before.

But now?

Now if I tried to live in my 2BR apartment again?

While part of me feels a little nostalgic for that place and that phase of life, there’s another part of me that’s like, holy sh*t, that would feel tiny by comparison now.

It’s all relative, but it’s difficult to downsize—lifestyle creep typically only creeps in one direction.

The same thing goes for cars

My first car was a 2004 Acura TL. The seats were ripped, it had a few door dings, and it was about 10 years old by the time it became mine.

But man, I loved that car. It was a great first car for a teenager. Sporty enough to make me feel cool as hell, but with relatively low residual value—so it wouldn’t have been a huge loss if I crashed it (though I can proudly say I didn’t!).

After it hit 225,000 miles and had suffered one (1) gnarly hit-and-run, it was time to retire the car and get a new one.

My parents leased an Acura RDX for me with the remainder of the money they had set aside for my college education. Because I ended up getting a scholarship, they had money earmarked for me that went unused. They told me if I graduated with a 4.0, they’d cover a lease on a new car for the first three years. After that, it was up to me to figure out my #wheels.

(I don’t think they thought I’d actually do it—joke’s on them!)

Because I was #YoungAndDumb, I said, “Sure! Please agree to pay the steepest depreciation hit on this vehicle so I can promptly give it back with nothing to show for it when I high-key cannot afford to purchase it outright when the lease terminates. Sounds great.”

(My take on leasing and why it really gives the driver the shaft lives here, though if you’d like an updated and more nuanced take, check out this “rent vs. buy your car” episode. I always joke that I can dunk on these decisions because I’ve made them myself and lived out the shitty aftermath firsthand. I’m trying to save you from my own screw-ups.)

I wasn’t thinking about three-years-from-now-Katie and what the hell she was going to do when the lease ended. I was just focused on the image of right-now-Katie cruising around Dallas in a brand-new sport utility vehicle.

By the time the lease ended, my budget for a car was $20,000 total.

But after driving a brand-new luxury SUV for three years, do you know how interested I was in downgrading to a responsible, used Honda Civic?

Approximately 100% uninterested.

The problem was, I couldn’t afford to purchase the RDX outright and still stay within my budget. I wanted an Audi Q3—also way over budget, even used.

But I was so stuck on continuing to drive a “nice” car (because how fun is it to go from a fancy car to a regular one? Decidedly un-fun) that I ended up purchasing a used Audi A3. I didn’t want to choose (what felt like) a downgrade.

Don’t get me wrong, I really liked that car (I ended up selling it after a year anyway since we moved to a mountain town where a jellybean with FWD wasn’t really practical), but there was this weird pressure throughout the buying process to get something at least almost as nice as what I had before.

It’s hard to go backward.

Lifestyle creep is fine within reason, but remember: It’s hard to throw it in reverse (pun not intended, but embraced)

Part of the reason I was so hesitant to lease this home was because, on some level, I knew that it was likely an irreversible step up the lifestyle creep ladder.

I knew it would set a new precedent for my baseline that would be hard to reverse—and so far, that’s held true.

Before, any house with a front door and functioning plumbing would’ve gotten me hot and bothered.

Now, the houses I lust after in our neighborhood are bigger, prettier, and fancier than ours.

That’s why I find it’s usually wise to take smaller steps than you’d think necessary so you can really wring all the joy and excitement out of each and every incremental inch upward, versus making giant leaps and bounds to which you’ll acclimate quickly (like I sometimes did).

Lifestyle creep—that is, wanting to experience outward proof of your own growth, success, and hard work—is natural. Striving for more is human, which means it’s probably more sensible to try to work with those inclinations (tiny, intentional steps up the metaphoric ladder), rather than deny they exist. 

Because it’s not just asking yourself “Can I afford this right now?” It’s, “Can I afford this forever?”

That’s why I think it’s necessary and helpful to constantly reevaluate your FI (financial independence) number. My FI number has certainly gone up since we moved here, though my income has, too.

I like to recalculate the goal every single year to make sure that it’s not creeping upward too quickly.

I earn more (and work harder) now than I did when I began working seven years ago, so I want to allow myself to selectively enjoy nicer things—but I don’t want to spend the same percentage of my income.

For example, when I first began working (and after I got my financial sh*t together, to be clear; that took about a year) I was probably saving about 30% of my income—a really respectable save rate, especially on my salary at the time. 

Now that my income is higher, 30% stops looking so respectable—because spending 70% of a much higher number would connote a pretty extreme lifestyle. 

As a general rule, even if my spending nominally rises with my income (a spending jump from, say, $2,800/month to $4,500/month allowed by a higher income), my savings rate should be rising faster.

My savings mostly go toward investments, but they also help buffer my cash cushion—because as my life becomes more expensive, my old “$10,000 emergency fund” is no longer as powerful as it used to be.

This ensures I’m not actually slowing down and getting farther behind my goals, despite earning more, which would be a pretty self-defeating way to make financial progress.

A little lifestyle creep is fine—as long as you’re conscious it’s happening, and you’re comfortable with the idea of paying to maintain that standard of living indefinitely.

So what got bigger, the house or the price tag?

So maybe—just maybe!—the price of homes isn’t inherently rising so much as it’s scaling up proportionally to our Super Size Me houses.

To fact-check my thesis, I wanted to explore not the overall cost of a home, but the price per square foot:

From AEI, the center-right public policy think tank: “The inflation-adjusted price per square foot for new houses (in 2015 dollars) has been relatively stable since 1973 in a range between about $107 and $128 per square foot at an average of about $116.”

That’s a lot of numbers, so to help summarize: This picture is worth a thousand words…

Granted, this data stops in 2015—and anyone who’s been paying attention for the 2021 and 2022 open Zillow hunting seasons knows that ~things have escalated~. The price per square foot has gone up a little bit, when adjusted for inflation, but it hasn’t quadrupled in price the way the median home value would suggest.

But if smaller houses aren’t as readily available, does it really…matter?

Perhaps it’s an irrelevant distinction; if there are fewer starter homes available (and the data would suggest that’s true, if the median home size is now three times as large as the Cleavers’), first-time homebuyers don’t really have as much of a choice to simply purchase fewer square feet. 

It’s not all high-maintenance consumer demand-based, either—building larger properties is more profitable for developers. Surprise, surprise.

37% of homebuyers in 2021 were millennials, and the median age of a first-time home owner is 33—up from 29 in 1981. Those damned millennials are too busy traversing Thailand and paying off their student loans to plunk down the cash for a mortgage!

But this data might contribute to the situation: Millennials are waiting longer to buy their first home, and likely have more income with which to do so because they’re further along in their careers. It’s not unlikely that millennials are skipping the starter house altogether and waiting longer to afford the home they actually want.

Of course, we’re in the Instagram era of folks posing in their front yard with the sold sign and the caption, “We did a thing!”, which means it’s also possible that we feel like we should buy more “house” than we need. 

Standing in the hallway in front of a condo door doesn’t lavish quite the same je ne sais quoi on the feed as a palatial, golf course-adjacent monstrosity—but maybe the 1,200-square-foot condo is both in-budget and big enough.

Houses are bigger, but families are smaller

Why? Well, families in the age of smaller homes had—on average—more children. In 2012, The Wall Street Journal published a fascinating piece about the vast swaths of modern American homes that go largely unused by the (smaller) families that inhabit them. (Highlighting the hilarity of statistics, the average household in 1960 had 3.33 people in it, compared to 2.51 in 2021.)

Another image that’ll speak louder than my rambling shows the movement of “Family 11” every 10 minutes over two weekdays and evenings:

The Journal found that “Family 11” spent 68% of its time in just two primary areas: the kitchen and the family room. Sound familiar? 

The transition to work-from-home likely shifts this calculus a little bit; our homes now double as our workspaces and—as any millennial living in a studio apartment will be glad to tell you—perching yourself on the same bed you sleep in for eight hours a day, laptop-clad, is not exactly the picture of work-life balance. 

(I remember desperately dragging my desk out of my bedroom and into the living room of my two-bedroom apartment after weeks of rarely leaving the same 100 square feet of living space, save for the obligatory afternoon mental health walk.)

Now that I work from home with my husband, my time spent in our house (apart from sleeping) is mostly spent sitting at my kitchen counter, sitting on my couch, or sitting upstairs in my office (damn, I do a lot of sitting). The entire two middle rooms of our home (the den and the dining room) could disappear altogether and it would probably take me a few days to even notice they were gone. 

Starter…condos?

So what’s a millennial to do? Should you consider moving into a condo instead of a single-family home if condos are our more readily available, affordable, smaller option?

It’s tough—condos face a bit of a chicken-or-egg financial appreciation issue and are usually saddled with absurdly high HOA fees that can actually end up making your monthly payments as high or higher than a comparable single family home of the same size (if you can find one, that is).

And the appreciation issue? The reason condos are a bit of a raw deal compared to the single family home is because the building itself (whether home or condo) is not appreciating. The land your home sits on is appreciating, and when you own a single family home, the most valuable component you own is the land. When you own a condo, you own a collection of rooms in a building. 

(This is why the IRS lets real estate investors write off property depreciation—because technically, all structures depreciate over time and require an outflow of cash to maintain.)

I’m not really looking to buy property just for the sake of buying property, condo or not—and it seems as though many other millennials have no choice but to feel the same way, given the rise in average first-time homeowner age we referenced earlier.

After all, the suburbs might be making us miserable

From Business Insider: “The trouble with the suburbs is that big houses with big yards, set behind wide streets and long driveways, make socializing much harder. And since everyone is driving from A to B, unlike in large cities where residents walk or take public transportation everywhere, people who live in the suburbs have to make a much more active effort to socialize.”

In our rush to get into that megamansion out by the airport and outside the city, we tend to skip the part where we’d ask ourselves: Are we actually ready for that lifestyle? Do we want that lifestyle, or does it just feel like the next obligatory step in the march toward middle age and weekend youth soccer tournaments?

For some of us, the answer is yes. The Home Depot Goers and Neighborhood Walk Fiends are ready for it.

For others, we underestimate the amount of social cohesion and togetherness we derive from walking down the street to our coffee shops, bumping into casual neighbor-friends in the hall, and feeling collectively ~in the mix~ that’s often easier in a city or more urban area.

Some even joke that Americans romanticize college because it was the last time we lived in communally organized, walkable areas together.

I find that we unquestionably assume the move to the suburbs is a logical life upgrade worth shelling out hundreds of thousands of dollars for.

When we moved from our Dallas apartment to a Colorado suburb, I was surprised at how isolated I felt. I figured I’d be glad to be rid of my upstairs neighbor whose inexplicable 3am home improvement projects woke me up on a weekly basis, or the girl next door who often threw loud parties on weeknights.

We’re only a mile-long bike ride from the town’s city center, a privilege we pay $3,000/month for—but after visiting the cookie cutter, treeless expanses of new developments surrounded by…well, nothing, I knew I’d absolutely lose my mind working, eating, sleeping, and living at home surrounded by 1,000 other homes that looked exactly like mine with nothing much else around.

I’m glad to have the space, but I miss living in a city.

My point? Having “the suburban house” is a fit for some, but not for everyone, and Jerome Powell is practically forcing us to wait a little bit longer to make the change. After all, if the homes you want are totally unaffordable until your mid-thirties, you don’t really have much of a choice. 

We could mourn the loss of the starter home, or we could embrace walking half a block to our neighborhood coffee shop/bodega/bar and meeting our neighbors on the roof for sunset cocktails.

Timelines for saving up for big purchases: Saving vs. investing

I hear people ask fairly frequently: “I want to buy a house in X years. Should I invest that money?”

Then I ask: “Well, is your timeline flexible?”

If you’re signing a blood oath with your lender in seven months and you need that down payment ready to rock—or else—it’s probably not wise to put it in the stock market and risk losing some of it, like many of us are experiencing in this bear market.

But if you’re like, “Meh, I wanna buy a house…eventually…probably in like, three to five years. But who’s counting? I don’t know,” then I wouldn’t let that down payment wither away in a savings account.

Suggestion #1: If you need the money in 12-18 months and your timeline is not flexible, don’t bother with investing. Just save it instead.

Aside from the risk of losing money you’ll need, the bigger issue with this approach is the fact that investing for a few months won’t really do much. Sure, you may make a few hundred bucks, but really, investing is a long-term game. It’s not intended to be something you do for a few months then call it a day.

Investing builds wealth over years of compounding. If you don’t have years (and you’re not willing to wait), just keep it in cash.

Now, if I were Ruler of the Universe, everyone would invest in their twenties before doing anything major like buying a house—everyone would have a few hundred thousand by the time they needed to make this decision, so it wouldn’t be an issue. But since I realize that’s not always how people operate, I think it’s important to state a timeline explicitly here.

That said, if you’re still in the process of building something as big as a down payment (meaning you don’t have the full amount yet) and you do have a few years ahead of you, investing can supercharge that experience. (And while I have your attention about housing, this post helps you determine whether you’re better off renting or buying.)

Maybe you don’t want a down payment—maybe you want a Soul bike (again, guilty) or a $4,000 pure-bred doodle shmoodle dog from a breeder named Anastasia (though, may I humbly suggest adopt a shelter animal like Sam Cat?). These purchases aren’t worth tens of thousands of dollars, yet they still need to be budgeted for separately from regular spending—and if you’ve got several years to accumulate the funds, investing in something flexible (like a brokerage account) probably makes sense.

“But Katie, what about the taxes in a brokerage account? Shouldn’t I avoid taxes by just saving my money instead?”

I understand the fear around paying capital gains taxes, but the interest you earn in a high-yield savings account is also taxable. In fact, it’s taxed at a higher rate than long-term capital gains and the same rate as short-term capital gains.

That means if you’re afraid to invest for something that’s still a couple years away for fear of paying long-term capital gains taxes on the gains, you should also avoid high-yield savings accounts—because you have to pay tax on that growth, too.

That’s why your HYSA provider sends you a 1099-INT for tax season. The interest is taxed like ordinary income, meaning it’s taxed at your marginal tax rate.

Check out this Instagram post where I broke this down with an example that demonstrates why the HYSA may be costing you more than you think if you’ve got a flexible timeline of more than a couple years.

TL;DR: Taxes should be the least of your worries when it comes to make the saving vs. investing decision. At the end of the day, if you’re paying capital gains taxes on your earnings (usually 15%), it means you made money.

The most important thing is time horizon.

Suggestion #2: If you’re saving up for a discretionary purchase that costs less than $10,000 but more than what your monthly budget allows for, designate a few categories in your budget that can be put “toward” that saving goal each month.

When saving up for my bike, the thing that I tried to avoid was dipping into money that I would have otherwise been saving and investing to pay for it. Instead, I wanted to defer existing spending into the future where possible.

Another high-level example:

Let’s say I spend $3,000 per month and invest $2,000 (so my total income = $5,000). If I’m saving up for my [insert expensive thing here], I’d ideally be shaving some money off that $3,000 spending chunk each month vs. dipping into the $2,000 per month I’m investing. 

Maybe I have $300 earmarked for travel and $300 earmarked for shopping. I’d try to file that $600 chunk that would’ve been spent in those two categories for my future expense and not spend it, waiting for the $600 chunks each month to accrue to the point that it’s enough for [thing I’m trying to buy] while still meeting the same investing goal every month.

Remember, money is about priorities. You can buy expensive stuff and still meet your investing goals—you simply have to plan for it. And maybe you’re not earning quite enough yet to where you can defer the entire amount from present-day spending, but the bulk of the savings for the discretionary item should ideally come from money you were planning to spend anyway. 

Too often, the chunk of money we’ve earmarked to invest is the first place we go when we need cash. Instead of investing it, we set it aside and blow it on something called a Cloud Couch from Restoration Hardware (which I’ve been told is all the rage with the Zillennial YouTubers), investing goals be damned.

It pains me so: The power of compounding is on your side to grow that investing chunk to Cloud Couch-levels over time instead of spending now.

Using your savings: An order of operations for spending

Maybe you’ve got plenty of money lying around and you’re ready to make a big purchase. The good news is, if you’ve followed the first two suggestions in the “save up” period, this shouldn’t really be a question: You’ve likely got the cash (or investments) earmarked somewhere already. 

But let’s say you’ve found this post on the other side of saving. You’ve saved in an emergency fund. You’ve saved in a brokerage account. You’ve got a Roth IRA. You’ve got funds to draw from everywhere. Where do you pull from to make your big purchase?

Here’s how I think about this decision, based on the “value” of the money in each of these accounts from worst to best:

• The worst place to pull from: Your Roth IRA

  • While your Roth IRA can technically function as a back-up emergency fund because you can access your contributions at any time, I wouldn’t recommend it. Your Roth dollars are the most valuable ones you have because they’ll never be taxed again. They’re a veritable wealth snowball, and you don’t want to do anything that’ll make that snowball smaller unless you absolutely have to. If you do pull out (your limited!) Roth contributions, you can’t retroactively go back in and re-contribute those same funds for the original contribution year (if I put in $6,000 in 2020 and took it out in 2021, I can’t then go back and put $6,000 of 2020’s contributions back in because 2020 is already over). 

• The second-worst place to pull from: Your Emergency Fund

  • While needing an at-home stationary bike that connects you to a portal of beautiful, sweaty people can often feel like the closest thing to an emergency you’ve experienced since the Kardashians announced their new show on Hulu, it’s something we should plan to buy, not buy in a frantic haze. The emergency fund is the backbone of your financial life, because it’s what enables you to invest comfortably. Without a fully stocked emergency fund (read: a cushion of cash you could pull from if shit hits the fan), you expose yourself to unnecessary risk. The amount you need in your emergency fund definitely varies depending on your lifestyle, but in general, I wouldn’t recommend using this for a purchase you can plan for.
    The worst thing you can do, in terms of opening yourself up to a lot of financial risk, is use your entire savings to put a down payment toward a house. When you buy a home, you’re also buying a 30-year headache. Shit breaks, and it costs money. Buying a home is a situation that necessitates an emergency fund—if you have to use yours to get a house, it’s not yet time for home ownership.

  • Here’s where I keep my emergency fund.

• The slightly fine place to pull from: Your taxable brokerage account

  • Notice how I said slightly fine. I’m not outright condoning dipping into your taxable brokerage account, but if you gotta pull from somewhere, it’s a good option. Because the dividend income and bond yield in this account is being taxed every year and you’ll be taxed on your gains when you eventually sell, it’s less valuable than the money in a Roth IRA. It’s also not as serious a line of defense as your emergency fund is. If money is in your taxable brokerage account, that money is usually excess.

  • After all, someone that invests aggressively for years will probably amass a pretty big sum in their brokerage account and may not keep much in cash. If you’ve got $150,000 in a brokerage account and you want to pull $1,000 out to buy a MacBook, have at it. What I’m trying to dissuade is someone who just started investing and has $3,000 in a brokerage account from pulling out $2,500 to buy a used Peloton on the black market (at least get the Soul bike; it’s sturdier). Just kidding.

• The technically optimal place to pull from: Your actual checking or savings account

  • If you’re like, “Thanks, Captain Obvious. WTF?” Cash is your least valuable asset. It’s a melting ice cube, losing money to inflation every year. This is why Suggestion #2 above (planning intentionally for your purchases) matters so much. It allows you to shuffle a few hundred bucks every month into a nearby cash account that you can use without having to sell any assets in a brokerage account (or, worse, the Roth IRA).

  • This is where we tie everything into a nice little bow and circle back to our original “saving up” piece. Ideally, you’d use money that’s “leftover” in checking from spending every month. What happens when you under-spend for a few months in a row? You ultimately end up with a nice little pool of extra cash from your cash flow just hanging out, unspent. That sum is the ideal chunk to spend on whatever it is you’ve got your eye on. You aren’t disadvantaging your investing goals, you’re not putting yourself in a dicey position with your emergency fund, and ultimately, it’s money that would’ve or should’ve been spent anyway.

  • I realize this won’t work for something as big as a down payment. You don’t just accidentally underspend enough to buy a house; that’s an act of intentional wealth accumulation. Here’s how I personally think about it: I put thousands of dollars every month into a brokerage account. Whether I use that brokerage account as a source of income in early retirement or use some of the money later to buy a house is irrelevant at this point: What’s important is that the money is building wealth more quickly than if it were just chillin’ in a savings account.

With my panini bike purchase, I had been consistently several hundred dollars under-budget for the previous six months or so. I know this was the case because I track my income, spending, and investing every month, so I could see the portion allocated for spending, and I knew it was hanging out in checking, waiting to be spent. I didn’t know I was going to end up spending that money on a bike, but I knew at some point something would come along.

Being able to get that bike was the product of months (if not years) of making decent financial decisions most of the time. It didn’t require perfection, just attention (and tracking; lots of tracking.).

Conclusions

I reiterate: Your saving and investing plan doesn’t have to be perfect!

But it’s the difference between having some semblance of a plan and tripping through life, Discover card in outstretched hand, swiping indiscriminately and squinting through the pain of opening the bill PDF.

Every layer of this whole “financial wellness” game layers on top of each other. First comes the budget. Then comes the different types of accounts. Then comes an article like this one, that builds on those two fundamentals as a way of determining the most optimal way to live a real life within the parameters of the financial structure you’ve created for yourself.

For example, if it’s an investment property that won’t be owner-occupied, there’s typically a 25% down payment requirement—which means the $50,000 down payment would be necessary for a $200,000 property. 

But if this is just a home-ass home that you’re going to live in, it’s possible you don’t need to put down a full 20% or 25% if you’re comfortable with PMI (private mortgage insurance), which acts as insurance for the loan. PMI, after all, isn’t that big of a deal if it allows you to snag a good deal, take advantage of a low rate, or even just makes it possible for you to have less money tied up in your primary residence. (Just make sure that the PMI will come off the loan once your equity eclipses 22%, as I’ve heard some lenders make it a permanent function of your payment.)

This same logic applies to setting emergency fund goals, too: If you’re trying to hit six months’ worth of expenses before you start investing because that’s the arbitrary number someone handed you, it might be worth revisiting whether or not you really need six months’ worth of cash in the bank. 

So: Is $50,000 necessary? Is that the right goal? Maybe you’re trying to buy a $1mm stunner with $50,000 down. In that case, yeah, it’s probably necessary (or maybe a bit low), but (in normal housing markets) you can put down as little as 3.5% in exchange for a higher monthly mortgage payment and PMI. 

I think there’s certainly a balance to be struck here, but it’s worth double-checking that your perception of what’s necessary is accurate. Make sure you’re setting the right goal.

Second question: Is it a realistic goal?

This is always the buzzkill question, but it’s worth asking: Am I setting myself up to fail?

For example, if I know that I make $50,000 per year and my annual expenses are $40,000, then assuming I can stay the course and hit $50,000 in savings in two years is simply not realistic. I’ll only hit $20,000 if I stay the course, in this hypothetical vacuum where taxes don’t exist.

It sounds silly to state explicitly, but this is the step of goal-setting (and achieving) that people often skip—they don’t run the numbers to see if what they’re trying to do even makes sense.

To extend this example—someone who earns $50,000 and spends $40,000—this person would need to either (a) cut their expenses by $15,000 ($1,250 per month) or (b) increase their income by $15,000 (or some combination of the two) in order to have a chance at saving $50,000 in two years. 

If this hypothetical Rich Girl just named “$50,000 in two years” as the goal without taking a step back to plot out how that would actually happen, she’d probably skid into home plate with $20,000 two years later and feel confused about why she fell short. 

Sometimes just adding numbers around a goal helps clarify how it can become realistic. After all, this person—who earns $50,000 per year and spends $40,000—could cut their spending by a more moderate amount ($625/mo.) and increase their income by the same amount ($625/mo., or $7,500/year—a 15% increase, or the average bump from switching jobs, ironically) and have no trouble saving $50,000 in 24 months’ time. 

To use another example: Our net worth goal by the end of 2022 was originally $1.75mm. When I set the goal, it seemed totally in reach, but after stepping back and running the numbers, I realized it might not be reasonable at all. 

If we hypothetically have around $1.1m in May 2022, that means we have seven months to add $650,000 to our net worth (to say nothing of making up for market downturns along the way). 

If the stock market ends up cruising this year (unlikely, given its current state), it’d be possible—but that’s adding money at a rate of $81,000 per month. Not exactly in reach unless we strike it lucky with a scratch-off, and our “stretch” goal should probably be closer to $1.5mm. 

It’s easy to dream big—but running the numbers grounds you in reality and shows you where you’d need to either cut back, earn more, or do both to make it happen. Make sure your goal is realistic for your current situation (or allow it to guide you to make the proper changes).

Third question: Is it a reachable goal?

On the flip side of the first question’s analysis about $50,000 potentially being too much, it’s important to consider that a home that requires a $50,000 down payment today may go up in value by the time you buy it in 2 years. 

If the home appreciates by 5% per year, it’ll be worth ~10% more by the time you go to buy it—and your down payment will have to be up-sized proportionally. Nobody knows this painful truth more than people who started saving for a home in January 2020 for a home they planned to buy in 2022 (though I maintain, this market is really, really unusual).

This is why I’m personally such a raging fan of taxable brokerage accounts (like Betterment’s “General Investing” or “Big Purchase” accounts that are tied to a goal’s timeline) as a place to store wealth as you go. Even if you don’t know what type of house you plan to buy (or when), having a ton of money sitting in a brokerage account will give you options, especially if you’re flexible about your timeline. 

(To be clear: If you will rage-streak through your landlord’s yard if you don’t get the house you want on the exact timeline you want it, the brokerage account may not be for you. Flexibility is the key word here; you’d have to accept you’re risking your down payment shrinking by 20 or 30% for the chance at growing it by 20 or 30%.)

“Reachable” goals are ones that account for these types of nuances—so by the time you reach the goal, you’ll actually be able to fulfill the goal’s intended purpose (in this case, the goal is $50,000, but the real underlying goal is “down payment for a home”). Check for nuances to ensure your goal allows you to reach what you’re actually trying to achieve.

Striving for financial goals before you even have them

This entire conversation is a testament to why my preferred method of financial goal-setting is reaching for goals before you even have them. In other words, strive for broader financial benchmarks that’ll provide optionality later.

“Buy a house” has not ever been a goal of mine, but because we’ve had broader, more flexible goals (“build wealth & become financially independent”), we’re now in a position where we could buy a house. 

I know a lot of people (including me!) that emphasize the importance of having goals for your money, but sometimes I think it can force us to be a little too specific—I want to buy a house, or I want to eventually send my kid to college. If you realize you want to buy a home and then start saving, you’re going to be waiting a while—whereas if your goal is merely to amass wealth regardless of what you eventually use it for, you increase the chances you’ll have what you need when you realize what you want. 

Same goes for the whole college thing—you may start seriously thinking about wanting to send your kid to college when they’re 10, and now you’re attempting to balance saving for retirement, paying for their overpriced basketball league, and investing in their college fund all at once. If you focus on “building wealth” more broadly from day one (meaning, before the kid is even born), you’ll likely have enough to pay for college outright by the time they turn 18 (because…compounding).

So while this article was about how to assess a goal, it might be fairer to say it’s about not setting specific goals at all

Building wealth across your qualified (read: retirement) and taxable accounts before you’re in a position to want anything major is—paradoxically—one of the best ways to guarantee you’ll actually be able to get it. In doing so, you put time on your side. Waiting until your goal is crystal clear to begin working for it means unnecessarily delaying the compounding.

We tend to overestimate what we can accomplish in one year, but underestimate what we can accomplish in 10. Start today for whatever Future You’s going to want 10 years from now (even if you’re not able to answer the 3 R’s questions yet). 

My friends, allow me to introduce you to – without hyperbole – the greatest discovery of my twenties: The Hyatt Zilara properties.

I’ve been to the Cancún location four times (confessions of a #Texan) and the Punta Cana location once, for my honeymoon.

Allow me to grace you with the high points:

• They’re five-star, all-inclusive resorts, and not the kind of all-inclusive where you can tell the kitchen threw 47 DiGiorno pizzas in the oven for poolside lunch: The kind of all-inclusive resort where they’ll custom-make eggs Benedict with so much care and concern that you’d think their life depended on the perfection of the poached egg. These are nice all-inclusive resorts with great drinks, beautiful facilities, and friendly staff.

• They have three locations: Cancún, Punta Cana, and Rose Hall (in Jamaica) – but I can only speak to Mexico and Punta Cana, as those are the two I’ve been to.

• There’s a sister property that you’ll have access to, the Hyatt Ziva. Hyatt Zilara is adults only, while Ziva allows children. They have distinctly different vibes, but having access to both (especially in Punta Cana) is great. You can book at either, but know that if you have kids, you won’t be able to bring them to Zilara – but if you can pawn them off on a well-meaning patron of the resort, you and bae can head next door. This is why I’m not a parent.

• I consider this the best discovery of my twenties because of how cheap it is – but not cheap dollars-wise, cheap points-wise: I just ran a search for November (a great time to check out Cancún) and the cost is $663 per night:

• But if you were to book with Hyatt points, you’d only pay 25,000 points per night! How does one get 25,000 Hyatt points, you ask? Easy. You sign up for the Chase Sapphire Preferred card (at 60,000 points) and transfer them to Hyatt. Bada-bing, bada-boom – you’ve got 2.25 free nights.

(For an article fully dedicated to how to transfer your points to Hyatt, check this out.)

The only thing I’ll note: You need to be flexible with your dates. For some time periods, the cost is 40,000 points per night, so you’ll need to click around the calendar and find a date range where every night is 25,000 points.

But if you assume the average cost is $600 per night, 2 x $600 = $1,200 value for your 60,000 points!

Other considerations

• Transportation: I recommend booking your transportation through the resort as well. They have two options (a van and an SUV) and while they’re expensive (I believe it’s $150 roundtrip), having safe, reliable transportation is priceless in other countries. The Cancún airport is a bit of a feeding frenzy and we’ve had drivers pretend to be ours before, so try not to engage with the drivers who flag you down as you’re exiting – look for the Zilara employee with your name on a sign, and only go with him. (Trust me – the schemes and scams are extreme.)

• Tips: Bring cash for tips. I know, I know – I said it was a free trip – but the staff are amazing, and you’ll want to tip them generously. We usually tip $5-$10 per meal (depending on how much we ate and drank) and $1 per drink, so you can extrapolate from there. $30 per day is probably fine, but bring cash ahead of time and don’t plan on relying on the ATM in the lobby or cash advances unless you love paying extra fees (I assume you don’t).

• Vibe: This is definitely a place to go and relax. The Punta Cana resort has a literal waterpark with crazy slides (which is super fun), but it’s (generally speaking) a laidback vacation. If you’re interested in eating and drinking delicious food and beverages and lounging by an infinity pool, this is the trip for you. If you’re trying to go on crazy hikes and see the sites, maybe not.

• Spas: The Hyatt Zilara in Cancún has a spa day pass for $25 (an amazing value) where you can use the sauna, steam room, cold plunge, and other amenities. I did this once on a day where it rained, and it was lovely. The Punta Cana resort’s spa day pass is far more expensive (like, $200) so I didn’t bother. Just something to note if you’re planning to use the spa.

Which Hyatt Zilara resort do I like most?

Objectively speaking, the Punta Cana location is nicer and has more restaurants (it was opened in late 2019, so it’s practically brand new as there weren’t many guests in 2020), but I actually think I’m going to pledge my allegiance to Mexico for a few reasons:

• Poolside: The cabanas are free/first come, first serve. In Punta Cana, you have to reserve them for $100 per day, which annoyed me.

• Size: Cancún’s resort is a lot smaller, so it’s easier/faster to get around. I felt like we were walking a lot in Punta Cana (which is fine!), but it seemed to take longer to do everything as a result.

• Familiarity and ease of access: Since I’ve been to the Mexico location four times, I feel like it’s a second home. I know exactly how to order my free room service cake after dinner. I know the room layouts. I know where I’m eating breakfast every day. I like the familiarity of the experience, because it helps me relax more – that said, if you’ve never been to either, you could theoretically achieve the same in Punta Cana with ease. The only shortcoming to Punta Cana (in the Dominican Republic) is that (for me, in Colorado) it’s harder to access. I have to take a connecting flight and have a longer, more expensive day of travel than when I fly nonstop to Cancún. When I lived in Dallas, we could do weekend trips to Cancún because it was so close.

Speaking of travel, what about flights to the Hyatt Zilara?

This is a trickier answer, as it fully depends on where you live.

For example, if you live in Atlanta, your best bet is Delta. Dallas? American or Southwest. Denver? Probably United or Southwest.

The point is, your location will impact which airline deserves your loyalty, but in general, the best “points redemption” programs are Southwest’s Rapid Rewards program and United’s MileagePlus program.

I’d recommend picking an airline card and snagging it a few months after you grab the Sapphire card (90 days is generally a safe bet for a second application).

This blog highlights my favorite, and why.

Interested in leveling up your travel rewards game?

Check out my full breakdowns:

• My overall strategy and 5-step process for achieving travel rewards world domination

• My strategy for couples specifically, to generate nearly $10,000 in free travel

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• $26,600 of interest, closing costs, and taxes

• $10,000 of principal payments

We’d pay $36,600 over the two years to build $10,000 in equity.

Even if the home appreciated by 7% per year over the two years that we live here (which is outrageously high), we would have spent:

• $60,000 down

• $26,600 in closing costs, interest, and taxes

• $10,000 in principal payments

= $96,600 to live in the house for two years, or an average of $48,300 per year

If the home appreciated by 7% each year, it’d be worth $343,500 when we sold it.

After paying the buyer and seller agents their commission, as is customary for the seller to do (6%, so roughly $20,610 total), we’d have $322,890.

Give the bank their $230,000 that we still owe them, which leaves:

= $92,890

We would’ve spent $96,600 to make $92,890, assuming the home appreciates by 14% in the two years we live here, for a loss of $3,710.

Now, the obvious shitty thing about this is that the entire $36,000 that we spend in rent this year will be a loss – but it’s a $36,000 “loss” that enables us to live in a near-million dollar home with no pressure or consequence, not a $3,710 loss to live in a home that… well, wouldn’t get us much in this zip code.

And that’s assuming annual appreciation of 7% – the average in Fort Collins is 6% (the nationwide average is closer to 4%, but it varies a lot depending on location).

As the math shows, even great appreciation is not enough to offset the costs of a home if you only intend to live in it for two years, and right now for us, moving around is part of our lifestyle and something we enjoy and look forward to – buying a home would definitely put a wrinkle in that.

Even if we could get a home we wanted to buy (at $300,000) here and were comfortable with the conservative $3,000 loss when we’d sell in two years, the other thing that really bugs me about buying is the opportunity cost of the down payment.

That $60,000 down payment wouldn’t come out of thin air: It would come out of our investments, where it’s currently averaging 17% returns in the stock market’s bull run (also, I should note, outrageously high).

If the market delivers 10% average returns over the next two years, it would turn into about $72,000 if left in the market – which means our “true” loss isn’t just the $3,500 noted above, it’s $3,500 + the $12,000 the down payment would’ve earned in the market – a $15,500 loss over two years.

Which – again – is still a lot less than our outlay of rent over those two years ($36,000 * 2 = $72,000, yikes), but the fact remains that there’s nothing we’d be interested in buying at that price point in this part of town, which says more about the northern Colorado market than probably anything else.

Summary: We plan to move every few years for the foreseeable future, and you take the biggest losses when you sell a home after the first couple years thanks to closing costs and front-loaded interest on your mortgage.

Reason #4: We’re striving for financial independence, which is the number at which you can live off your investments indefinitely

Homes are an illiquid presence in your net worth, which doesn’t help us.

This is perhaps the biggest and simplest reason:

We’re trying to reach $1.5M-$2M in investments together as quickly as possible so we can withdraw between $60,000 and $80,000 per year to live on, tax-free – that’s between $5,000 and $6,666 of spending money each month, the latter of which being more than enough for our (current) lifestyle.

With a combined net worth of $500,000, we’re not super far away from being work-optional (even if we did have an expensive, infinite rent rate of $3,000/mo.).

Since homes are an illiquid asset (meaning you can’t spend your home’s value the same way you can spend the money in your investment account), having a lot of our net worth tied up in something we can’t spend doesn’t really help us reach that work-optional goal.

If we hit a work-optional FI number of $1.8M invested, we can withdraw $72,000 tax-free (thanks to long-term capital gains taxes) indefinitely – more than enough to pay our rent on a million dollar home, and all our other expenses, without having to work – leaving us free to stay home with our future kids, monetize hobbies if we want to, and more.

Putting down a bunch of our invested assets on an illiquid asset that we’d have to sell in order to use doesn’t really make sense for us and our goal of retiring in our early thirties, especially if we can support a renting lifestyle indefinitely and retain all the ease, flexibility, and low-maintenance attributes.

That’s not to say that we’ll never buy a home, of course – just that it doesn’t make sense for us right now for those four reasons.

So when would it make sense?

Here’s when we’d buy a house

I could see us buying a house if we decided to finally move somewhere to settle down for the next decade (and in a place where the cost of living was reasonable).

If we moved somewhere like the town I grew up in (Northern Kentucky) where you can buy a 5-bedroom home in a good neighborhood for $350,000, I’d be far more interested in doing so.

Realistically, I think what’ll likely happen is:

1. We’ll reach FI (or at the least, a seven-figure net worth) in 4-5 years from now

2. This’ll probably happen around the same time that we decide to settle down in one place for at least 10 years and start a family

3. Then, we can make a more accurate decision about how much we’re comfortable putting down, knowing that in the meantime it’ll lower our immediately accessible net worth

4. The lower monthly cost will offset the steep hit to the net worth

That would look like this, in practice:

• Hit current FI number for the two of us: $1.8M

• That produces $72,000 per year in tax-free income (4% safe withdrawal rate coupled with 0% long-term capital gains taxes)

• Of that $72,000, $36,000 would go to rent (based on our current rent), which means the other $36,000 could go to discretionary expenses, or $3,000 per month in other spending

• If we decided to spend $100,000 on a down payment (20% of $500,000), that would knock our net worth down to $1.7M

• $1.7M produces $68,000 per year instead of $72,000

• But the monthly cost of principal, interest, taxes, insurance, etc. on a $500,000 home with 20% down is only $2,200 per month, thereby lowering our monthly housing costs by $800, or $9,600 per year

That means… drumroll please!…

While we’d have to put $100,000 of our $1.8M down and lower our net worth accordingly, we’d ultimately be spending $9,600 less per year, while only generating $4,000 less in investment income.

…which would be a net positive of $5,600 per year, in this perfect mathematical vacuum.

This is the magic of waiting to buy a home until you’re already relatively wealthy – you don’t chop your fledgling wealth snowball in half early on to buy an illiquid asset. You let that snowball grow and grow, then shave off a corner to buy the house.

The bottom line

Eventually, it’ll make more sense to own a home – once we’re at FI (or close to it), in a place where we’ll be sticking around for a while, and hopefully have access to more affordable housing, it’ll make more sense for us to buy than to keep renting.

The cool thing is, we could keep renting indefinitely if we decide that that just works better for us. Some people (like Ramit) intend to rent indefinitely.

But right now, buying a home would actively detract from our goals, not help them, and ultimately, that’s what this decision comes down to for us: What gets us closer to our goals?

If our goal were to own a big, fancy house, we could go ahead and do that – but that’s not our goal. Our goal is to create lifestyle flexibility by being work-optional and living in a nice place, and right now, renting is what’s best for that goal.

How I’m still investing in real estate despite not owning a home

The funny thing about real estate is that it makes for a pretty suboptimal investment if you intend to live in it, but a pretty great one if you’re using it for cash flow (rental income, forced appreciation through repairs, etc.).

But being a landlord isn’t really my thing at this stage in my life, so I was interested in finding another way to make it work. I decided to start with a $5,000 investment in Fundrise (their “Core” level), which effectively invests your money in dozens of private real estate deals that their team puts together.

The statistics are pretty compelling: private real estate is an alternative asset class that has outperformed the stock market in the last 20 years, with less volatility – that’s ultimately what convinced me to diversify with private real estate (again, without having to become Myrtle the Landlord).

You may also like these posts:

1. Why I Don’t Include a Primary Residence in Net Worth for Financial Independence

2. How to Consider a Mortgage in a Financial Independence Calculation

3. When the Math Supports Buying Your Primary Residence Instead of Living in It

4. Hot Takes on Home Ownership: Keep Renting

Disclaimer

I’m an investor with Fundrise. I asked them if they’d be interested in sponsoring this post, and they agreed. I don’t receive any commission if you sign up.

And no, it’s not deleting your Starbucks Rewards app and swearing off fast casual dining.

Today I want to talk about something we often write off as an immutable fixed cost: Housing. “But Katie,” you say, “I have to live in a place with an espresso bar and Peloton in the gym – it’s non-negotiable for my quality of life!”

Let’s take a journey back in time, shall we?

Finding my first apartment

Back in 2017, we revisit young, hapless, Dallas-obsessed Katie, on a hunt for her first apartment. Flush with cash from making $12/hour as an intern at Southwest, she was plotting her first Uptown apartment lease – because there’s obviously nothing amiss about someone who makes the equivalent of $24,000 per year signing a 1BR lease in the most expensive part of town.

Thankfully, my friend Rob swooped in and saved the day. He was moving to Dallas for work and made substantially more than I did. We decided to be roommates to cut back on housing costs.

Despite the fact he was a high earner, he was hellbent on not paying more than $1,000 for rent.

That may have been the first time I encountered anyone in Dallas who felt it was not only possible, but necessary to keep housing costs low. Every other young person I spoke with treated their apartment lease like their first home purchase: Unless it was in the best neighborhood, with granite countertops, stainless appliances, and walkability to the hottest bars, forget it. $1,500 per month? A bargain for a new graduate making $52,000 per year, right?

I’ve said it once and I’ll say it again: Thank God for Rob.

We ended up signing a 2BR lease at an older apartment complex in Victory Park for $1,785 per month, or $892.50/each.

The countertops were plastic, the fridge was the same one I had when I was in the third grade, and there were always rowdy pool parties happening at the most inopportune times – but thanks to that one decision, I was able to save hundreds of dollars more every month than most of my peers. (And I owe it all to Rob, because otherwise, I would’ve been in an Uptown 1BR apartment spending one entire paycheck on rent.)

And I didn’t sacrifice location to do it – we were up the street from the American Airlines Center and across the street from Happiest Hour, two major attractions in the Uptown/downtown mix.

At $892 per month compared to the average that most of my friends were spending (between $1,200 and $1,500), I was saving between $300 to $600 more on a monthly basis because of one simple decision that I almost didn’t make.

The worst part is, I can’t even take credit for it. I would’ve made a horrible choice if it weren’t for this singular positive influence (and now, I hope I can be that singular positive influence for you).

Not long after, I encountered another high earner – a software engineer who made $130,000 per year – who lived in the same apartment complex as me. I was shocked to meet someone who made more than twice my income slumming it with me at the only old apartment complex in a sea of hastily constructed high rises. “I just don’t care that much,” he’d say, “I’m trying to invest instead.”

Again, another impactful encounter. Maybe it’s not weird to live way below your means, I’d think, after witnessing most of the people I knew doing precisely the opposite.

I’ve never had a 1BR apartment or paid more than $892 per month for rent in Dallas.

…and I’ve lived in both Victory Park and Knox Henderson, two areas that are walkable to bars, restaurants, and offer ready access to the highway and grocery stores. The next apartment I lived in actually cost less; we paid $1,741 for a 2BR (and that time, it did have granite countertops, stainless steel appliances, and other fancy amenities that used to matter a lot to me).

How I always found “cheap” housing in good areas

My method has always been simple: Visit leasing offices of places that are clearly not attempting to replicate a shiny hybrid of Vegas pool party and NYC high-rise style. They’ll see you coming.

Typically, the older complexes tend to have bigger units, because they were built in a time when Dallas housing wasn’t priced at a premium (you can spot these by looking for places that are only a couple of stories high). Because they’re older, they usually rent more cheaply, and a lot of them have been renovated to keep up with the flashy newcomers that boast weird perks like eucalyptus towels in the lobby and valet parking.

When I found our previous apartment, I knew I wanted to live on Henderson Avenue. I simply walked into every single leasing office of every apartment complex between 75 and McMillan, stretching a solid few blocks, and asked what specials they had. It took approximately one afternoon of light research, and when I saw this place and its price, I knew I had a steal on my hands. Price-comparing is a necessity. Don’t just sign the first lease someone puts in your face.

I visited four complexes (which took a few hours) and was feeling dejected and disappointed before walking into that one, so I had a good sense (rooted in reality) of what the “market value” for apartments on that stretch of land was. I didn’t really use the internet at all beyond the basic pre-research – it was all done on foot, in person. People are more willing to strike a deal when they’ve got you, a potential tenant, standing in front of them.

The price range – even in the two-block stretch I was traversing – was wild. The units and amenities weren’t even that different (and obviously the location was the same), and yet I was seeing differences of between $300 and $400 for very similar units.

Don’t take the leasing agent’s word for it that you won’t find anything cheaper or better – remember, they’re trying to sell you something.

With the exception of San Francisco and New York City, affordable housing is easier to find than most people think – living just a mile away from the hottest neighborhood can save you hundreds of dollars per month (if not more), without sacrificing much.

And while it’s not impossible to save an extra $400 per month by cutting back in other categories, nothing will have more of an impact on your finances month to month than where you choose to live.

Your housing costs are likely the single-most impactful influence on your monthly costs

This is simply the byproduct of the fact that rent is usually the single-most expensive thing you’re on the hook for on a monthly basis.

And it’s even more impactful when considered as a percentage of your total income – the difference between $900 per month and $1,200 per month isn’t crazy if your total take-home pay is $6,500 a month. But if you’re making $3,000 a month, that $300 difference represents a full 10% of your monthly take-home pay.

It’s almost insulting to think giving up your cold brew a couple times a week could ever make a dent in a budget that’s bloated from an inflated housing budget.

Think about how many happy hours you’d have to give up to compensate for an apartment that costs just $400 more per month.

It’s that weird phenomenon where we anchor to a price and then view deviations from it relative to the whole (yeah, I passed calculus once – what of it?).

In other words, it’s way easier to reason with yourself on high-ticket items because the differences don’t feel that big by comparison:

“Well, this place that’s pretty good is $950, but this other place is $1,150… that’s not that much more.” When in reality, it’s a full $200 more – and that $200 difference would probably feel stark and shocking if it were tacked onto anything else.

“My car insurance went up from $100 to $300 this month! I’m not paying for that.” Why does this feel so much more egregious? It’s still $200.

We don’t consider it as an absolute, we consider it relative to the whole. But it’s still $200, or $2,400 per year.

The alternative to finding reasonably priced housing is paying through the nose and finding another way to make up that savings difference every month, which usually ends up going one of two ways:

1. Cutting out fun stuff that actually improves your quality of life

2. Not saving at all and compromising your financial success

Neither are great options, and I’ve been shocked by how arbitrarily things seemed to be priced in a medium cost of living city like Dallas. I’ve seen friends inexplicably pay $1,800 per month for a 1BR apartment in a good part of town, and other friends (who live literally a mile and a half away) pay $750 a month for a bigger place.

(And this isn’t a slam on renting – I am a HUGE proponent of renting – but renting wisely counts.)

Where you live in your city will have less of an impact on your quality of life than the amount of money you have to spend on entertainment and fun with your friends. I’d never tell you to live anywhere unsafe, but moving just a mile or two away from the fanciest, trendiest neighborhood can change your financial trajectory more than just about any amount of cutting back or cooking at home.