Friday Financial Foul Ups: Being Too Eager to “Move Out and Move Up” Kept Me In Debt and Cost Me Thousands

This week’s Friday Financial Foul Up will feature a guest post by David Weliver. David publishes Money Under 30, a blog featuring common-sense financial advice for twentysomethings. David is also on Twitter (@MoneyUnder30). In the past, David has worked for SmartMoney Magazine, although much of his blogging (including this foul up) is influenced by his personal experiences with money. Enjoy his story.

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I have rarely met twenytsomethings who want to live at home with mom and dad. Similarly, I only know a few friends who prefer living with a gaggle of roommates to having a place of his or her own. But as I learned the hard way, trading up from these less-than-ideal living situations too soon can cost you.

The longer you can endure living at home or splitting cheap rent with roomies, the faster you can get out of debt, build an emergency fund, or save a down payment for a home of your own.

The Situation

After graduating from college I moved to New York City for my first job with SmartMoney Magazine. I didn’t know anybody in the city, so I had to find housing on my own. I shelled out $650 a month to rent a ten by twelve foot room in Harlem, sharing a tiny kitchen and bathroom with a single mother and her teenage son. In Manhattan, that’s was about as cheap as rent can get.

After a year in the city, however, I realized that I wasn’t able to make ends meet in that expensive city with my meager entry-level salary. What’s more, my now-wife, friends, and family were all in Boston. I made the decision to take a job back in Massachusetts (and move back in with mom and dad). I would be able to dramatically trim my budget and start chipping away at the substantial credit card debt I amassed in college and in my year in New York.

Fast forward a little more than a year, and I was getting really antsy to move out from under my parents’ roof. I loved them; I just didn’t love living with them when I was almost 24. With a second job and no rent, I was making progress on my debt and had enough wiggle room in my budget to at least move in with some roommates.

So I hit up Craigslist and found another rental bargain: Another very small room in a small house shared by four guys for just $425 a month, plus utilities. I lived there for six months. But it was cramped, and I longed to have a place all to myself. With more earnings from the second job and a raise at my full-time job, I again seemed to be able to afford an upgrade. I found a modest apartment just minutes from my job for $1,000 a month, utilities included.

I was willing to pay more than double the rent for the privilege of living alone.

Where I Fouled Up

At each step along the way, I told myself that I could “afford” to upgrade my living situation (from my parents’ house to a shared house and from living with roommates to my own pad). Trouble was: I wasn’t out of debt yet, I didn’t have adequate savings, and I wasn’t thinking about long-term goals like trying to buy a home someday.

By the time I was living alone I could have been putting an extra $500 a month towards my debt had I still lived with roommates. And if I stayed at home with my parents, I could’ve been putting an extra $1,000 towards my debt, which would’ve allowed me to clear my debts pretty quickly. Doing so would’ve saved me several thousand dollars in interest.

I didn’t track my exact debt and payments during that time, but take this example, which is close: I had credit card debt of about $15,000 at an average 15 percent APR.

After other expenses, I had a budget surplus of $800 a month. I could either put all of that towards my debt, or $300 towards my debt and $500 towards paying more rent.

If I put all $800 to my debt, I could pay off that $15,000 in 22 months at a cost of $2,200 in interest. If, however, I put $500 towards paying more rent and only paid $300 a month towards my debt, it would take me 79 months (six and a half years) to pay that debt off and would cost me $8,687 in interest!

Had I been willing to live at home for an additional two years, I probably could’ve gotten debt-free and saved up a modest down payment to buy a home. Instead, about three and a half years since I moved out from home, I’m only now paying off the last of my debts and have paid several thousand more in interest.

What I Learned

Patience pays off!

Being smart with money requires us to consistently delay gratification. When it came to choosing where to live, I didn’t delay at all; I moved out and up as soon as my monthly budget would allow (even though in the grander scheme of things, I really could not afford these moves).

Usually, housing is our single biggest monthly expense. So cutting how much you spend on rent almost always results in bigger savings than you can get by making small tweaks to your budget. So if you’re trying to watch how many lattes you buy but are splurging to rent a luxury penthouse, it might be time to re-think your priorities.

Not everybody can live at home when they’re just starting out, but most of us can choose to spend less on rent by living with a couple of roommates. When you’re young, this can even be more fun than living alone (assuming you choose your housemates carefully!) And if you’re getting out of debt or trying to bolster your savings account, nothing can help you reach your goals faster than a few hundred dollars not spent on housing!

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Do you like this series? Check Out The Previous Foul Ups:

Foul Up #7 – Matt (Debt Free Adventure) – Upside Down and Paying The Price
Foul Up #6 – Brian (MyNextBuck) – Overdue Books Prevent Me From Renting an Apt
Foul Up #5 – Kelly Whalen (The Centsible Life) – Poorly Planned Vehicle Purchase Costs $24,000
Foul Up #4 – Stephanie (Poorer Than You) – Signed My Life Away at Age 17
Foul Up #3 – Deliver Away Debt – How I Wasted Over $10K and 11 Months
Foul Up #2 – Brian (MyNextBuck) – Quick Fixes to Weight Loss
Foul Up #1 – Brian (MyNextBuck) – How I Didn’t Earn $3000 in Free Money

10 Responses to Friday Financial Foul Ups: Being Too Eager to “Move Out and Move Up” Kept Me In Debt and Cost Me Thousands
  1. Financial Samurai
    November 6, 2009 | 5:33 am

    Nice post David! I think it’s absolutely NORMAL for you to want to be independent and live on your own. After all, slumming it with buddies happened for 4 years in college already!

    It’s interesting how you write from your perspective of loving your parents, but not loving to live with them. What about your parents though? Do you think they loved having their grown son still living with them after college? I’m sure some parents do.

    I wonder how it is for folks nowadays. I remember about 10-15 years ago, it was actually dishonorable to live with your parents after college. Have perceptions changed since then?

    Heck, if my parents had a nice Park Avenue townhouse in NYC, I would MOST CERTAINLY try and live for free for the first couple years! I paid $1,000/month to SHARE a studio way back when. :)

    Freedom is pricelss for me now though, and is worth the extra premium to be on my own, the longer you’ve been away from college.

    Best,

    FS

  2. Jeff
    November 6, 2009 | 7:22 am

    I believe the term these days is Boomerang. A Boomerang is a grown kid who leaves home then returns. Also know as a “back-to-the-bedroom-kid” Often this is a temporary situation but in extreme cases the symptoms can linger for many years.

    I think it is somewhat normal for people to move back in with their parents. I did it too for 6 months and took the same path as you. I can relate to EVERYTHING in your post. Great job explaining it.

    The only problem I had was I was continuing to live “la vida loca” and spending my butt off. At least until I moved back out on my own, then reality set in.

    At least you are on your last debt. Awesome! Keep fighting and keep writing…

    Thanks for sharing your FFF
    Jeff

  3. Broke M.B.A.
    November 6, 2009 | 7:24 am

    Great read David. Once again, I’m amazed at how vast the cost of living spread can be depending on which part of the country you live in. $650 for a 10X12 room and a shared bathroom?!? Wow. We’ve been paying $610 for an 850 sq. ft. apartment in a quiet and safe neighborhood for the last couple of years.

    Great advice about how patience pays off!

  4. Brian
    November 6, 2009 | 7:50 am

    I too have thought about this situation. I have not had the opportunity to live at home, but i have been slowly downgrading my living over the past few years. When i moved to DC i was paying upwards of $1550 a month for rent (with a roommate). My next apartment was $1250 (with two roommates).

    Now i pay base rent of $650 with one roommate, in a safe, but far as hell apartment from the city. I have a heck of a commute, but commuting and not having debt is ideal to the reverse.

  5. Angie
    November 6, 2009 | 9:52 am

    My parents were begging me to move back in with them after college. No way. I’d rather have 5 extra years of repayment. My life woul be too miserable. I wouldn’t call this a foul up. It’s you matching your happiness as a priority. I mean. You could have saved a ton of money if all you ate was. Rice for five years too.

  6. J. Money
    November 6, 2009 | 10:38 am

    I would absolutely LOVE to live back w/ my parents rent-free! Just for like a year or something….I salivate at the thought of all that money we’d save. Rough calculations say it would be at *least* $30,000. Damn, how do I go about doing this? haha….I don’t think my wife would bee too happy about it though. Nor our cats.

    Enjoyed reading this! Keep it up Brian & Crew.

  7. Craig
    November 6, 2009 | 10:39 am

    It is tough. I lived at home for a year to save up to move out and now basically living pay check to pay check. I wouldn’t have been able to move out without the savings. So tough to become independent and save for the future and enjoy a half decent living situation when younger.

  8. David @ Money Under 30
    November 6, 2009 | 11:41 am

    Thanks for all the responses so far! Glad you guys enjoyed the article.

    Samurai, I was fortunate in that my parents *loved* having me at home. They’ve had a hard time being empty-nesters, so they probably would’ve let me stay as long as I wanted. Not everybody’s so lucky; I definitely have friends whose parents would charge them hefty rent to live at home again.

    I’m sure most people face this kind of choice between increasing their freedom and privacy and saving some cash, and everybody probably values those things a bit differently. Hopefully my experience can help some people make the best decision for them at some point!

  9. katalog gabel
    August 29, 2014 | 7:55 pm

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