Let's face it. The biggest cost that most of us have is "shelter".
Whether we rent or own, shelter eats up more of our income than any other single expenditure. Yet, if you compare living conditions in the US with almost any other nation, Americans are on average spoiled with space.
This of course offers an opportunity to possibly save some money, but it does require trade-offs, and these trade-offs are in general not considered socially desirable.
In tough times though, sometimes we need to fundamentally change our way of looking at things.
Living space per person varies widely across the planet. In Switzerland it is 474 sq.ft./person, in India...
55% of the country's urban population live, sleep, cook and wash in a space no bigger 5.5 sq m (59 sq.ft.). The comparable figure for the average American is 83.6 sq m (900 sq. ft.) per person .
At the moment our family is at 450 sq.ft/person, which is the most that we have ever had. It is only this high as both my spouse and I work from home.
When I first met my future spouse I was living in Asia. In Asia most people have far less living space per person than in the US (especially in urban areas), and it did take some getting used to, but it also provided an opportunity for us to really save some money.
We rented a 4 bedroom, 2 bathroom, apartment and rented out three of the rooms to one other married couple and to 2 singles. In total we had 6 people living in the apartment. We continued to do this for 3 years, even after we were married.
By renting out rooms we were able to keep our rental cost to a minimum, an amount far less than if we had rented just a one bedroom apartment. Our "tenants" also cut their rental costs. In fact one couple that we rented to for a while even had a child (the child live with its grandparents about 2 hours away). The couple only saw the child on weekends, but felt that with both of them working in the city, the only way they would be able to save, and provide for their child was to use this arrangement.
Over at the Daily Reckoning there is an interesting article ("The benefit from being a Baby-Boomer")talking about how it is possible to reduce living costs in retirement by sharing living space with other retirees. It is an interesting read
You get together with your friends. You say: "We're all retired now. I've got a big empty house. You do too I suppose. Maybe we can think of living together. That would help reduce our living expenses. Plus, it might be fun, and it would be a good way to keep an eye on each other. That can be important when you're getting older."
Everyone is repulsed at first, because we Americans are all taught that we have to live as far away from each other as possible. But, they remember that, when they were in college, they used to share houses, and it was kind of fun. Also, everyone is older now and a lot better behaved than when they were in college. And, it is true that it might be good to have someone keeping an eye on you.
So, everyone decides to move into one house, owned by the Owner. The people who move in, two other retired couples, are the Renters. The Renters pay the Owner $800 a month to rent a bedroom, and agree to pay 1/3 of the utility and heating bills.
...and concludes
So, now, instead of paying out $18,000 a year in housing expenses, you're living for free, with your friends, with a live-in housekeeper, with some extra cashflow on top of that, and a lot of your food costs are covered as well. What is there to be worried about? Pass the 401(k) on to your kids. Don't worry about the corporate pension. Consider the Social Security check to be your entertainment budget. If there's inflation, just raise your rents.
The obstacle of course is "privacy".
In North America we have been willing to pay a substantial premium to live on our own. But tough times require using all of our resources, and one of the resources many of us have is "extra" living space. Turning that space into some extra income is one way to stretch our buying power. It has even become a topic around our dinner table (as we could rent out a room to a student to bring in some extra cash). It is obviously not going to be the first choice for many people, but it can actually be more profitable than a lot of the other scrimping and saving that we would otherwise do.
Thoughts anyone?