"House poor" is a common expression used to describe people who are wasting too much money>1. Shack up with the parents
Young Americans are increasingly aware that shacking up is a moneymaker. A majority are now living with their parents.
This is a massive change from the way things were in 1960, when>2. Rent out your home
You can do this>3. Move to a low-tax or no-tax state
There are 42 states, plus the District of Columbia, with earned income taxes. The states that don't tax salary and wage income are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
If you live directly>4. Downsize
If it's not practical to share or rent out your home, consider downsizing to less costly housing that still suits your needs.
Americans have large homes. In fact, the majority of recently constructed homes have three or more bedrooms. Having lots of rooms when you're raising kids makes sense. But after they've left the nest? That's a prescription for overspending on housing.
Yes, holding on to a house gives you a built-in safety net — a store of value that you can eventually swap for entry into a long-term care facility. But every year you pay too much in imputed rent is a year you've wasted money.
Paying for something you don't need to mitigate a specific future financial risk isn't necessary. There are other ways to deal with long-term care needs. One is to buy long-term care insurance. A second is simply to hold financial assets, including real estate, but indirectly in the form of real estate investment trusts, or REITs.
A third is to arrange for your children to care for you if you need assistance short of skilled nursing. This can be quid pro quo.
For example, you might downsize, then use freed-up equity to provide your children with down payments to buy their own homes. In exchange, you can make it clear that you expect them to take care of you if you need help down the road.
