It’s tough being a millennial. Your parents and older relatives don’t respect you, your boss isn’t woke to tank tops and crocs at the office and your dream job as an Instagram star has given way to the reality of 9-to-5 paper pushing.
Your friends — without rich parents — are jamming themselves into cramped apartments with crushing rent and, if they’re getting by at all, are likely saving about $50 a month … forget about the 401(k).
The truth is, despite the wonderful feeling of coming home to your own place, moving back with mom and dad at the beginning of your career could be an incredibly savvy financial decision and have a sweeping effect on your future.
The perks
If they’re are on board, living with your parents means no rent, and a manageable commute to work – it’s really a no-brainer. Even $1,000 a month of rent avoided adds up to $12,000 after a year. If you’re willing to swallow your pride and go for two or three years, the gains go from there.
If you’re smart, too, that money won’t sit static under your mattress, either. Properly invested, you can put reinvested dividends and compound interest back into your portfolio for some very serious return on top of what you’re saving. That’s huge. As I’ve previously written, millennials who get a head start on saving in their 20s can look forward to smoother sailing later in life.
The end goal, of course, is that a few years with mom and dad and some smart investments could put you on track not for the life of a renter, but a homeowner. If you have a pot of savings for the downpayment (and your credit is solid), a monthly mortgage payment might not be much more than what you would shell out in rent.
Think of all the savings
Rent is an ugly thing. You live in a place in which you have no stake. Monthly payments plus utilities and whatever other exotic charges there are eat 20, 30, 40 or perhaps even 50 percent of your monthly paycheck. And at the end of the day, you end up with a very happy landlord but little else to show for all the sacrifice. It’s a guaranteed roof over your head — but the price is steep.
Unlike rent, paying a mortgage is an investment in yourself. With each payment, you grow your equity and take a little more real control over your home. When it’s all done, you have something real in your name. If you’re lucky, it will have appreciated well beyond what you initially paid for it.
None of this is to say there aren’t downsides to moving back in with mom and dad. You will be mocked by your friends, and your dating life will become immeasurably more difficult. The plan also doesn’t work for people whose folks live far away, or who have ideological concerns against “freeloader” children.
But if you can handle all that, you might just close on your own place sooner than you think — and you’ll have the last laugh.
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