Less House More Resilience ... (00:45)
Welcome to Less House More Resilience podcast. As I said last week, it is going to take more than Mula for us to be resilient. You know the stories, the ones that maybe your great grandparents or your grandparents or your parents talked about, about the time when things were really difficult and they relied on their neighbors and their community.
for sure this idea that just having enough money will make you okay is kind of a modern phenomenon. So we're going to be continuing to talk about this idea of building multi-dimensional resilience or resilient wealth. This is coming directly out of a worksheet that I've got available for you on my website. I'll put that link in the show notes and mention it here at the end.
But there's a lot of different aspects of our life that can make us resilient. And so I want to be focusing on them one at a time. And today I want to talk about our living environment or home. This of course, being the basis for all of my work here on this podcast and helping ⁓ people build financial plans around tiny and alternative living. ⁓
Let's start with our home base and think about our living environment and how it allows us to be resilient and build resilient wealth.
I think it's fair to say that we have mostly been shown a one dimensional view of our home or living environment in terms of the wealth that it creates for us. That would be the word home equity, which I've talked about on this podcast before. But I believe that our home environment ⁓ is definitely a foundational piece of our resilience and not just from a financial freedom standpoint.
Obviously I've talked a lot about financial freedom through tiny living or alternative living on this podcast, but there's other ways that our living environment makes us more wealthy and it's not just on paper.
Though of course having less or no housing debt definitely allows us to be far more flexible, to focus our human capital, which is our time, our attention, our energy, onto things that we think are more important. Having less house allows us to focus on other aspects of our life. And having less or no debt usually makes us less subject to the change risks that we're facing in the world today.
So we'll definitely be talking about debt mitigation in another episode. Having just enough house also frees us up to be more focused on building wealth and resilience in other areas of our life. The reduced responsibility, the less time that it takes to maintain our house and the less amount of our money making work that we do when we're paying for a smaller roof, it gives us
more time to focus on other aspects of building resilience. But for new listeners who haven't heard all of this before, let's rehash the cost burden of the American dream just to set the stage because I think it's important for us to realize how much the cost of our house may be impacting our resilience.
So we're going to go through some median numbers here. This is going to be a little nerdy. We're going to exit the numbers coming up. So stick with me on the numbers, but we're going to talk about median numbers. Median numbers are if you have a full range of numbers, the median is going to be the middle one in the midpoint. I use this rather than averages because personal income, sizes of homes, they range
you know, wildly and especially when you get up into the wealthier or bigger homes, we're talking about really extremes. So I wanted to look at median.
So let's just think about median income. So individual, personal, individual, one person's income median in 2024 for annual income, $45,140. So the average or median person making a full year's worth of salary or hourly for work is making $45,140.
And let's talk about two scenarios. One, people who bought their house in what we call the before times. That would be before housing prices got really crazy through the pandemic. And think about the overall cost of a home purchased in 2019 and paid for by that median income. So median home price in 2019. So pre pandemic high prices.
before recent interest rate increases. median price of a home in 2019 was $327,000. The median interest rate in 2019 was 3.7%. So kind of a far distance both on price and interest rate from where we are today. So if you were lucky enough to buy a home say in 2019 and you put
of the total price down your loan amount was $261,000. If you have that in a mortgage and we assume that we're paying PMI, primary mortgage insurance, taxes and insurance, monthly payment amount according to mortgagecalculator.org is $1,579 a month. So to pay for that house purchased in 2019 at that median price in 2019 at that median rate in 2019.
For a year, you're going to spend $18,949 on mortgage, principal interest, taxes, insurance, PMI, not utilities, just the cost of the house
Median rents. So renting instead of buying back in 2019, average was about $1,300, according to realtor.com. So
Annual housing costs back in 2019, of course, when you buy a mortgage, you're lucky enough that that amount, if you have a fixed rate mortgage, continues forward. So if you bought that house in 2019, today you're still spending $18,949 a year as a percentage of the median income. So if you're making $45,140 and you're spending $18,000 of that on your housing,
That's about 42 % of income. 42 % of income spent on that house that was purchased in the before times back in 2019.
Now for the sake of comparison, let's take a look at buying a house in 2026. So the most recent data that we have, of course, is that same income of 45,140. This is St. Louis fed data, by the way. Most recent data on a median home price today, $410,800. So definitely has gone up since 2019.
Median interest rate, most recent 6.09 % as I was preparing this outline for this podcast. So 6.09 % interest. So if we put that into mortgagecalculator.org, which is the mortgage calculator that I always use because it doesn't have a lot of ads or pop-ups trying to get me to buy a mortgage. And we look at the same assumptions around taxes and insurance and PMI. We have a monthly payment.
of buying a house in 2026 of $2,364 a month.
That's $28,373 a year. Median rents, just to throw that in there too, for 2025 according to realtor.com were $1,696. So up from $1,300 back in 2019. So if you were to buy a house in 2026 based on median price and median rate,
and median income, your annual housing cost of $28,373 as a percentage of median income of $45,140 is 63%. So if you've ever been through a mortgage process, you will know that you cannot buy a house if it's going to cost you 63%. This is where debt to income ratio comes in.
How much debt payments are you making as a percentage of your income? In this case, 63 % is higher than what a mortgage lender will allow. So therefore, if two people come together to buy that house and they both are having median income, we're going to have total household income of $90,280. And if they buy that median house at that median rate, we're at 31%.
of income 30 % in rough numbers of total household income spent on the house. So what is the point of going through these numbers that we've probably talked about before? ⁓ And how does this tie into resilience? So as I'm sure that you are feeling just like I'm feeling we are in times of extreme uncertainty.
I remember when I first learned the Justin Trudeau quote, "The pace of change has never been this fast, yet it will never be this slow again." quote was Justin Trudeau said that back in 2018. Since then, a lot has continued to unfold. So maybe in 2018 or 2019, it made sense to spend $327,000.
on the median house and devote over 40 % of one's income because you felt fairly secure in the world, but things are definitely changing. Housing has become completely out of reach for the individual making $45,000 a year. And even when you put two of those people together making those median incomes, then their incomes are really stretched to buy a house today.
And what happens if one of those folks loses their job or their job is cut back due to AI functioning? Or what if one of them has a medical crisis? Or what if one of them wants to launch a business or has to take time away to care for a loved one or a child? That's like a lot of us have those situations that play out.
If you look at a variety of data sources from, numbers of last year, 1.1 million people were laid off in 2025. Our total labor force is about 170 million people. So for there was one in every 170 people that were laid off last year, now maybe they all landed on their feet or some portion landed on their feet. But nonetheless, that may have created a gap in income.
And unfortunately, the mortgages don't give you a gap when you lose your job. some of those other situations that I mentioned, 37 million people in 2023 provided unpaid elder care. So we have an aging population, a lot of us are being called upon to support elder family members.
that can generally, you know, start out maybe as less demand and grows over time, but that can impact a person's ability to work as many hours as they were able to in the past.
There are over one million small businesses started roughly each year in the United States. The numbers vary a lot from year to year on that, but a lot of people start businesses, a lot of businesses fail, and there's a net number that comes out and makes it through their first year. But that's a lot of people that take a risk to start a job.
The changes that we see today that we didn't necessarily foresee or have a full grasp of back in 2019 include job loss due to AI, more shortages of caregivers for elders due to deportations and just people not being in the caregiving career it paying really badly. We have sharply higher housing costs. We have higher costs of living overall. We have increased
costs and risks associated with climate change and we definitely have increased polarization, violence and governmental breakdown that's kind of global but definitely going on in the United States. So all of these things present uncertainties and a lot of change and so one of the things that I really want to be talking about
in this podcast going forward is about how we make ourselves resilient and adaptable to the changes that we don't necessarily have any control over.
The thing with these risks that I just mentioned are that they're all, being felt very strongly right now and each one of them ties into the others. So it kind of makes things even more complex when you put different risks together. So how do we incrementally start working on becoming adaptable and practicing resilience in advance or one or more of these
threats leaving us in a bad spot. These are the questions that I started asking myself when I woke up in my $4,000 a month housing costs back in 2020. I was experiencing a crisis. We were all experiencing a crisis. And I wanted to know, why is it that I'm locked into this really expensive housing cost when it makes me feel so fragile? I feel so stuck.
I feel so vulnerable to the change that's going on around me that I have no control over. That's when I started to think about what are the other options out there. so this is how my exit from the American dream from the high housing costs really got started.
So as we start to work towards resilience, I wanted to start with the biggest ask first, the house and its associated
there are certainly folks who are living in a home debt free or already have transitioned to tiny. Either way, do you have a full understanding of the cost of your home and what percentage of the income that you have coming in it takes to stay in your home?
A lot of folks that are called homeowners will tell you that they own their home. But if you actually look underneath the hood, you'll realize that when you have a mortgage, you don't own your home. The lender owns your home. And if you don't continue to pay the lender on a regular basis for that mortgage payment that that home can be taken away. So
I think it's important to understand like what is that cost? How much income does it take? What is the percentage of income? If somebody in our household lost their job, would we be able to still make sure that we make that payment? What other things would get dropped if we had to make that payment on less income? ⁓ How much other debt may be complicating things, consumer debt?
How much do we spend otherwise? These are all parts of understanding your numbers that can be really an important first step for building resilience. So knowing exactly where you stand financially and what the possibilities are and how you would take care of yourself financially is important.
So what would happen to your home if you weren't able to make the rent or mortgage payment? Would your spouse or partner have enough income? Could you borrow from your family or friends? Could you rent out your home and stay with a family or friend until you were able to make that payment? Are you able to drum up another income stream quickly? These are what ifs that we need to be talking about right now.
We need to be thinking about these things right now because facing risks is a reality in our lives today. And we as humans have
one of which is called the status quo bias. We think that things that are as they are right now will continue as they are. But to be resilient, we need to move through the emotions of fear and uncertainty that
come over us when we think about what could happen and be prepared with some options and ideas.
It's important to think about these things in advance because the moment you cannot make your house payment, there are likely other more pressing things going on. So figuring out the money might be the last thing that you're thinking about in the middle of a natural disaster where your job is shut down or a medical crisis where you're worried about, getting appointments scheduled for scans or what have you like figuring out
and having conversations now about what if something goes wrong, how will I make this house payment is really important.
One of the most important things that we can do that every financial planner will recommend is to have a emergency savings for covering housing costs. ⁓ Covering housing costs and other costs of living pieces is really important. A good rule of thumb is three to six months in our current economic environment. Probably the more the better.
So starting working on that if you haven't already is a really important way to make sure that you are taking care of yourself and the fact that we all need a roof over our head.
So now that we have explored the cost of our home and how we make sure that we're prepared to have that cost covered in the event of some sort of unexpected crisis, I think it's important to also understand our home as a source of value that is beyond just the dollars.
our homes as structures. They are full of mechanical technologies. They are containers for ourselves and our stuff and our dogs. And they are containers for some natural resources. And so all of these things are more valuable to us than just the number that we see on our Zillow Zestimate.
Our home can help us actually take care of some basic needs like food, water, and air. Our roofs shed precious water that can be used for food growing or can be used to back up our well or utility water supply. This is redundancy. Redundancy is how we make sure that we're going to be okay if something happens to our water supply.
And so thinking about our roof as a source of water can be one way that we can add some redundancy of something that is literally critical to our ability to keep going. Water is really important for us. are 80 % water as I think you know.
The aspect or position on a piece of land, whether that's in a condo or an apartment or a house, and the vegetation that's around our home or living environment can actually benefit our need for heat and cooling and clean air. I'm sure that we all know that the plants in our homes create clean air for us to breathe and that the shade that trees can create
reduces our need for cooling. In times where we hear about major heat waves or major winter storms, these are situations where those extreme temperatures can threaten life. And so if we have good solar windows that are capturing sun's heat, if we lose heat, we may be in a better spot than someone who's completely shaded in.
And likewise, if we were to lose power and our air conditioning, having good access to shade trees can keep us alive. So these are really important functions of our home's built environment too.
Lastly, the waste that comes from our homes can be used to build soil. This is composting, right? All of the organic scraps that we have that come out of our home can be used to build the soil that we desperately need as we are in a topsoil shortage in this country and we have a looming potential crisis for where we get our food.
These are all important parts of our home and byproducts of having a home that can create a lot more resilience for ourselves if we think about how we can make the best use of everything that is going on in our home. So our shelter is more than just shelter. So let's expand a little bit further and take our living environment, our home and think about it.
in some other areas of resilience because we will be talking about each one of these topics in more detail. But I think the home or living environment is a really great basis for a lot of other things.
So one of the things that is really important for resilience is human relationship. And if you're like me, you may have taken the cultural message around valuing independence a little bit too far and learned a distinct distrust of others. But now is really the time for us to question our mindset around how we need others to survive.
and we need networks and communities of people that we can rely on in times of difficulty. And our homes, our living environment is the place to build these networks. Because when we have a natural disaster or a flu or a supply shortage, we are not as likely to be able to rely upon people that are further away from us. We really need to be developing relationships with the humans that are closest.
and nearest by. So how can we start meeting our neighborhood humans and building trust with them now? Maybe we can share a meal, we can offer a tool or a skill or an item that has come up is maybe something that they're looking for. We have this human tendency towards reciprocity. It's another one of those built in things that we may not pay that much attention to.
But when we get that chain of giving started, we are likely to have someone ready when we need something in the future by sharing or giving or extending to others, we are building in a possibility that they will do the same for us in the future. So we'll be talking more about this in a community episode.
But since we are at home and thinking about home, this is really the basis for where we can create those relationships, especially the ones that we have probably ignored in the past.
So within our living environment, our container for ourselves and our stuff, there are small things that we can do to be building resilience within our homes now.
If we live in areas with a tendency for fire or flood or human caused disruptions, we can use this container of our living space as a supply backup. There is nothing weird about bulking up our pantry or making sure that we have an extra drinking water supply separate from the tap. This is the most simple way to look out for ourselves in a very
real world where things happen. This is what we did while we were in Florida, We had preparations for power outages because of hurricanes. had extra supplies on hand. This is something everyone should be doing now. They should be working on building up some extra supplies around them, especially food and water in case something happens in their area.
Another area that we will talk about resilience in is skills and talents. There's obviously a major shift going on in the labor market right now. And our home is a base from which we can start exploring other things we might be good at besides going to work and making the paycheck It's time to work on our ability to grow things. And maybe it's time to start thinking about other
skills, handy skills that might be useful in a world of AI disruption. So our homes are a laboratory to see if we can expand our capabilities into the skills that we have lost in prior generations. Our grandparents or great grandparents knew how to do a lot more things than we do. And so now is the time for us to start refreshing our memory on how to take care of ourselves.
in a way besides just putting a paycheck in the bank and going to the grocery store to buy all of our food.
we will be talking about mental and physical health as a source of wealth. This is especially important because we have nothing else if we do not have our health. And so our living environment is our basis from where we can work the hardest on these things. Sure, there's a gym we can stop at on the way to work, but really when it comes to good habits of sleep and mental health practices,
feelings of connection that are tied to our health. This is at home. This is where we create these things. This is where we learn how to balance ourselves, how to be resilient in times of extreme change. This is where we work the hardest on our nutrition. This is where we work the hardest on our exercise and, and sedentary habits. Home is where we create our health.
And so this is a really another important aspect of our home that we have to remember that home ties into our health, both mental and physical.
So if you have been meaning to institute a digital blackout hours schedule for yourself or wanting to do better with processed foods or water intake or taking more walks or grounding, whatever that is, home is where we have to do it. It is the place where we can establish the best habits. Now is the time
to start thinking about our health too and how that without our health, we can't be resilient in other areas of our life. We're going to be less adaptable to change. We're going to be less prepared for crisis. So this is really important to work on our health.
I'm sure that there are other ways that you can think of that our living environment or our home is a key to our resilience. Feel free to share those ideas with me. You can click the text Laura button in your podcast player, or you could copy and paste my email address from my website, thetinyhouseadviser.com
Please stay tuned because we're going to continue to explore this resilience concept and all of the nine dimensions of resilience. In time for all the changes that are coming to us, we're going to talk about debt mitigation, relationships, community, self sufficiency, skills, talents. If you want to start exploring this concept yourself, you can get the free worksheet at the thetinyhouseadviser.com/resilientwealth
