Humans are an irrational species.
We overvalue certain things, and undervalue other things. One of the things we overvalue the most is safety, and this has allowed a whole industry to exist, insurance. These days, the are 14.2 million different kinds of insurance, and I’m not even exaggerating for (weak) comedic effect like I normally do. You can literally insure anything. Jennifer Lopez has apparently insured her ass. I’m not exactly sure what would have to happen to trigger a payout on that one. What if a violent Rottweiler took a bite out of her ass? Does that count? How about if she gets a bad case of hemorrhoids? You don’t want to know how much time I just spent thinking about this.
At least in this author’s opinion, many people are overinsured. I see people in their 20s without dependents who have life insurance, because they’re under some sort of delusion that someone might actually care if they kick it. The insurance industry often perpetuates this myth, by overstating the looming threat of people becoming uninsurable at some point later in life, even though that risk is pretty low.
Emergency funds are another form of insurance that we’ve discussed the uselessness of a million times. Still, it’s always amusing when I see someone with 60% of their net worth earning 1.2% in a savings account. That’s the financial equivalent of switching from regular mayonnaise to the light stuff on your bacon double cheeseburger. Also, mayo kinda resembles semen, and only porn stars like that.
When it comes to buying a house, many people buy more house than what they need. There are many reasons, like they overestimate the amount of crap they’ll need to cram into the place, they feel the need to have both a living room and a family room, (after all, we need rooms to put our TVs) and the one we’re going to spend a little time talking about, the extra bedroom cost.
Having an extra bedroom is important, see, because all of our friends and parents and other relatives and drinking buddies and random hobos off the street are going to come over and spend the night. And even though most of those people will end up masturbating ALL THE HELL OVER your spare bed, you insist on being nice and inviting them to stay over. It’s just yet another reason why being nice is for suckers.
Ultimately, having a spare bedroom is just a different kind of insurance. Having too much space is okay, because you can always pack it away and crack it out on special occasions, like your girl’s special lingerie. Where if you don’t have enough space, your guests are resigned to the couch or the floor, the places homeless people sleep. And so we have a culture of houses filled with extra bedrooms just in case somebody comes over.
In my neck of the woods, you’re looking at approximately $200 per square foot for a new house. This is pretty expensive, but just about all of Canada’s major cities cost about this much, so let’s go with it. A decent sized spare bedroom is about 10 feet by 10 feet, let’s call it 10% of a typical house. So first of all, you’re looking at an extra $20k just to build the thing.
If you finance your house over 25 years at just 4% interest, that $20k extra turns into more than $31k extra over the life of the mortgage. You’re probably not using much more electricity because it’ll sit empty most of the time, but you’re still probably spending $20 extra a month in heat and extra property taxes. And let’s add an extra thousand bucks to furnish the thing, since that spare bed your aunt offered you for free is filled with bedbugs and unidentifiable stains. Those add up to $7k over the life of the mortgage, bringing the extra bedroom cost to $38k, or more than $3k per year.
Assuming you stick your guests into a nice hotel that sets you back $150/night, you could pay for your guests to stay 20 nights a year for less than what it would cost you to have an extra bedroom. Do you really have people using your spare room 20 nights a year? Oh, and you get the bonus of sending your in-laws the hell away for the night, so you’ve got a little privacy… to complain about the in-laws.
What? You expected something else there? PREVERTS.
Collectively, we have houses that are way bigger than we need. We all know half a dozen empty nesters who are too lazy to move from their 5 bedroom 3 bath houses even though their kids are pushing 40 now. This will probably change as Baby Boomers realize they have to sell their places or face a retirement eating cat food, but there are a lot of people who are paying for hundreds of square feet they don’t even use.
This is fine if you can afford it, but most middle income families in Canada really can’t, especially in big cities where an average house will set you back more than half a mil. I can’t find the numbers for Canada, but the average American house is more than 2100 square feet, or more than 800 square feet per person. Even if you’re one of those 600 lb people who are on TLC, I’m pretty sure you could exist with a little less than 800 square feet. Apparently Hitler was onto something with that Lebensraum stuff. FINALLY A WORLD WAR 2 JOKE ON FINANCIAL UPROAR.
Cutting down your living space is a pain in the ass, so I understand if you don’t jump off the couch and immediately start calling a moving van. Still, maybe take a realistic look at how much space you actually need the next time you move, and realize the high extra bedroom cost. It’s a pretty easy way to save money.