Kuta Beach

Kuta Beach

Sunday, 11 April 2010

The Stigma of Living with Parents

I was browsing through Yahoo! and stumbled upon something in Yahoo! Answers about a 28-year-old guy who lives with his parents and is annoyed at all the criticism he gets from other people.

The criticism this person gets reminds me of me. I too am a male who lives with my parents and many people criticize me. I remember last week I was talking to a bunch of friends about the Melbourne property market. My friends were all desperate to save up to buy a house. One was renting and the other two were living with their parents as well. Anyway, one of them said, "I plan to live with my parents for about two or three more years so that I can save for a deposit for a home, and then I will buy. Paying rent is a waste because you get no asset at the end. If you get a mortgage you get an asset at the end."

I actually think my friend is wrong because when you rent a house you pay less than if you borrow money to buy a house. If you took an interest-only loan from a bank then the mortgage repayments you make will be approximately equal to rent you would have paid for the house.

I told my friends that I personally do not plan to buy a house because I fear that Melbourne house prices are too expensive. Median house prices in Melbourne are around $500,000 now, so if I get an average house I would need to go into massive debt. The thought of paying off massive debt for the next few decades of my life is not appealing to me. I actually think the best move for me to make is to simply live with my parents and with the money I save I can invest. If I think house prices will continue to go up then I can invest in companies that are likely to profit from rising house prices, e.g. Commonwealth Bank and Stockland.

Even though my friend (let's call him Clive) is actually living with his parents at the moment, he then decided to criticize me. He said, "Oh, so you're just going to leech off your parents! How shameful!"

My response was as follows: "I am not a parasite. Every month I estimate my cost and then pay it to them plus a little extra."

Clive then claimed that I didn't pay enough because I was not paying the "market rate." He believes that if I don't pay the current rental rate, which is about $200 per week, then I am not paying enough. I currently pay around $200 per month, which is about $50 per week. Clive believes that because my parents could get $200 per week from renting out my room to someone else but are instead getting $50 from me, they are making a loss from having me in the house and therefore I am not compensating them enough.

This argument is actually wrong, mainly because Clive did not have enough information. One piece of information Clive didn't know about was that my parents are apprehensive about renting out rooms in their house to strangers (understandably). My brother used to live with the family but now he does not. His bed is empty and my parents have not rented out the room to others. If my parents did rent out my brother's room to others, they could potentially earn $200 per week, but they choose not to, and I think the reason why they choose not to is because it is uncomfortable sharing a family home--a very private and intimate place--with a complete stranger. I have spoken to my parents about moving out and I have told them that if they want me out them I can leave. They have no obligation to keep me if they didn't want to. They encouraged me to live with them for as long as I wanted to, and they cited the monetary benefits of doing so. I also asked my parents if they would rent my room out if I left and they said they would not the reasons I have previously given.

If I leave the family home, my parents get nothing. Their payoff is zero. If I stay in the family home, it is true that I use up electricity, gas, and so forth. However, I transfer cash to my parents every month. If I estimate that my cost in electricity, gas, and so forth is $150 per month then I pay that. Then I pay a little extra, say $20 per month. The net effect is that my living with my parents results in my parents making a profit of $20 per month, which is higher than the zero payoff that they would get if I did not living with them. Hence from cost-benefit analysis it is beneficial for my parents to keep me. My living with my parents benefits not only my parents but also me since I do not pay exhorbitant rental rates nor do I destroy my financial stability by imposing a massive debt burden on my future self. The arrangement is mutually beneficial.

I understand that there is social stigma if a male lives with his parents, but I am willing to face that. The guy at Yahoo! Answers who is in a similar position to me wonders why so many women do not like men who live with their parents. I personally think that a woman has the right to assess a man using whatever criteria she wants. But I think that many of the arguments that many women made on Yahoo! Answers is not quite right. I will address them below.

A female named Laraby9 said the following:
The fact that you don't cook your own food and you don't do your own laundry makes you seem infantile, I don't care how many degrees you have. To most of us, the goal in life is to be independent. When a woman comes across a man who has no desire to be independent or standing on his own two feet, it is a HUGE turnoff, and it makes the man seem weak and unable to cut the umbilical cord. It makes the man seem like he has no interest in being an adult. That is a big turnoff for most girls who are looking for that strong man to help them start and raise a family with. If you are truly proud of the way you are living, then why are you here defending yourself?
I am defending myself on this blog. The issue of living with my parents is one that I have thought about over a long period of time. Am I proud of my decision? The first question to ask is what is pride? Pride is something you feel when you feel that you are important and worthy or respect. This is vague because when I decide to live with my parents I do not aim to respect myself or to make others respect me, nor do I try to somehow try to feel important or make others think that I am important. The decision to live with parents was based on an assessment of cost, benefits, and risks. Writing about my decision on a blog helps me to articulate my thoughts, which allows me to explore it further. Even though I have decided to live with my parents, I cannot be sure that I decision is correct. Based on my analysis so far, living with parents seems to be the best move, but I may be a victim of lack of information or even cognitive biases. By writing about the issue, thinking about it, and talking about it--all with an open mind--I learn about it more, which helps me make better decisions. There is also an altruistic aspect to it as well. By writing about the issue, I inform other people who may be in a similar situation to me. I give them ideas that they can use to make decisions for themselves.

Another argument this female made was that a man who lives with his parents is not independent and therefore cannot survive. His inability to survive is bad because as a female she wants the male to help her survive. If there is one topic that I am passionate about, it is survival. Based on my research, I know that pure independence is difficult, if not impossible for an individual to achieve. To be independent you must live out in the country all by yourself and grow your own food. This is difficult because getting a balanced diet requires you to have Noah's ark on your farm. You'd need to raise cows, chicken, pigs, and fish. You'd need to grow many different types of vegetables and fruits. You'd have to prepare the soil, sow the seeds, water them, and then wait, and you'd have to hope that the weather is good otherwise your food will not grow. It is extremely difficult to be fully independent. That is why humans tend to specialize and trade with others. Instead of trying to grow all kinds of fruits and vegetables in your farm, you can focus on one, say, rice. Then you go to your neighbour and engage in a barter exchange, say, exchange your excess rice for his excess avocados. Through specialization and trade, we make things easier for ourselves. Even if I leave my parents, I will not be fully independent. Even if I cook my own food, I do not grow my own food. I buy basic ingredients from the supermarket. Hence I am dependent on that supermarket. I am dependent on the farmer to grows the basic ingredient. My point is that dependency or interdependency does not necessarily reduce your ability to survive. Rather, interdependency increases your ability to survive by allowing your to exploit the gains of trade to produce greater payoffs for both parties. When you go to work, you are dependent on your employer to pay you a salary and your employer is dependent on you for you services to the organization. There is mutual dependency. My living with my parents is just another form of trade. My parents are dependent on me for my cash (and also my presence, I hope) and I am dependent on them for accomodation. If I were to move out and rent, I would be dependent on the landlord. If I moved out and took out a mortage to buy a house, I would be dependent on the bank for the loan. No matter what I do, I am not fully independent.

Furthermore, the argument here is that a man who lives with his parents cannot survive. This is false, I think. If a man moves out of home and is put into a property market with very high prices, he either pays high rent or goes into immense debt to buy a house. Either way, he loses a lot of money, either in the form of rent or interest. If he loses a lot of money, his ability to be independent and his ability to survive decreases. By living with my parents, I save a lot of money, and the accumulation of saving increases independence.

I will use a numerical example to illustrate my point. Assume that investments produce 5 per cent return. Assume that you only need $5000 per year to cover the cost of food. Assume that by living with parents you are able to save $2000 per month ($24,000 per year). After 4.27 years of living with your parents, you will have $100,000 saved up, which will produce $5000 per year in investment income, which covers your food costs. You are dependent on your parents and your employer for 4.27 years after which you are independent because the most important necessity has been covered. Now assume that rent is $200 per week ($10,400 per year). If you move out, you can save only $13,600 per year rather than $24,000. This means it takes 7.35 years of dependency to your employer for you to be financially independent. Living with your parents allows you to be financially independent faster. Remember that the definition of financial independence is that the cost of necessities is covered by passive investment income.

I know I have gone on about this issue for a long time, but let me also address one more issue. Another friend of mine--let's call him Frank--told me that it is important for me to move out because it is important for me to find a female and start a family. I asked him why this is important and Frank told me that pooling my money with my partner's money means that I need a smaller deposit to buy a house. He also claims that living with a partner allows you to gain economies of scale e.g. with air conditioning bills. That is, per person the power bills are lower if two people live together than if one person lived alone. But just because there can be economies of scale if one person decides to live with two people, it doesn't mean I should leave my parents' house. In fact, living with parents gives even greater economies of scale because even more people live in the same house. The idea that moving out and getting a partner is important because it makes it easier to buy real estate seems to assume that buying real estate is something you must do. It is not. If Frank's argument is that real estate is a necessity because you need shelter from the cold, then living with your parents fixes that problem. If Frank's argument is that real estate is a good investment and you should get into it quickly by investing jointly with a partner, then a better idea is to invest through a property syndicate. Many property development companies have property syndicates that allow you to pool money with other investors to invest in real estate. Better yet, why not just invest in a mutual fund, which also pools money but to a massive extent?

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