Keeping Up With The Bulls

A personal finance blog focused on making more money, saving money and smart spending.

Can You Really Afford That House? It Depends

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Just when you think housing can’t get more expensive buying a home literally goes parabolic. In Denver, 65% of homes are selling for over asking price at an average of over $30,000 but many are going for even more. There are countless stories of people bidding over asking and still not coming in the highest. It’s gotten so crazy recently you may wonder how do people afford houses. You want to own a home but now you don’t know if you can afford to buy a home. How do you know if you can afford that house or not? Is renting now cheaper than buying a house? Here are a few things to consider when figuring out how much house can you afford. Know the rule of thumb for home spending but also how much should you expect to pay to maintain that home every year? How much does it cost to furnish a house? How will this home impact your other spending?

Rule of Thumb for How Much To Spend on A Home

A rule of thumb is that housing costs should be no more than 30% of your gross income (pre-tax income). What does housing costs actually encompass though? It includes your mortgage, taxes, bills like electricity, water and wifi and any repairs you may have to make. Make sure you factor in these other expenses when looking at properties. It’s easy to look at just the mortgage and tax payment and forget about the monthly and ongoing expenses.

Understand The True Cost of Home Ownership Per Year

How much does it really cost to maintain a house every year? Million Acres suggests a few different ways to estimate this. One rule of thumb is to estimate between 1% and 4% per year of the original purchase price. Another rule of thumb is to estimate $1 per square foot per year for general wear and tear and upkeep.

On top of this, you’ll encounter major repairs at some point during home ownership. This can include replacing major appliances like water heaters, renovations, adding onto the house such as a patio, deck or addition. When buying a home know how many major repairs are likely in the next 3-5 years. Ask how old the appliances are and know the average lifetime of those appliances. Don’t waive the home inspection so that you know if there are major home repairs required. If you’ll want to renovate all or part of the house factor that into your budget.

Understand What Else You Need to Buy For Your New House

You’ve bought the house, now you need to furnish it. If you’re moving from another house, the initial set up fees will be way less. When I first moved into my condo it was my first time living by myself. I had all these ideas on small improvements like painting, curtains and decoration ideas. When I went to Home Depot I was shocked that it would cost over $1,000 just for basic blinds for windows for just one room. I couldn’t believe it, I thought these costs were only to be seen for high end custom work! The bigger the house, the larger this bill will be even for the basics.

Luckily, there are a lot of financial tips to save money on furniture, decorations and other household items.

How Your New Home Will Impact Your Other Spending

When buying a house, it’s easy to only look at how much you were approved for your mortgage and the amount you’ll be paying for your mortgage and taxes every month. But, it’s not good to look at housing costs in a silo.

Where your home is located impacts your other spending. Say you’re moving from the city to the suburbs. In addition to the house you may now need to buy one, or two cars. With the cars comes insurance, gas, car maintenance, car taxes and other various fees. Do you have kids? What school district is the house located in? Will your kids go to public school or will you need to send them to private school? How much is childcare?

Of course, where you buy can impact smaller expenses like how much it costs to eat out and groceries. But, the big expenses like another car and childcare / school can make a huge difference in your financial situation. The difference between children attending public school and needing to pay for private school can run you tens of thousands of dollars a year. And, sometimes real estate taxes can vary wildly town to town, even for towns next to each other. It’s important to know what these expenses will be before you buy the house. It may result in a smaller budget for the house or even finding a different area to buy in.

Renting vs Buying a Home – Which is Better?

Ok, the above is costly but isn’t it cheaper than renting? It’s hard to put a blanket statement on which is better renting vs buying because so many factors can ultimately change that answer for individuals. It depends on where you buy, what the market is like in that location, housing appreciation / depreciation, how long you’ll stay, how much money you need to put into the house and more. Instead of guessing or making an assumption based on what you hear from someone use this data. Nerdwallet has a good renting vs buying calculator that enables you to enter in a few data points and it’ll spit out the answer whether renting or buying will be better for you.

Can I Afford A Home Calculator

Once you know if it’s cheaper to rent or buy, determine how much house can you afford. Nerdwallet has a good how much house can I afford calculator. Remember these calculators are based on the rule of thumb for how much to spend on housing. The calculator includes the mortgage, taxes, HOA and insurance. You personally need to figure out how much you’ll spend per year on home maintenance, renovations, furnishing the house and how it increases (or decreases) any other expenses. Those expenses are usually not included in these online calculators but are very important expenses to take into consideration.

Know Your Financial Goals And How A House Impacts Them

Yes, the rule of thumb for housing costs is that you should spend no more than 30% of your gross income. But, what if you only spend 20% of your gross income? How does that change what you can afford to save or what other things you can buy? Because housing is such a big expense, spending less than you can afford here can make a huge impact to how much you can save, the vacations you can afford and more. It will go much farther than skipping a $5 latte or clipping coupons for groceries. This difference can easily add up to thousands of dollars more a month in your pocket.

Additionally, spending less on housing enables you to be more flexible with major income changes. When income changes unexpectedly, or when you’re considering a career shift / retirement it’s very easy to cut back on discretionary expenses if needed. It is much harder to cut back on housing expenses. You’re pretty much limited to looking at holding off housing projects, trying to cut utility costs, and refinance if interest rates are better.

On the other hand, if you don’t travel, don’t spend much on hobbies a nicer house may align exactly to your goals. You’re going to spend most of your time at your house and want to enjoy that time.

What factors did you consider for whether or not you could afford your house when house shopping?

12 Simple Ways to Save Money During Coronavirus

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No one prepared for a global pandemic and significant disruption to daily life, personal finances and businesses whether you have an emergency fund or not. More than 16 million Americans have lost their job in the past 3 weeks. Regardless if you’re in this situation or not, it’s important to save money during coronavirus and create an extra cushion just in case.

The most important thing to getting back on track financially is to generate income. This can be done through your career, a side hustle or passively. However, if your current income has been disrupted it will take more time to develop a new plan of action. In the meantime, an immediate action you can take is to cut expenses. Start with cutting your largest expenses to make the biggest difference and work your way down to cutting back on the smallest expenses. Here are 12 simple ways to save money during coronavirus.

Create a Budget or Financial Baseline

Before you start cutting expenses to save money during coronavirus it’s helpful to know first where you are spending money today. How much money are you spending on housing, transportation, bills, food and other items? This is helpful whenever you’re looking to start saving money, but even more important now with all this uncertainty. Even if you don’t know exactly how much you’re spending in each category a ballpark number or a range will help you prioritize where you should look first to cut expenses. Then, start looking at simple ways to save money on household expenses. Household expenses are usually your largest expenses and provide the most opportunity to save money.

Reduce or Delay Mortgage Payments

The CARES Act recently put in place two protections for homeowners with federally backed mortgages. The first is a foreclosure moratorium and the second is a right to forbearance for homeowners who are experiencing a financial hardship due to the virus emergency. The Consumer Finance Protection Board shares more information along with helpful resources on what you need to know, which options you qualify for, how to get mortgage relieve and more.

Reduce or Delay Rent Payments

The CARES Act included a little bit of protection for renters. For renters that are renting from an owner who has a federally backed mortgage there is a suspension or moratorium on evictions and you can’t be evicted for non payment of rent for 120 days beginning March 27,2020. In addition, many states have suspended all evictions and foreclosures due to the pandemic. For more information, go to the Consumer Finance Protection Bureau. You are also always able to call your landlord and see what options there are for flexibility. Having a conversation with your landlord instead of assuming you’re out of luck is always best.

Creative Ways To Save Money on Rent

There are creative ways to save money on rent in the short term if your landlord is willing to negotiate. For example, can you pay less rent now and make up the payments later? Pay less rent now and extend your lease? Help with maintenance like painting or yard work in exchange for lower rent? Are there construction projects the owner wants to do in exchange for lower rent?

One time I was renting and our landlord wanted to expand a half bathroom to include a shower. This would have been a significant living disruption for two months. As a result our landlord offered us a rent reduction. Our landlord wanted to do this because once our lease was up he’d be able to charge a lot more for rent. We ultimately declined the offer. In times like these there are situations where both you and your landlord can come out winning.

Come armed with data to the conversation with your landlord, especially if your lease is ending soon. Know current market rates and how much your landlord would be able to get if they listed it now or in a few months. If your lease is ending soon negotiate a better rent. Ask if you can go month to month so that you have flexibility to move if you need to.

Reduce or Delay Student Loan Payments

The CARES Act passed in the United States included a provision to help student loan borrowers. All federal loans are temporarily suspended retroactive to March 13th and interest will not accrue through September 30th. Most federal loans qualify but not all so make sure to check the details before making any assumptions. For loans that do qualify, this should happen automatically but make sure to continue checking your statements. If you can afford to continue making your federal student loan payments during this time consider doing so. All payments will go towards paying the principle and you’ll be able to pay down your balance faster.

Even if your debt payments aren’t covered in the stimulus bill that doesn’t mean you don’t have flexibility. You always have the option to call your servicer and understand what options you have.

Reduce Transportation Expenses

Data shows Americans spend roughly 13% of their income on transportation. When you’re looking at options for cutting your expenses, transportation is one of the top household expenses to make an impact.

Negotiate or Reduce Car Payments

Don’t forget, it’s always better for both you and the lender to work together. It’s more expensive for your lender to repossess your car. Even though the CARES Act didn’t provide specific relief around car payments you still have options. To see what options are available to you, you must call your lender. The Consumer Financial Protection Bureau recommends asking to change the date your payment is due, request a payment plan or ask for a payment extension / deferral. Here is their advice on how to handle these conversations with your auto loan servicer.

Reduce Auto Insurance Payments

If you’re in a shelter in place area and are driving way less you have an opportunity to save money on car insurance. Don’t hesitate to contact your car insurance company and negotiate. Several car insurance companies such as Progressive and Allstate have already announced they will be offering partial refunds to customers. While this is a great proactive step, you may be able to negotiate more if you’ll be driving less for longer than they’ve assumed.

Trip of a Lifestyle called their auto insurance to let them know they were driving way less due to social distancing. Their provider ended up giving them an immediate partial refund on their current 6-month billing cycle, in addition to the automatic discount they are giving everyone next billing cycle. It only took them 7 minutes and was well worth it!

Reduce Spending on Gas

Since you’re likely driving less you should automatically be spending less on gas right now. In addition, oil prices have drastically reduced due to a combination of oversupply and reduced demand. Even when areas start opening up again expect to pay less at the pump. Do your best to estimate how much you were previously spending on gas per month and how much you expect to pay a month in the next few months.

Reduce Spending on Ride Shares and Public Transportation

With only essential businesses open in many places and many businesses moving to work from home the amount you spend on ride shares and public transportation should automatically be reduced. As areas begin reopening, continue to look for ways to keep this expense at a minimum. For example, now that you’ve shown you can be productive working from home, can you continue to work from home a few days a week?

If you aren’t commuting and normally have a monthly ride share pass or monthly train card don’t forget to cancel or pause it.

Reduce Spending On Food and Alcohol

Instead of ordering takeout cook as much as you can. It’s harder to use coupons and sales to get good deals on food right now but it is still cheaper to cook yourself than ordering takeout. There are plenty of tips for beginner cooks to help you get started. If you’re used to cooking but aren’t sure what to make here are meal ideas for breakfast, ideas for what to cook for dinner and recipes with few ingredients.

To reduce your food spend even further, consider buying less alcohol and planning out all of your meals so you waste as little food as possible. Food costs are rising at grocery stores but by planning as much as you can you can mitigate the amount these costs rise. Not sure how much you were spending on food in the first place? If you don’t document where you spend your money look at your last few credit card statements or think back to where you have spent money the past month on food and restaurants. This will help you develop a baseline.

Reduce Additional Household Expenses

Staying at home full time may actually increase some of your household expenses such as electricity, gas and water. When you look at your total household spending it’s important to take these potential increases into account. To make up for these increases can you cut your expenses anywhere else?

Reduce Internet and Cable Bills

A simple way to save money during coronavirus is to make a quick call or email to your internet and cable provider. Call and see if there are better deals on your internet and cable package. If you can’t negotiate the amount you spend, can you negotiate a better internet speed or cable package for the price you’re paying today? With no sports on, can you move down your cable subscription or even cancel it entirely? Many of the streaming services offer a week or month free if you’re not a current customer. You can take advantage of these one at at time.

If you already have streaming services and taking advantage of the free month isn’t an option look at how much cable, internet and streaming services cost you today. Cutting the cord may not save you as much money as you think if it’s bundled with your internet. Your Average Dough created a breakdown of every single cable, streaming and internet expense to see how much money they could save (without negotiating).

Reduce Cell Phone Data Plan

Are you using less data on your cell phone because you’re always home and connected to wifi? Consider reducing the data package on your cell phone plan and using your wifi for data more often.

Remove As Many Non Discretionary Expenses as You Can

Every purchase you avoid to save money during coronavirus, even if it’s only $5, will help create a financial cushion. It’s easier to avoid non discretionary expenses now because so many businesses including bars and restaurants are closed until further notice, travel is restricted and sports are paused. If you’re not sure how much money you spend on discretionary purchases every month look at your last few credit card statements or think back to where you have spent money the past month or two. This will help you develop a baseline. If you’re still not sure think about a few things you bought recently and ask yourself if it was a purchase you could have delayed or went without.

Delay Purchases Until Later

Because of the situation we are in, there may be necessary expenses that you can delay until later. For example, do you really need a new pair of pants or shoes when you’re working from home or can that wait? Is that thing on Amazon truly a need or is it a want that can wait a couple of months? Personally, I need a new pair of running sneakers but since I’m socially distancing I’m going to hold on this purchase until I see a good sale.

Call Someone Instead of Buying Them A Gift

A simple way to save money during coronavirus is to call someone instead of buying them a gift. A call or video chat is a great way to show someone you care about them and they’ll probably treasure it more than a material item.

Don’t Avoid Spending Money At the Expense Of Your Mental Health

It’s important to not take cost cutting too far. Mental health is really important. The virus, cabin fever, worrying about the health of your friends and family and job changes is a lot all at once. Don’t completely deprive yourself of happiness to save a few dollars. Be smart with your spending and wait a few days before you hit buy on the discretionary purchase.

What are simple ways to save money during coronavirus that you’ve found?

10 Financial Tips for Living On Your Own

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You’ve decided to live on your own for the first time, congratulations! Maybe you’re moving out of your parents house, or moving out of living with roommates. Now, you get to decorate your new place exactly how you want and have everything match. The room is a bit bright so you’ll get some curtains and… oh wait, curtains are over $1,000 for the room?! Welcome to the joys of furnishing your own place. No matter the situation, living on your own requires getting a lot of stuff. This doesn’t even include the mortgage / down payment / deposit! Here are 10 financial tips for living on your own for the first time.

Don’t Buy Too Much House

Top living on your own tip: don’t buy too much house. Whether you are renting or buying, it’s important not to buy too much house. If you spend too much money on rent or a mortgage you will not be able to cut back on this expense if money gets tight. What does this mean? It means that your housing costs should be no more than 30% of your gross income (pre-tax income). This includes rent, mortgage, taxes, bills like electricity, water and wifi and any repairs you may have to make.

Even though the rule of thumb is no more than 30% of your gross income the lower this percentage is, the more money you’ll be able to spend actually furnishing your place and more money you’ll be able to save.

See Also: How to Save Money in Your 20s

Organize Your Move

Being organized about your move will help save you money. Start by creating a few lists, including a to do list and everything your new place needs. In the “everything you need list” identify what you already have, what is needed, what is needed but can be purchased later and what is nice to have. For example, you’ll need a lot of kitchen items but you’ll absolutely need to have pots and pans to start if you plan to cook. While a good knife set is also needed if you’re not a big cook this is an example of a purchase you can delay.

Also create a list of general household items (paper towels, cleaning supplies, spices) that you often don’t think about because you’ve acquired a collection from living with your parents or living with other roommates over the years. You’ll avoid a lot of repeat trips to the grocery store, Costco or Target by creating a list of what you need here before you go shopping.

Now that you know what you need immediately and what purchases you can delay match this to your budget. Likely, this is more expensive than you anticipated but see how far you can get. There are tricks you can use to lower these costs and make your money stretch further.

Spend As Little As Possible Moving

Moving from one place to the next is always a pain and spending money on the move itself is unavoidable. There are ways to minimize this expense; however, moving expenses and effort tend to be inversely related. The less you spend, the more effort you will have to put into the actual move. The least effort will be to hire movers that pack everything for you and unpack everything for you. On the flip side, the most effort but least expensive option is for you to move yourself in your own car. In the middle, there are options to rent a uHaul, ask for friends help and offer to buy them food, etc.

When you’re moving to your own place for the first time it should be easy to minimize this expense as you have less stuff to begin with. At the same time, you will be spending money on moving after the initial move too as you begin buying more furniture for your place. Some of these purchases may require having to rent a truck or spending money on delivery fees.

Set A Budget For Furnishing Your Own Place

Living on your own can get expensive quickly. It’s important to set a budget. Remember, you don’t need to have everything day one. You need wifi, a place to sleep and a few household items like toilet paper and some food. It’s ok if you don’t have a kitchen table or look settled for a couple of months. You’ve just paid the big expenses of first month, last month and security deposit or perhaps the closing costs and downpayment on your first home / condo. You’ll also have to start paying the monthly bills of living in your own place.

How much should you budget? That varies by person, and is really more about what you can afford and personal preferences. It’s more important avoid going into debt than being settled day 1.

Accept Furniture and Household Item Donations from Family Members

Your first place doesn’t have to look all put together – that can come with time. Forget what you see on Instagram, House Hunters and what your friends that don’t have their own place suggest when they come to visit. Earmuffs and blinders are key here! When you move into your own place for the first time without any roommates it is expensive. Even getting curtains for one room can be hundreds of dollars, if not over $1,000.

Understandably not everyone has the option to get used items from family. But, if your parents or your aunts, uncles, grandparents, etc, have things you need, accept them. Even if they don’t match or will need to be replaced soon it’s better than nothing. You don’t need to have these items forever, but moving into your own place requires a lot of things all at once and the fewer things you have to buy the easier it will be.

Are any of your friends moving? Or, are you living with roommates now and is there anything your roommates are trying to get rid of? Any time someone moves there are always items – big or small – that they won’t want in their new place. It works out for both of you if you can take something off your friends hands they don’t want anymore.

For the items that won’t last long, add them to your list of things to buy in the future. Prioritize this list and throughout the year look for sales. Always set aside some money in your budget to purchase items for your house in future years.

Scour Local Estate Sales For Furniture and Household Item Deals

Finding deals on household items and furniture at estate sales is one of the best kept secrets. An estate sale usually happens when there is a death and the family is trying to sell almost everything in the house before putting the house on the market. You’re able to get multiple things from one place at a steal and if you do need to rent movers or a uHaul, you can do it once. One friend ended up getting a $8,000 large dining room set in excellent condition for under $1,000. When she moved out (it didn’t fit in her next place) she ended up selling it and made a profit!

You may end up spending the same money you would have for something brand new at Ikea but there are two benefits to buying furniture / household items second hand. First, the quality of what you’re buying is much higher and you’ll be able to command a higher value should you ever try to resell the same piece a few years later. Second, you don’t have to self-assemble.

To find local estate sales, enter the town + estate sale into Google. If you live in a city, you may have more success looking at close suburbs.

Buy Second Hand Household Furnishings On Craigslist / LetGo

Craigslist and LetGo are also good to search for specific things you need to furnish your new place. I really wanted a wine rack from Crate and Barrel and didn’t want to spend $400 for it new when I first moved into my own place. After regularly searching for a few weeks I found one nearby on Craigslist for $125. A few years later when I moved I ended up selling it for $150. Both of these website / apps are best when you know exactly what you’re looking for otherwise you’ll spend a lot of time browsing. The strategy of buying second hand can save you hundreds if not thousands of dollars.

Use Coupons For Household Staples and Decorations

Normally I don’t talk about coupons often as I don’t think it’s worth going out of your way for 20 minutes to save $0.50. But, moving in on your own requires a lot of stuff so it’s worth it to spend a few hours looking around for the best deals and setting alerts. In this case, you’ll end up saving a lot of money by shopping around. Still, it is important to be smart about your time. If you see a good deal for one thing that will take 2 hours out of your day, is the amount you’ve saved worth those 2 hours?

T.J. Maxx and Homegoods generally has good deals and there are extra sales on holiday items after a holiday has passed. Bed, Bath & Beyond always mails 20% off coupons and you can try to split your transactions (or go with a friend) to use multiple coupons during the same trip. Usually, Bed, Bath & Beyond also accepts coupons that have expired. For higher end, Bloomingdales Home has Friend & Family sales (it’s free to become a loyalist) which you can take advantage of for things like bed sheets and towels. Macy’s also frequently has sales and coupons.

Budget Your Time Wisely

Don’t spend so much time on searching for the best deal that you waste all of your time. Everyone only has 24 hours in a day and each hour you spend looking for deals you could have been using to do something else, including doing something that would make you more money. You have a lot to buy when starting your own household and shopping around can take you to many stores and require a lot of repeated trips if you don’t plan correctly. Plan ahead as best as you can with lists and research ahead of time but never waste a couple hours to save only a couple of dollars.

You’ve Now Living On Your Own, Now What?

You’re now officially moved in and living on your own. Now what? It’ll always take some time to get settled and you’ll realize you’ll need things you completely forgot about. Don’t worry about buying everything at once. Continue to keep your lists of prioritized needs, needs and wants. Chip away at these lists over time and take advantage of yearly sales. Do more research on when the best time to buy certain items are, which you can find here, and here.

Once you’re more settled, look for other opportunities to be smart with your spending so you can get back to saving more money or finding ways to fund more of what you need for your home!

What are other ways you’ve found to save money when moving to your own place for the first time?

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