Tuesday, September 30, 2008

Buy a House Where You Want to Live

#5 Saving Money Tip – Buy a House Where You Want to Live. As a continuation of yesterday’s post, I wanted to elaborate a bit more on buying a house. This post will not directly save you money, but it might in the long run. Many people decide to buy a house and they think about what they want in a house – say, 4 bedrooms, 2 ½ baths, and an eat-in kitchen, etc. Then they come up with the amount that they are willing to spend on a house – say, $300,000. Then they find out where in their area they can buy a house with 4 bedrooms, 2 ½ baths, and an eat-in kitchen for $300,000 and they buy in that area.

I think they are going about it all wrong. First and foremost, find a town, neighborhood, or area where you want to live. Scout it out – during the day, at night, and on weekends. Shop at their stores, go to their parks, and check out their schools. Meet some of the residents. If you like it, great, but also look other places. If you don’t like it, find another town/area to look in. Keep looking around the area until you find exactly where you want to live. That is more important than the number of bedrooms or whether the house has an eat-in kitchen. Trust me. It is. When you find the neighborhood or town that you want to live in, find out what is for sale. Are the houses in your price range? No? A 3-bedroom house costs $300,000? Well decide how badly you need that 4th bedroom. Which is more important – living in a town you love with good schools, nice parks, and friendly residents or living in a 4-bedroom house? Personally, neighborhood always wins hands down for me. You can always change your house. You CANNOT change your neighborhood!

Now in the short–run, this won’t save you money. After all, a 4-bedroom house in a neighborhood that’s not so great or a 3-bedroom house in a neighborhood that is perfect will both cost your $300,000. But after a few years, the better neighborhood will win out. The values on the houses will rise faster. And you won’t want to move to somewhere better. By staying in one house for a long time it will save you money on moving costs and mortgage fees.

In Real Life (IRL) – As I mentioned yesterday, we had $250,000 budgeted for a house 8 years ago. My husband has a job about 30 miles outside the city center so we could have bought a nice sized house far out of the city for $250,000. Problem is, I don’t really like the city that he works in. The city’s crime rate isn’t the greatest and neither are the schools. Because there is a lot of land, the building that has taken place there over the past few years has been out of control. And the infrastructure is not necessarily keeping up with it. But my husband made me check it his work town and I agreed. And I didn’t like what I saw. Sure, the two-story foyers and the gourmet kitchens in the new construction homes intrigued me. But I wasn’t impressed by the people I met in the malls or the all of the box stores I saw on the main road into town.

We looked several other places as well, but my criteria were that I wanted to live in a town. I wanted a town that I could walk to shops, parks and schools. I wanted a town that had good schools. A town that people took pride in. And we found it a town close in the city (10 miles away) and boy were the houses expensive. As I said yesterday – A 1950’s 3-bedroom 1-bath house was about $250K. Guess what? There was a reason the houses were so expensive because lots of people wanted to live here.
Fast forward 8 years and the housing market had made a very steep climb and has come back down again. But guess what? In my town, the values haven’t dropped as much as in other places. People still want to live here. The amenities that I liked so much attract other people as well, keeping the values in check. And in the end, when we really needed that 4th bedroom, we spent only $12,000 to turn our porch into one. Not much at all. Plus it added value to our home. Those 4-bedroom homes in the town where my husband works? There are quite a bit for sale because as the housing market has declined, those that are farthest out from the city went down the fastest. If we had bought out there, we probably would not have been happy – with the schools, with the overbuilding, and with neighbors in dire financial straits. We probably would have ended up wanting to move and we would have added one more “For Sale” sign to the block. Buy the neighborhood first, and the house value will take care of itself. You won’t be sorry.

Monday, September 29, 2008

Buy Less House Than You Can Afford

#4 Saving Money Tip - Buy Less House Than You Can Afford. Common practice when buying a house is to find out how much mortgage you can qualify for and then buy at that price point. But I disagree. Do you really want to be stretched so thin? Buying a house is exciting and of course you will get "wowed" by beautiful homes - those at the top of your budget and those above your budget. But it won't be much fun to live in a house that you can just barely afford. Or to live in a house that you cannot decorate or to not be able to go out to dinner once in awhile. And if you're young and buying a house before you have children, consider what you plan on doing if you have them. If one of you wants to stay home when you have kids, then you definitely do not want to buy as much house as you can afford. Buy a house a little smaller, a little less polished.

A great way to buy a house is to see past the 1970's carpet and wallpaper. Pay more attention to the neighborhood, lot size, location, and size and layout of the house than to the decorating in it. The beauty about buying a house that needs cosmetic changes is that you can make them when you can afford them. Ripping down wallpaper is tedious, of course, but it's something that can be done pretty cheaply. Same with paint and carpet. Another reason to buy less house than you can afford is that you really don't know what the future will bring, and it's better to have a cushion of money than not. And if by some stroke of luck or hard work you find that you have more money than you thought you would, you can always add on, move, remodel, etc. Too many people, however, buy as much as they can afford at the time. Then down the road one of the couple loses a job or the wife wants to stay home with their new baby but they cannot afford to. This is a position you do not want to be in. If you plan ahead for these types of unforeseen circumstances by buying less than you can afford, then you will have more freedom in what you can do with the extra money. And if you find you need the extra money to pay your mortgage, at least you will have a roof over your head.

In Real Life (IRL) - My husband and I (no kids) bought our house 8 years ago in a fairly expensive city. My husband was new to the area so he was shocked at how expensive homes were. At the time, a small 3 bedroom 1 bath 1950's ranch home was in the mid $250's (which now seems awfully cheap, actually). We qualified for a house well over $300K that probably would have had 4 bedrooms, but I was hoping to only spend about $250K. Problem was, while we were satisfied with only 3 bedrooms, we wanted a 2nd bathroom. Most of the houses we looked at did not have a second bathroom or it was in the basement. We looked and looked in our price range but could not find one that met this criteria. So finally we did what most people do, we looked at higher priced homes - those up to $300K.

Okay, so we did what I'm telling you not to do and that's why this section is called IRL. Well of course you can guess what happened we found our "dream" home. It had 3 bedrooms, and not 1 bath, not 2 baths, but 2 1/2 baths! Oh and it was priced at $309K. And I did what all real estate experts tell you not to do - I fell in love with the house and I made it mine mentally before it really was mine. But back to the point of buying a house with 70's wallpaper. We were lucky, this house, while on a beautiful lot on a quiet cul-de-sac with more than 1 bathroom was decorated, well, not so good. One room was painted a bright red and I mean bright almost fuchsia. Another had loud blue-flowered wallpaper. And there was no furniture in any of the rooms to show how it would look furnished properly. For some reason this lovely home with not so nice decorating had been on the market for weeks (which was long for that time period; houses were selling very quickly) and had not received one offer. So we low-balled them with an offer in the $250s which of course was rejected. But after going back and forth we agreed on a price of $290K! $40K above my target price, but remember it was less than we qualified for. And we still did have a cushion of money. We had $90K saved up to buy a home and only used $70K for the down payment. That $20K went to an emergency fund and is in fact still sitting there.

We were lucky, not only because we bought when the market was a bit lower than it is now, but because we found a house that needed cosmetic changes that other potential buyers poo-poohed. After we had a contract, the interest in our house grew and others wanted to buy it. It took them a little bit longer to see past those ugly red walls and that blue-flowered wallpaper. Looking back it was one of our best purchases. Because we paid for the neighborhood - a nice lot on a quiet street. That stuff doesn't change. The rest? The red paint is now beige. The blue wallpaper is still there - when we put our furniture in it, it didn't looks so bad. And that 3-bedroom house that was smaller than the 4-bedroom house we qualified for? We decided to turn our porch into a fourth bedroom when we found out we were having our 3rd child last year. Because we bought less than we could afford, we were able to save money each month and put it away. This afforded me the luxury of staying home with my children when they were young. So even though we went above my preconceived budget, we did buy a house less than we qualified for. We knew we had emergency money and we planned on me staying home if we had children. And because we bought a smaller home, we were able to do all that.

Sunday, September 28, 2008

Buy Used

#3 Saving Money Tip - Buy Used. Go Ahead. You can do it. Don't be afraid. Seriously. Buying used can save you up to 90% of the retail cost of something. There is no shame in it anymore. In fact, it's cool to buy used. If you're embarrassed, just say you are doing it to help save the environment. What to buy used? Well, let's see, if it's your first time, you want to start with things that don't gross you out. Hmm...how about lawn tools and equipment? That can't bother you. Need a lawnmower? Go to Craigslist and just look. Go to the farm and garden section and look under lawn mowers. Find one that looks good. Then go to one of the big box stores' sites and check out their prices. Would it save you money buying used? You betcha. Of course only if you need it and you were in the market for a lawnmower anyway. Other good places to buy used are thrift stores, yard sales, and consignment shops.
Once you are comfortable buying used things such as outdoor tools, you can look for more personal things that you were planning to buy such as a t.v., a purse, books. It may take awhile to become comfortable owning something that was owned by someone else but once you do, you will never look back. After all, you use used things all of the time. Ever go to a restaurant? Have you eaten on their dishes? They're used and used and used by thousands of people before you. Ever go to the airport and wait for a plane? That seat - thousands of tushes have sat on that seat before you. And the doctor's office? That magazine you are reading in the waiting room? Read by dozens of others before you got there. So seriously what's the difference if you buy it for your house? Most things can be cleaned thoroughly. And once they're cleaned, they become yours. Once you become used to buying used, you'll thank me. And there will be more money in your bank account, too.

In Real Life (IRL) - I used to be scared of buying used things. I was taught that used was second best or for poor people who couldn't afford new. I was taught wrong. I was first introduced to buying used things by my husband who likes to scour thrift stores in search of Meisen figurines (he's yet to find one). That was acceptable to me because he wasn't really buying for his use. Then I was next introduced to buying used when I had a baby and made friends with some other new moms. Some of them were buying used strollers and Eek - used baby clothes. I was horrified.

Then I went to one of those kids' consignment sales with one of the said friends and looked around. Hmm...lots of other people - nice middle-class people were buying used. But I still couldn't do it. I found one item that looked new and almost bought it, but in the end I put it back down. I'm not sure what my first used item that I bought finally was. I think I decided it was okay to buy something used that would be kept outside. After all, things get dirty out there anyway. I also decided that big plastic toys that can be cleaned easily were okay, too. Clothes were still a no-no. Yuck. Then one day I went into a consignment store and saw this adorable pink outfit - shirt and pants that I thought would look very cute on my daughter. I still remember exactly what I did. I picked up the outfit and then I called my mom on my cell phone and said, "Mom, I've crossed over to the other side. I'm buying used clothes." And once I did it, I was hooked!

I now go to garage sales nearly every weekend in spring and summer. I look forward to kids' consignment sales with a passion! I went to two sales yesterday (tell you more about that in a minute). My husband and I don't drive buy a thrift store without stopping and I scan craigslist almost daily for things we need. To show for it, my house is filled with craigslist furniture:

--a dining room set from the 1950's bought for $500. It includes the table, six chairs, a buffet, and a china cabinet. It's beautiful and I love it. I wouldn't have found one I like so much in a furniture store and even if I did, I would have had to shell out $2-$3000 dollars for it, I'm sure.

--a television armoire bought for $30. It matches the furniture style of my living room, has lots of storage and was sold by a motivated seller. It does the trick.

--A computer armoire in like new condition bought for $150. Same exact ones sell at those office stores for $500. Love it. I close up the thing and no one knows I have a computer in our den.

--Two bookcase bought for $80. I was looking for bookcases to match the style of our den and was shocked at the prices at those office stores. Two bookcases plus shipping would have cost over $200. We found two of the exact same bookcases (from two different sellers) on craigslist. And we pocketed the difference.

I could go on and on - two of our kids' bedroom furniture, our reel lawnmower, our beautiful outdoor shed.
Now back to yesterday's sales. I bought a Brownie Girl Scouts skirt for my daughter for $1.50. These are over $20 new! I saved more than 90%! And I bought a Brownie Handbook for 50 cents. They are normally $11 new - again I saved over 90%. I also bought a shirt for my son that he needed to match an outfit he has. It cost me 75 cents. Seriously. I don't care if he wears it once and it rips.

These are all things we needed and would have bought new had I not come around to the idea of buying used or as we like to say "preowned." Try it.

Saturday, September 27, 2008

Sell What You Don't Need

#2 Saving Money Tip - Sell What You Don’t Need. Look around your home and find things that you don’t want, don’t need, or don’t use anymore. Then go onto Ebay - and look up if it’s worth anything. Yes? Then why not sell it? No? Then donate it. You may not get any money for it but you can take a write-off if you itemize your deductions. If nothing else, you will declutter your home. Scared to sell on Ebay? Then try Craigslist. No skills are needed. You don’t even have to attach a picture if you don’t want to, but it does help. There are other places to sell your items, too – consignment shops, local newspapers, bulletin boards at the supermarket, or word of mouth. It’s a great way to earn some extra cash.

In Real Life (IRL) – I got into selling on Ebay a few years ago. I’m not a big-time seller and my interest waxes and wanes with the seasons. But I am so happy it’s there. I am constantly making a pile of things my family no longer uses. Sometimes we buy something and decide we don’t like it anymore and on to Ebay it goes. Sometimes we receive a gift that’s a duplicate and we turn around and sell it on Craigslist. Today I listed some dishes that I bought at a yardsale. I thought they would look good in my home but the colors were all wrong. I also listed an old snowsuit on Craigslist. I already have two interested parties. Between those two items, I should make about $10. Again not a lot, but if I could make $10 per day on things I have around the house that I'm not using, it adds up. I have a goal of listing one item per weekday until my pile disappears. DId I mention that I've been doing this for a few years. For some reason, it seems like I always have a pile...

Friday, September 26, 2008

Walk, Don't Ride

#1. Saving Money Tip - Walk Where You Need to Go, Don't Ride. That means when you open up the door to your house, apartment, or townhouse, walk past your car and keep on walking. With gas prices at $4.00 per gallon, it's easy to figure out cost per mile for driving. My car gets about 20 miles to the gallon city driving. $4.00 gallon/20 miles to the gallon = 20 cents per mile! Everytime I drive 1 mile I spend 20 cents. Eek! That 1-mile drive to the grocery store - 40 cents roundtrip. The 1/2 mile walk to the park - 20 cents roundtrip. Now I know that you can't walk everywhere and it's not always feasible - it's too cold, it's raining, there's not enough time, etc. But when you can, WALK!

In Real Life (IRL) - We try to walk anywhere we can. We can walk to the library, preschool, the supermarket, the playground, the drugstore, and other stores and restaurants. All are within one mile of my house. We TRY but we don't always succeed. As mentioned above, it's not always feasible. Sometimes we wake up too late to make the one-mile walk to preschool before 9 am. Sometimes the baby is napping at pick-up time. But in the past 3 weeks that school has been open, we have walked just about every afternoon to pick up my daughter at preschool and once in the morning to bring her there (we like to sleep late!). Yesterday we walked to the library. It's about 3/4 of a mile away. So I saved myself 30 cents by walking there, not to mention the exercise and fresh air my kids and I got (oh and the free books to borrow but that's another post!). After we were done at the library, we stopped at the drugstore to pick up a prescription for my daughter. That's an additional 1/4 of a mile away, so we saved another 10 cents! A total of 40 cents saved today! It's not going to make me rich overnight but when combined with my other saving money tips that I'll be writing about, the savings add up quickly. What's within one mile of your house? Where can you walk to?