Saving at Home #1: The Home

There are a couple things that will occur frequently here (and that you will be able to search for using the categories). One is our “Money Missteps”.  Another is our “Saving at Home”.

When people think about paying off debt it can be overwhelming to think about how much money you need and how you are going to obtain it.  However, there are a lot of little things you can do right where you are to reduce some of your spending plan line items (also known as a budget – spending plan just sounds more positive!).  If you can reduce how much you spend at home you can put that money toward your debt in addition to extra money you earn.

Yesterday I mentioned we cut our grocery budget in half.  Over 100 months we will be saving $5,000 that we can now put toward debt!  Yes $5,000!  Where can you save $50 a week for the next 100 weeks and do the same?  What if you could save $75 a week.  Over 100 weeks that would be a savings of $7,500 – you could buy a driveable car in CASH!

Some of our goal is to reduce our day to day living expenses so that we can put that money toward debt.  One practical – and maybe larger step – is to evaluate your living situation.  Can you do it cheaper than you are?  There are really 3 groups of people

1) People who live free of rent/mortgage.  You already  have this point covered!
2) People who rent (like us)
3) People who own

For those in category 1, if you are in an expense free living situation and it is comfortable (i.e. not your moms basement when she is begging you to move out!).  Enjoy it for the time you have it.  In this group are people that live with family, people who have housing provided such as pastors or visiting professors and even people who have been gifted a home as inheritance or by other means.  Consider your situation and gift and think through how you can use it to support others.

For those of us in category 2, this a a good time to reevaluate where you are.  If you have a lease start thinking about your future plans about 90 days out so you have a clear idea of what you need to do, if anything, to better your situation.  One way to cut down on living expenses is by finding a cheaper place to rent. This may sound “simple” but take a moment to think through all sides of the equation.

-Can you obtain a lower rent?  If so how much?  In some areas rent is very steady and standard across the board and moving to save $25 is more expense than it is worth when you consider the cost of moving.  However, for some, like ourselves, moving and finding a cheaper rent is very doable.

We live in the city limits of Chicago, IL.  There are over 40 neighborhoods to choose from and many more suburbs. Due to my husband’s job we need to stay in the city so we started there.  We then made a list of things that were a “need” in housing and a “want”.  Our need list was very short:  laundry on site, safe and clean.

Our want list was much longer and we ended up with very few of those things.  On the plus side we do have a side yard and easy street parking (both wants).  On the down side we have an eat in kitchen – no dining room, laundry in the basement not in unit, no dishwasher, no counter space, only 2 closets and our kids share a room.  None of these are deal breakers, just compromises.  We have learned to love where we landed.

We left 1800 sq ft about 1.5 miles away for 850 sq ft and a 4×4 storage space in the always wet, always flooding basement.  It sounds like a HUGE compromise BUT we are saving over $100 a month in rent alone not to mention the decreased utilities, ease to more public transit and better community for our kids.   All things we have gained just by changing our location.

Now, before those of you that own get all up in arms know that this is an option for you as well.  There are many more factors that effect you including stipulations on your loan if you received grant money and pure location.  BUT as a homeowner you have the opportunity to temporarily downsize and have your dream home waiting for you in the wings!  Think about renting out your home so you can live somewhere smaller for an allotted period of time.

There are some factors to consider as I mentioned above but do consider it if you are in a dire financial situation.  In your area can you rent your home to cover the mortgage payment including taxes and insurance?  If the answer is yes then this may be the right move for you.  If you can find a (reliable) renter to come live in your home and cover the costs of the home what is stopping you from moving?  (Note: In addition to my simple list of things to think through there may be some tax consequences to this so talk to your accountant before making this change.)

For instance, if your Mortgage, Taxes and Insurance is $1400/month can you rent your  home for that (or even more) and move to an apartment that is $850/month for a couple years?  You would save a significant amount of money out of pocket if you could do this.

Another obstacle to keep in mind is if you are ready to be a landlord.  Renting does mean that you are responsible for your home just as you were if you lived there.  If something breaks it is your job to fix it.  If someone treats the property poorly it is your loss.  You will have to maintain landlord insurance to cover any accidents that may happen. None of those things are free.  I am not trying to discourage having this discussion with your family and looking at the tax benefits and consequences but I also want you to know it isn’t just as easy as moving out and moving back in a couple years.  It is a legal change of residence that should not be done lightly.

Know that there are plenty of very good renters on the market.  My husband and I are one of them.  When our landlord called to see if we were going to renew our lease they jumped for joy when we said yes!  We always pay on time, care for the home like it is our own and are very easy to communicate with.  There are good folks out there if you choose to go this route!

Before we wrap up talking about possibly moving don’t forget the time factor.  Time is money after all!  If your move sends you 45 minutes further away from your job will that 1.5 hour additional commute be worth it?  If you have to drive an additional 50 miles a week to continue the important things in life are you saving anything with all the extra gas and wear and tear on your vehicle?  Talk about time.  Map out what your weeks look like and make sure that even if you can sacrifice something like commute time that it is worth it in the long run.

The type of moving I am talking about isn’t meant to be a permanent change  but it will still affect your life for the time being.  Make sure you are committed to all the changes moving brings.

In conclusion, I will say it took me about 1 year to really start warming up to liking our small space.  I was embaressed to have people over, sad that we lost our dining room space and disappointed that THIS is all we could afford.

However, with time I began to realize all the things that we have gained.  We have much better neighbors than we ever had before, we live two blocks from a park and we have a beautiful yard which is a rarity in the city.  We have had the chance to sell a lot of things on Craigslist and Ebay as we have continued to downsize our space.  Friends are always amazed about how “homey” and “calm” our house feels.   It is because we are giving up cultural comforts to gain so much more and we are joyful because of it.  We are living our true selves.

Less really is more.


~ by Rachael Judd on June 24, 2010.

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