rent http://www.wisebread.com/taxonomy/term/7748/all en-US Can You Really Afford to Live in Your Dream City? http://www.wisebread.com/can-you-really-afford-to-live-in-your-dream-city <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/can-you-really-afford-to-live-in-your-dream-city" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/house-4366298-small.jpg" alt="family moving" title="family moving" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>It finally happened. You've been offered a job in the city of your dreams. Or you're coming up on retirement. Or you're just sick and tired of the Midwest winters. Before packing up your belongings, however, consider these five factors to avoid having your dream move turn into a financial nightmare. (See also: <a href="http://www.wisebread.com/10-ways-to-save-on-a-long-distance-move?ref=seealso">How to Save on a Long-Distance Move</a>)</p> <h2>A Dollar in Boise May Not Buy as Much in Dallas</h2> <p>To get a better handle on how living expenses &mdash; from groceries to a visit to the dentist &mdash; vary from city to city, use a free online <a href="http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx">Cost of Living comparison calculator</a>. This tool will also give you an idea of what your income needs to be in order to maintain the same style of living.</p> <p>The factors that make some cities more affordable than others varies. Kiplinger's compilation of the <a href="http://www.kiplinger.com/slideshow/real-estate/T006-S001-10-cheapest-u-s-cities-to-live-in/">cheapest cities in the U.S.</a> cites shows low grocery prices for some, low housing costs for others, and low medical fees in others. As Kiplinger's points out, however, cheaper living often goes hand in hand with less healthy economic conditions. (See also: <a href="http://www.wisebread.com/10-of-americas-awesomest-cheap-cities?ref=seealso">Awesome Cheap American Cities</a>)</p> <h2>Determine How Much It Will <em>Really</em> Cost to Hang Your Hat</h2> <p>Most financial experts agree that housing costs should represent 30% of your gross annual income. But to play it safe, some say to increase that to 35% to cover all the &quot;a-la-carte&quot; costs that come on top of the mortgage payment or rent &mdash; property taxes, utilities, assessments, or building/neighborhood amenities, like swimming pools or workout facilities.</p> <p>Property taxes can be a significant factor affecting the cost of owning a home or condo. New York residents contribute the highest percentage of their income to property taxes, followed by New Jersey, Connecticut, California, and Wisconsin. On the flip side, Wyoming residents pay the least percentage (6.9%) of their income to property taxes. Alaska, South Dakota, Texas, and Louisiana round out the <a href="http://247wallst.com/special-report/2014/04/02/states-with-the-highest-and-lowest-taxes/">lowest property tax states</a>, according to 24/7 Wall Street.</p> <p>In addition, potential homebuyers need to consider maintenance costs, building or community assessments, and repairs (often hard to predict). Snow removal may not be a factor if you're moving to Phoenix, but your air conditioning costs may skyrocket compared to what you paid in Minneapolis! (See also: <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for?ref=seealso">Costly Things New Homeowners Don't Prepare For</a>)</p> <p>Homeowner's insurance is required by most mortgage lenders. Average homeowners insurance rates are higher in states prone to extreme weather conditions or with higher building costs.</p> <p>If you're planning to rent, ask the property manager or landlord which utilities or building amenities are not included in the rent, and make sure your budget allows you to comfortably cover these expenses.</p> <h2>Chart Your Commuting Course &mdash; and Costs</h2> <p>How do you plan to get to and from work, the grocery store, or the movie theater and what will it cost? <a href="http://htaindex.cnt.org/">The Housing + Transportation Affordability Index</a> (searchable by city) factors transportation costs into the equation with its recommendation that your <em>combined</em> housing and transportation costs should be no more than 45% of your monthly income.</p> <p>Looking for a place where you can walk, bike, or take public transportation to work? Check Walk Score's <a href="http://www.walkscore.com/cities-and-neighborhoods/">rankings of the best cities</a> to live car-free.</p> <p>If driving is your preferred (or only!) commuting option, take a look at how fuel prices stack up with the help of GasBuddy's <a href="http://www.gasbuddy.com/gb_gastemperaturemap.aspx">gas price heat map</a> or its list of <a href="http://www.gasbuddy.com/GB_Price_List.aspx?cntry=USA#us_cities">average gas price by city</a>.</p> <p>Parking can put additional strain on your monthly budget &mdash; or not, depending on where you plan to live and work. A parking spot in a Chicago high rise could set you back $200 to $500 per month, but far less in Milwaukee, just 90 miles to the north. BestParking offers a <a href="http://www.bestparking.com/">searchable database</a> of parking costs by city to give you a general idea, but be sure to check with individual buildings, which may vary widely in fees. And don't forget the vehicle permit stickers required by many cities.</p> <h2>Be Prepared for the Unexpected</h2> <p>Unforeseen expenses for homeowners come in many forms, from a leaky faucet to a leaky roof &mdash; and everything in between. Where you live can impact repair costs. The national average cost to hire an electrician is $380 per project, but only $213 in Myrtle Beach, and $398 in Seattle, according to <a href="https://www.homeadvisor.com/">Home Advisor</a>. Any repair can put a strain on your wallet depending on the cause and the potential ripple effects.</p> <p>Renters are not immune to the unexpected. Renter's insurance &mdash; often required by the landlord or apartment management company &mdash; is always advised. Sure, if the roof leaks, the landlord will fix it, but what about your computer, clothes, and other personal property? Renters insurance not only covers personal effects, but often covers living expenses should your apartment become uninhabitable due to a fire or natural disaster. Generally very affordable, renters insurance can start as low as $10 per month depending on your coverage. (See also: <a href="http://www.wisebread.com/save-time-money-and-hassle-by-bundling-your-home-repairs?ref=seealso">Saving Money on Home Repairs</a>)</p> <p>As the saying goes, &quot;The best laid plans of mice and men often go awry.&quot; In this economy, that could mean your job.</p> <p>If your dream city is a thriving employment mecca versus a job desert, you'll find yourself with more options if your company downsizes or your position is eliminated. MuniNet Guide provides a snapshot look <a href="http://www.muninetguide.com/employment-data/">employment trends</a> by metro area. (Note: I am the managing editor of MuniNet Guide.) When considering the health of the employment environment, check both <em>unemployment</em> rate trends (which should be heading down) and <em>employment growth</em> rates (which should be heading up).</p> <h2>Do Your Homework</h2> <p>We are fortunate to live in times where information is more readily available than ever before. Take full advantage of state, city, and county websites, which can provide valuable information and links to help you research a move to your dream city. Being financially prepared can make your dream become a prudent reality.</p> <p><em>Have you moved to another city or burg? Were you surprised by the cost difference (up or down) versus your old home town?</em></p> <a href="http://www.wisebread.com/can-you-really-afford-to-live-in-your-dream-city" class="sharethis-link" title="Can You Really Afford to Live in Your Dream City?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/mardee-handler">Mardee Handler</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing affordable housing home buying housing rent Fri, 11 Apr 2014 08:24:15 +0000 Mardee Handler 1135085 at http://www.wisebread.com 6 Ways to Haggle Your Way to Cheaper Rent http://www.wisebread.com/6-ways-to-haggle-your-way-to-cheaper-rent <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-to-haggle-your-way-to-cheaper-rent" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/man-apartment-5229222-small.jpg" alt="man at apartment door" title="man at apartment door" class="imagecache imagecache-250w" width="250" height="186" /></a> </div> </div> </div> <p>Don't think that housing negotiations only benefit those who purchase a home. Just about everything is negotiable, and if you fall in love with a rental that's slightly outside your housing budget, there are ways to haggle yourself to a cheaper rate. (See also: <a href="http://www.wisebread.com/whats-a-fair-relationship-between-salary-and-rent">What's the Right Ratio Between Salary and Rent?</a>)</p> <p>This approach isn't likely to work if you're checking out rentals owned by large management companies. There's usually a set price across the board for all tenants, and some managers aren't going to budge &mdash; not even a little. There is, however, a bit more leeway when renting from a private landlord.</p> <p>You might not be able to negotiate dirt cheap rent, as private landlords have to charge enough rent to cover their costs. But if the monthly rent is more than their expenses, there's some wiggle room.</p> <p>Of course, there's no way to really know how much wiggle room you have. Just go with it, ask for cheaper rent, and then see if the landlord will take your offer.</p> <h2>1. Know the Market</h2> <p>Educate yourself and learn about similar properties in the area. If the landlord's already letting the place go at a price below current market rental rates, you probably won't get the house or apartment for much cheaper. Asking for anything cheaper might offend the landlord. (See also: <a href="http://www.wisebread.com/how-to-evaluate-a-neighborhood-before-you-buy">Checking Out a Neighborhood Before You Move In</a>)</p> <p>Drive around local neighborhoods, look through the newspaper, and contact other landlords for pricing information. This can be your bargaining chip. If a rental you're eyeing comes with a high price tag, let the landlord know that you found a similar place for such-and-such price. Learning about cheaper rentals in the area might move the landlord to reduce his rate.</p> <h2>2. Ask Questions</h2> <p>Don't be afraid to ask questions. This not only helps you assess whether the property is right for you and your family, it's also an excellent way to feel out the landlord and gauge whether he's open to negotiations. It all really depends on his motivation.</p> <p>For example, if the property is newly vacant and the landlord doesn't appear to be in a hurry to sign a new tenant, lowering the rent might be the farthest thing from his mind. Not that you can't ask, but if he isn't motivated he might hold out for another tenant. Then again, if an apartment or house has been vacant for several weeks or months, and eagerness is written all over the landlord's face, the ball is in your court.</p> <h2>3. Sell Yourself</h2> <p>The landlord doesn't know you from Adam, and if others are interested in the property, there's really no incentive to choose you. This is really where your negotiation skills come into play.</p> <p>If you go into the situation with the intent of asking for cheaper rent, be ready to sell yourself. Ask yourself, what makes me different from other applicants?</p> <p>Factors that can push your rental application to the top include a good credit history and a solid rental history. Landlords might find this appealing as other applicants may have a few credit problems. A high standard of cleanliness might also help you win points with the landlord, as does stable employment and sufficient income.</p> <h2>4. Get Creative With the Rental Terms</h2> <p>Don't just come out and offer a lower rent price &mdash; have a game plan. For this to work, you've got to offer something in return. Signing a longer lease is one way to sweeten the deal. Most landlords lock tenants into a one-year lease agreement. If you agree to a two-year or a three-year lease in exchange for lower rent, this might be the thing that gets your foot in the door.</p> <p>Yes, the landlord takes a loss each month. But on the flip side, he doesn't have to deal with an empty property next year. (See also: <a href="http://www.wisebread.com/so-you-want-to-be-a-landlord-part-i">What Renting Is Like From the Landlord's POV</a>)</p> <p>Additionally, you can offer to pay one year's rent in advance in return for a discount. The landlord gets his money upfront, thus alleviating any worries that you'll break the lease early.</p> <h2>5. Offer to Handle Certain Repairs or Maintenance</h2> <p>This doesn't mean that you're expected to go in your pocket for every type of repair. If a house needs a new roof or if another major issue occurs, that's totally on the landlord. But for little things that happen around an apartment or house, such as a broken toilet or a broken thermostat, you can take care of these expenses in return for cheaper rent.</p> <p>Now, this can get a bit tricky, as your landlord may try to push all minor repairs on you. For this to work, make it clear that you'll only repair items that break after you've moved into the house, and only up to a certain amount, perhaps $200 per repair.</p> <p>Do a walkthrough of the property before signing the lease and document anything that's damaged or broken to avoid being liable for these repairs. Get the landlord's signature and include this document with your lease paperwork.</p> <p>Another creative approach for cheaper rent: Offer to assist your landlord with maintenance beyond your home. Is there a commons area or park in the community? Perhaps you can mow or tidy the area a few times a week. Is there a rental office? Maybe you can clean the office from time to time. Don't forget to get these agreements in writing.</p> <h2>6. Pay a Higher Security Deposit</h2> <p>Money talks, and if you're trying to haggle your way to cheaper rent, offer a higher security deposit. It doesn't have to be much. If the landlord requires one month's rent as security, maybe you can afford to offer double this amount. (See also: <a href="http://www.wisebread.com/20-tips-for-getting-your-security-deposit-back">Get Your Security Deposit Back When You Move Out</a>)</p> <p><em>Have you negotiated cheaper rent? How?</em></p> <a href="http://www.wisebread.com/6-ways-to-haggle-your-way-to-cheaper-rent" class="sharethis-link" title="6 Ways to Haggle Your Way to Cheaper Rent" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing negotiation rent rental maintenance rental terms Wed, 04 Sep 2013 09:48:29 +0000 Mikey Rox 981552 at http://www.wisebread.com Best Money Tips: How to Negotiate Your Rent Payment http://www.wisebread.com/best-money-tips-how-to-negotiate-your-rent-payment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-how-to-negotiate-your-rent-payment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/home-2674291-small.jpg" alt="kitchen" title="kitchen" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found some awesome articles on negotiating rent payments, free stuff for your birthday, and making your commute suck less.</p> <h2>Top 5 Articles</h2> <p><a href="http://moneysmartlife.com/negotiate-rent-payment/">How to Negotiate Your Rent Payment</a> &mdash; To negotiate your rent payment, pay your rent early and propose a longer lease term. [Money Smart Life]</p> <p><a href="http://genxfinance.com/free-stuff-on-your-birthday/">Free Stuff On Your Birthday</a> &mdash; Did you know you can get a free Grand Slam at Denny's on your birthday? [Generation X Finance]</p> <p><a href="http://www.narrowbridge.net/make-your-commute-suck-less/">7 Ideas to Make Your Commute Suck Less</a> &mdash; If you want to make your commute suck less, carpool or eat your breakfast in the car. [NarrowBridge Finance]</p> <p><a href="http://livingonthecheap.com/ideas-for-a-wedding-on-small-budget/">How to have a great wedding on a small budget</a> &mdash; Have a great wedding without breaking the bank by opting for simple invitations and choosing a non-traditional venue. [Living On The Cheap]</p> <p><a href="http://www.stretcher.com/stories/12/12aug20f.cfm#.UhJMRlN3ufg">Helping Others Without Spending Money</a> &mdash; Volunteering or sharing your expertise with others can enable you to help others without spending money. [TheDollarStretcher.com]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.boomerandecho.com/30-signs-you-grew-up-in-a-frugal-family/">30 Signs You Grew Up In A Frugal Family</a> &mdash; Chances are you grew up in a frugal family if you rarely went out to eat or got takeout. [Boomer &amp; Echo]</p> <p><a href="http://www.savvysugar.com/How-Dress-Work-25062372">The Essential Rules for 9-to-5 Attire</a> &mdash; When dressing for work, always aim for a polished, professional look. [PopSugar Smart Living]</p> <p><a href="http://lenpenzo.com/blog/id21356-five-personal-finance-tenets-that-arent-as-smart-as-they-used-to-be.html">5 Personal Finance Tenets That Aren't as Smart as They Used to Be</a> &mdash; Instead of taking advantage of tax deductions through a 401k account, only max out your 401k to the limits that your employer will match your contributions. [Len Penzo dot Com]</p> <p><a href="http://cashmoneylife.com/health-reimbursement-account-benefits/">Health Reimbursement Account Benefits - What You Need to Know</a> &mdash; Health Reimbursement Accounts are not tax deductible for employees. [Cash Money Life]</p> <p><a href="http://parentingsquad.com/9-whole-foods-to-feed-your-baby-when-shes-ready-for-solids">9 Whole Foods to Feed Your Baby When She's Ready for Solids</a> &mdash; Consider feeding your baby brown rice and pears when she is ready for solid food. [Parenting Squad]</p> <a href="http://www.wisebread.com/best-money-tips-how-to-negotiate-your-rent-payment" class="sharethis-link" title="Best Money Tips: How to Negotiate Your Rent Payment" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing best money tips negotiate rent Tue, 20 Aug 2013 09:36:43 +0000 Ashley Jacobs 981371 at http://www.wisebread.com What's a Fair Relationship Between Salary and Rent? http://www.wisebread.com/whats-a-fair-relationship-between-salary-and-rent <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/whats-a-fair-relationship-between-salary-and-rent" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/decaying-building.jpg" alt="Decrepit house" title="Decrepit House" class="imagecache imagecache-250w" width="250" height="164" /></a> </div> </div> </div> <p>Can a minimum-wage worker in your state afford to rent an apartment? Does the answer to that question say anything about us as a people? Should you care? (See also: <a href="http://www.wisebread.com/a-decent-standard-of-living">A Decent Standard of Living</a>)</p> <p>Pretty quickly after I started writing for Wise Bread, I discovered that writing about a &quot;decent standard of living&quot; is really hard. There is no luxury so frivolous that there aren&rsquo;t people out there who consider it a necessity, and there is no necessity so essential that there aren&rsquo;t people ready to point out that a billion poor people around the world manage to get by without it.</p> <p>With that in mind, I found this map (from the <a href="http://nlihc.org/">National Low Income Housing Coalition</a>&lsquo;s report <a href="http://nlihc.org/oor/2012">Out of Reach 2012</a>) pretty interesting:</p> <p>&nbsp;<img width="605" height="453" alt="" src="http://www.wisebread.com/files/fruganomics/u203/2012-OOR-Min-Wage-Map.png" /></p> <p>It shows the number of hours of minimum-wage work it takes to pay the monthly rent on a two-bedroom apartment at fair market rent.</p> <p>Their statement here is that there&rsquo;s nowhere in the country where a minimum wage worker can afford to live. If you go by the rule of thumb that it&rsquo;s reasonable to spend about 30% of your income on rent, and you figure that there are 21 working days in an average month, then you&rsquo;d calculate that it&rsquo;s reasonable to spend 50 hours a month earning your rent. But there's no state where that's possible. The cheapest states (West Virginia and Arkansas) take 63 hours of minimum wage work to pay for a two-bedroom apartment.</p> <p>To my mind, the whole notion is a bit odd. For how long has it been reasonable &mdash; not just <em>reasonable</em>, but presumptively true &mdash; that every worker needs his or her own two-bedroom apartment?</p> <p>Let's try an alternative perspective. Let's instead suppose it&rsquo;s reasonable that poor folks shouldn&rsquo;t expect to be able to make ends meet without a roommate. In that case, it would be reasonable for rent to run as high as 100 hours a month, with two workers sharing the cost.</p> <p>Accept that as a standard &mdash; poor folks have to have roommates &mdash; and the implication of the map seems much more reasonable. It&rsquo;s still too expensive to live a few places &mdash; the Northeast corridor, California, and Florida &mdash; but everywhere else 100 hours of minimum-wage work will rent you an apartment.</p> <p>Of course, having a roommate is only one way to afford decent housing. An even cheaper option might be to rent a room in someone else's house. Or to rent a one-bedroom or an efficiency apartment.</p> <p>In fact, there's a lot of complexity, once you dig a little deeper. The whole idea of &quot;fair market rent&quot; buries a lot of variation in the costs of individual units. If you can find a cheaper apartment that meets your needs &mdash; and you only need to find one &mdash; it doesn't really matter what other units go for. (The <a href="https://portal.hud.gov/hudportal/HUD">Department of Housing and Urban Development</a> calculates the fair market rent numbers used. It might be worth mentioning that my wife and I &mdash; and I presume, most of our neighbors in our apartment complex &mdash; are paying almost 25% under the fair market rent for our area.)</p> <p>Underlying all this are a lot of implications about social organization. If one minimum-wage worker can afford a two-bedroom apartment, then one worker with a spouse can afford to start a family, and the non-working spouse can stay home and take care of the child. At the lower end of the income spectrum, that's been tough to arrange for many years now &mdash; in large part because it isn't &quot;decent&quot; to live at <a href="http://www.wisebread.com/our-high-high-standard-of-living-1">the standard of living that a single wage-earner can afford</a>.</p> <p>But if you don't get too hung up on what's decent, and instead go for what works for you, a whole lot of options open up. As I said, you only need to find one apartment that's affordable. You can eat a <a href="http://www.wisebread.com/healthy-frugal-eating">healthy diet that's frugal</a>. There are a million ways to spend less on transportation, clothing, fuel, education, health care, and all the other necessities of life, and produce a standard of living that would have been considered superb by almost everyone who has ever lived &mdash; as long as you don't get too hung up on what <a href="http://www.wisebread.com/when-poor-folks-have-better-crap-than-you">other people consider necessary</a>.</p> <p>I'm glad people are talking about issues of fairness related to the cost of living and how it relates to the minimum wage, and I&nbsp;rather like this group's contribution to the discussion. But I'm also glad I'm living large on a small budget.</p> <a href="http://www.wisebread.com/whats-a-fair-relationship-between-salary-and-rent" class="sharethis-link" title="What&#039;s a Fair Relationship Between Salary and Rent?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Personal Finance minimum wage rent standard of living Tue, 04 Dec 2012 10:36:45 +0000 Philip Brewer 955733 at http://www.wisebread.com Best Money Tips: Negotiate for Lower Rent http://www.wisebread.com/best-money-tips-negotiate-for-lower-rent <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-negotiate-for-lower-rent" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/2621971821_7f36fcde7d_z-1.jpg" alt="Negotiate for Lower Rent" title="Negotiate for Lower Rent" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found some great articles on negotiating rent, last-minute tax tips, and credit card expiration dates.</p> <h2>Top 5 Articles</h2> <p><a href="http://www.carefulcents.com/negotiate-for-lower-rent/">Negotiate for Lower Rent and Live Large on a Small Budget</a> &mdash; Negotiate your rent by offering to pay early and go paperless. [Careful Cents]</p> <p><a href="http://www.savvysugar.com/Last-Minute-Tips-From-IRS-Filing-Taxes-15440903">April 17 Is Approaching: 4 Last-Minute Tax Tips</a> &mdash; If you are filing your taxes last minute, use IRS Free File to file for free. [SavvySugar]</p> <p><a href="http://www.narrowbridge.net/credit-card-expiration-dates/#more-3756">Credit Card Expiration Dates</a> &mdash; Just because your credit card expires doesn't mean your account expired. When your card expires and you get sent a new card, consider canceling it if you have a card with an annual fee that you don't plan on using. [Narrow Bridge]</p> <p><a href="http://www.mangomoney.com/blog/financial-empowerment/8-things-you-should-buy-used">8 Things You Should Buy Used</a> &mdash; Make sure you buy office furniture used. [Mango Blog]</p> <p><a href="http://www.thousandaire.com/how-to-avoid-the-underpayment-penalty/">How to Avoid The Underpayment Penalty</a> &mdash; To make sure you don't get hit with the underpayment penalty, make sure you withhold at least as much in taxes as your tax bill in the previous year. [Thousandaire]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.thedigeratilife.com/blog/stubhub-vs-ticketmaster-online-ticket-brokers-sites/">Tips For Using Online Ticket Brokers and Sites</a> &mdash; When buying tickets online, remember that anything goes in the ticket resale market. [The Digerati Life]</p> <p><a href="http://moneyning.com/debt/the-one-way-to-never-fall-into-debt-again/">The One Way to Never Fall Into Debt Again</a> &mdash; Decide to live in the black and avoid using credit cards so you prevent yourself from falling into debt again. [MoneyNing]</p> <p><a href="http://www.quizzle.com/blog/2012/04/why-you-cant-afford-not-to-talk-to-your-kids-about-money/?utm_source=feedburner&amp;utm_medium=feed&amp;utm_campaign=Feed%3A+QuizzleWire+%28Quizzle+Wire+&raquo;+Personal+Finance+Blog%29">Why you can't afford not to talk to your kids about money</a> &mdash; You can't afford to not talk about money with your kids because the average college student has $4,100 in credit card debt by the time they graduate.[Quizzlewire]</p> <p><a href="http://cashmoneylife.com/how-work-can-benefit-your-life/">How Work Can Benefit Your Life</a> &mdash; Work can benefit your life because it gives you a sense of purpose. [Cash Money Life]</p> <p><a href="http://parentingsquad.com/prosquad-underage-drinking-and-support-for-adopting-families">ProSquad: Underage Drinking and Support for Adopting Families</a> &mdash; Combat underage drinking by informing your children about the dangers of alcohol abuse and drunk driving. [Parenting Squad]</p> <a href="http://www.wisebread.com/best-money-tips-negotiate-for-lower-rent" class="sharethis-link" title="Best Money Tips: Negotiate for Lower Rent" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing best money tips negotiate rent Tue, 10 Apr 2012 09:48:12 +0000 Ashley Jacobs 917197 at http://www.wisebread.com Ask the Readers: Save Money on Rent? (Chance to win $20!) http://www.wisebread.com/ask-the-readers-save-money-on-rent-chance-to-win-20 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-the-readers-save-money-on-rent-chance-to-win-20" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/for%20rent.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p><em><strong>*** Congrats to our winners! ***</strong></em></p> <ul> <li><a href="../../../../../../ask-the-readers-save-money-on-rent-chance-to-win-20#comment-456409" class="active"><strong>Comment #14: Take a Drive Around the Block</strong></a><strong>&nbsp; Submitted by </strong><a href="http://theclimbtofinancialfreedom.blogspot.com/" rel="nofollow"><strong>bhleigh</strong></a><strong> on March 16, 2010 - 16:17.</strong> I recently went looking for a new apartment in Alameda, CA. I had trolled through the local management companies and complexes advertising on Craigslist, which resulted in nothing decent. I called my Father adn asked for some advice. He told me to drive around the block and look for places with signs up. I spent three hours driving aroudn the niehgborhoods and found a great spot. It was not advertised in the paper or online and was half the price of other places with more space. So take a drive through the neighborhood and just might find your new place around the block.</li> </ul> <ul> <li><span class="status-body"><a class="tweet-url screen-name" href="http://twitter.com/leofair" onclick="pageTracker._trackPageview('/exit/to/leofair');">leofair</a>&nbsp;<span id="msgtxt10594956779" class="msgtxt en"> Try housesitting if your living situation is flexible. That can equal absolutely free or dramatically reduced rent. <a title="#wbask" class="tweet-url hashtag" href="http://twitter.com/search?q=%23wbask"><b>#wbask</b></a></span> <span class="meta entry-meta"><a href="http://twitter.com/leofair/statuses/10594956779"> 6 days ago </a><span class="source">from <a href="http://twitter.com/">web</a></span></span></span></li> </ul> <p>We get a lot of email asking us about apartment-hunting, rental properties, and finding cheap (but lovely) places to rent.&nbsp; As a farmgirl with only a couple of years' experiences in the &quot;rental market,&quot; I'm pleased to say I haven't really had to deal with it much. &nbsp;I know that our readers, do, however.&nbsp; What are your tips for finding cheap rent?&nbsp; Do you have stellar solutions for making the most of each square foot? &nbsp;Or maybe you have some advice for getting back your deposit?</p> <p>We'd love to hear what you have to say. &nbsp;You are the experts! Share your thoughts, either below in the comments or on Twitter, and you could be entered to win one of two Amazon gift cards!</p> <h2>Win a $20 Amazon Gift Certificate</h2> <p>We're doing two giveaways &mdash; one for random comments, and another one for a random <a href="http://www.twitter.com/">tweets</a>.</p> <h2>How to Enter:</h2> <ol> <li>Post your answer in the comments below, or</li> <li><a href="http://www.twitter.com/">Tweet</a> your answer. Include both &quot;<a title=" @wisebread #moneytippers" href="http://twitter.com/wisebread">@wisebread</a>&quot; and &quot;#WBAsk&quot; in your tweet so we'll see it and count it.</li> </ol> <p>If you're inspired to write a whole blog post, please link to it in the comments or tweet it.</p> <p>At the end of the drawing, we'll update this post to include (and link to) all of your helpful responses.</p> <h2>Giveaway Rules:</h2> <ul> <li>Contest ends Friday, March 19th at 11:59 am CST. Winners will be announced after March 19th on the original post and via Twitter. Winners will also be contacted via email and Twitter Direct Message.</li> <li>You can enter both drawings &mdash; once by leaving a comment and once by tweeting.</li> <li>Only tweets that contain both &quot;@wisebread&quot; and &quot;#WBAsk&quot; will be entered. (Otherwise, we won't see it.)</li> </ul> <p><strong>Good luck!</strong></p> <a href="http://www.wisebread.com/ask-the-readers-save-money-on-rent-chance-to-win-20" class="sharethis-link" title="Ask the Readers: Save Money on Rent? (Chance to win $20!)" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/linsey-knerl">Linsey Knerl</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Giveaways apartment Ask the Readers giveaway real estate rent Tue, 16 Mar 2010 18:29:59 +0000 Linsey Knerl 5866 at http://www.wisebread.com Should you try to reduce your rent? http://www.wisebread.com/should-you-try-to-reduce-your-rent <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-try-to-reduce-your-rent" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/forrent.jpg" alt="for rent sign" title="For Rent" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Lately it seems that rent prices have been dropping in many areas of the country.&nbsp; Here in San Mateo some residential apartments <a href="http://www.sfexaminer.com/local/San-Mateo-County-tenants-have-reason-to-smile-46866122.html">are dropping prices as much as 20%</a>.&nbsp;&nbsp; This seemed a bit unbelievable until I looked on Craigslist and found that a specific apartment my husband and I looked at around two years ago actually dropped its price by $300 a month from $1699 to $1399 a month.&nbsp; With our lease expiring soon, I wonder if we should move or try to negotiate a lower rent.</p> <p>My husband and I both do not like moving because it takes a lot of time&nbsp; to look for a new place.&nbsp; There is also the cost of renting transportation and the general headache of carrying everything. However, if the discounts are large enough it might be worth the cost. &nbsp;&nbsp; Although occupancy rates are still quite high in San Mateo county I am seeing many similar nearby units for rent on Craigslist for anywhere from $150 to $300 less than our condo.&nbsp; It definitely seems that we are paying too much for what we are getting.&nbsp; If we are able to sign a new lease for $300 less a month for a comparable rental then it might be worth the hassle of moving.</p> <p> Another option is to just ask our landlord for a discount. A few months ago <a href="http://blogs.wsj.com/wallet/2009/02/09/how-to-reduce-your-rent/ ">a Wall Street Journal blog post</a> showed how a simple letter detailing the declining of the rental market in Manhattan allowed the author to reduce her rent by $300 a month.&nbsp; I think this would probably work well for any good renter&nbsp; in a declining rental market since it would hurt the landlord quite a bit to leave an unit empty for a couple months.&nbsp; For example, if my landlord gave us a discount of $100 a month then he would be losing $1200 in a year, but he would lose $1700 a month if we moved out.</p> <p>I think the important thing is to craft a letter that incorporates evidence that the rental market is declining.&nbsp; It also helps your case if you are consistent on your rent payments.&nbsp; This probably would not work in areas where rental markets are still quite active, but I think&nbsp; it is still possible to negotiate a lower rental rate for a longer term lease.&nbsp; In general month to month leases are the most expensive, and leases that are a year or longer could provide a discount.</p> <p>Anyway, right now my husband and I decided to just write a letter to our landlord requesting a discount.&nbsp; I will probably enclose some of the cheaper listings I have found recently.&nbsp; I do not expect that I would get a $300 a month discount, but I would definitely be happy with a discount of $50 to $150 a month.&nbsp; That discount would add up handsomely over a yearly lease.&nbsp;&nbsp; The largest expense in most of our lives is housing, so I think it makes sense to try to reduce that cost if possible.&nbsp;</p> <p><em><strong>Have any of you tried to ask for a rent reduction this year ? Have you moved recently due to large rent drops in your area?&nbsp; Feel free to share!</strong></em></p> <p>Update:&nbsp; I got $75 off per month on my rent after simply asking my landlord.&nbsp; We signed a new 1 year lease, and this would save us $900 over the year.&nbsp; <br /> &nbsp;</p> <a href="http://www.wisebread.com/should-you-try-to-reduce-your-rent" class="sharethis-link" title="Should you try to reduce your rent?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Personal Finance Real Estate and Housing bargaining housing rent Tue, 09 Jun 2009 00:22:38 +0000 Xin Lu 3242 at http://www.wisebread.com Borrowing, renting, substituting, and doing without http://www.wisebread.com/borrowing-renting-substituting-and-doing-without <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/borrowing-renting-substituting-and-doing-without" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/piggy-bank-among-the-flowers.jpg" alt="Piggy bank rests amid the flowers" title="Piggy Bank Rests Amid the Flowers" class="imagecache imagecache-250w" width="250" height="278" /></a> </div> </div> </div> <p>Finding deals is a key topic on Wise Bread, and for good reason--finding a great price may make something you want affordable and make it easier to stretch your resources to cover your needs.&nbsp; There's a lot here about the tactics of finding good prices--knowing where to look, knowing how to negotiate, being willing to wait, and so on.&nbsp; This post, though, is about four other tactics for frugality--tactics that, for me, make a much bigger difference than finding deals.</p> <p>Personally, I'm a big fan of <strong>doing without</strong>.&nbsp; I'm with Henry David Thoreau:&nbsp; &quot;A man is rich in proportion to the number of things he can afford to let alone.&quot;&nbsp; This is no solution for things that you need, of course, but for things that you merely want, it really is.&nbsp; My own preference is to pick only a few wants, and that satisfy those wants fully and deeply.</p> <p>Where you can't do without, consider <strong>substituting</strong>.&nbsp; In particular, consider substituting a cheap thing for an expensive thing, but that's not the only possible substitution.&nbsp; Considering substituting something that you've already got for something that you'd have to buy new.&nbsp; Consider substituting something that you can make for something that you'd otherwise have to buy.</p> <p>One special category of substituting is <strong>renting</strong>.&nbsp; For things that you simply want to experience, but that you don't really need to have, this is perfect.&nbsp; Some people look down on renting, especially when it's done in a way that seems intended to give others a false impression--renting expensive jewelry to wear to an event, for example.&nbsp; To my mind, though, it's perfectly reasonable to, for example, rent a powerful sports car for a week, so that you can learn what it's like to drive one.&nbsp; Doing it so people will think you're richer than you are seems kind of lame, but also pretty harmless.</p> <p>Finally, as what can be viewed as simply a free version of renting, there's <strong>borrowing</strong>.&nbsp; This covers a wide range of options--borrowing from friends, neighbors, relatives, etc.&nbsp; This is a really important option to consider--nothing will <a href="http://www.wisebread.com/why-dont-people-share-more">raise the standard of living of the whole group</a> more than sharing.&nbsp; Getting in on the borrowing requires two things--first, you need to show yourself to be the sort of reliable person who returns borrowed things promptly and in good condition.&nbsp; Second, it helps a lot to show yourself as the sort of person who is willing to lend as well as borrow.&nbsp; </p> <p>One reason that I tend to gravitate to these options rather than &quot;deals&quot; is that so many deals are specifically structured to give you a taste of &quot;the good stuff.&quot;&nbsp; Airline upgrades are often cheap, on the theory that once you fly business class you won't willingly go back to coach.&nbsp; Wine stores have regular sales on premium wines, hoping that, after some number of cheap bottles of expensive wine, you'll decide to upgrade your cellar.</p> <p>With that in mind, it's important to be careful about a special category of borrowing that's distinct from the personal borrowing from friends and neighbors:&nbsp; Borrowing from sellers or producers.&nbsp; Becoming an &quot;opinion leader&quot; of any sort can result in opportunities to borrow new cool stuff, in the hopes that your use of it will influence others to consider buying the item.&nbsp; Sometimes, though, companies will pretend that this is what they're doing, when what they're actually doing is trying to get you to add their item to your list of things you've got to have.&nbsp; It's the same logic as the pusher:&nbsp; the first one's free.</p> <p>Deals are great, but don't let a search for deals blind you to these other options.&nbsp; And always take care to manage your tastes.&nbsp; It's fine to decide that you only want the best--but only if it means that you'd rather <a href="http://www.wisebread.com/doing-without-is-often-better-than-making-do">do without</a> than settle for second best.<br /> &nbsp;</p> <a href="http://www.wisebread.com/borrowing-renting-substituting-and-doing-without" class="sharethis-link" title="Borrowing, renting, substituting, and doing without" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Personal Finance Frugal Living borrow deals lend rent substitute Thu, 19 Mar 2009 20:20:18 +0000 Philip Brewer 2942 at http://www.wisebread.com What your house is really worth http://www.wisebread.com/what-your-house-is-really-worth <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-your-house-is-really-worth" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/nice-house.jpg" alt="A nice house" title="A Nice House" class="imagecache imagecache-250w" width="250" height="196" /></a> </div> </div> </div> <p>There are several things you can do with a house that you own.  During the housing boom, most of the attention was focused on two of those things:  You could sell it, or you could borrow money against it.  Now that the bust has arrived, it&#39;s easy to see the limitations of that particular model.  Happily, there&#39;s a more stable, more useful way to value your house.</p> <p>Until the housing boom distracted people with fantasies of easy riches, most people focused on the two other things you can do with a house you own: <ul> <li>If you live in it, you don&#39;t have to pay to rent someplace else to live</li> <li>If you don&#39;t live in it, you can get paid rent to let someone else live there</li> </ul> <p>Looked at this way, what is a house worth?<br /> <h2>The financial analysis</h2> <p>Purely as an example, suppose you can rent an apartment as large as a small house for around $750 a month.  (That&#39;s what a largish apartment around here might run).</p> <p>Alternatively, suppose you owned a small house about the size of that apartment.  You&#39;d have a few expenses that the renter doesn&#39;t have:  property taxes, insurance, maintenance, water, sewer, garbage, etc.  If those add up to, let&#39;s say, $400 a month, then owning a house is worth $750 minus $400:  $350 a month.</p> <p>Note that this is true <strong>whether you&#39;ve got a mortgage on the house or not</strong>.  Just like having some credit card debt doesn&#39;t change the value of the clothes or TV or BBQ grill that you might have charged, the value of your house is unrelated to the structure of any debts you might have.</p> <p>A <a href="http://www.arachnoid.com/lutusp/finance.html">financial calculator</a> can crank out a value for a $350 stream of income.  Depending on the value you pick as the relevant discount rate, that stream of income is worth around $60,000 to $65,000.  (I used 6.5% as the discount rate.  You also have to plug in a number for how long the stream of payments goes on, but the payments in the distant future are discounted away to a vanishingly small value--a stream of $350 payments that goes on for 100 years is only worth a couple thousand dollars more than a stream that only goes on for 50 years.)</p> <p>Now, around here, a house comparable to a $750/month apartment (2 bedrooms, 1 bath, 1000 sq ft) could just about be had for $65,000--but only if it had serious problems.  It would probably have a serious maintenance backlog or be in a bad neighborhood, or else it would cost more.  (This is a big part of the reason that I rent rather than owning a house.)<br /> <h2>Non-finanacial aspects</h2> <p>You can&#39;t write in praise of renting without getting a lot of comments from people who think that renting amounts to stuffing their money down a rathole.  You write checks month after month--possibly for years--with nothing to show for it.  On the other hand, if you buy, you end up owning something.  There&#39;s some truth to that, but it&#39;s worth being clear about what, exactly you do own.  Specifically, you own the items listed at the beginning:  You can sell it, mortgage it, live in it, or rent it out.</p> <p>There are, of course, other advantages to living in a house:  You have more privacy, more control of your living environment, more options in terms of size and amenities, and so on.  But you don&#39;t own those things--those things you pay for just like rent.  That is, the money you pay this month pays for this month&#39;s privacy and control.  (Because, remember, owning a house also ties you to the neighborhood.  If a creepy guy moves into the apartment next to yours, you can always move when your lease runs out.  But if a creepy guys buys the house next to yours, you can lose a lot of privacy and control at exactly the same moment having that neighbor makes it a lot harder to sell your house.)</p> <p>Of course, being tied into your neighborhood can have an upside as well--you&#39;re in a community.  But, then, some apartment buildings have a community as well, even if most of them don&#39;t.<br /> <h2>Principal and interest</h2> <p>Note that we haven&#39;t talked about actually paying the mortgage.  As I said, that&#39;s really a separate issue.  Your house is <strong>worth</strong> the cost of the rent that you don&#39;t have to pay, adjusted for the extra expenses that fall on a homeowner.  The mortgage and interest are <strong>what you have to pay</strong> to get it.  (In the United States the interest payment is tax advantaged, which makes the effective cost a bit harder to figure out, but that&#39;s just a detail.)</p> <p>If what you have to pay is less than what the house is worth, it&#39;s a good deal financially.  If what you have to pay is more than what the house is worth, it&#39;s a bad deal financially.  It&#39;s that simple. </p> <h2>Accumulating wealth</h2> <p>People seem to be strongly motivated by the idea that the money that goes toward their mortgage is going to buy something that they own, whereas money that goes toward rent is just gone.  I think looking at homeownership that way just confuses people.</p> <p>Your house is worth what it would cost you to rent an equivalent place or what you could get for it if you rented it out (adjusted for the expenses of home ownership).  That&#39;s true whether you own it outright or have it mortgaged to the hilt.  (Of course, if you have a mortgage you owe a large debt, but that doesn&#39;t affect the value of the house.)</p> <p>Your apartment, of course, is worth zero.  But if it&#39;s cheaper to live in an apartment than it is to live in a house--and it often is--then the apartment dweller has surplus cash to invest, and therefore can accumulate wealth.</p> <p>One thing I&#39;ve left out of this calculation is &quot;appreciation&quot; in the value of the house.  If the price at which a house can be sold grows <strong>faster than other investments grow</strong>, then home ownership can win in a big way.  But, as is now clear, there&#39;s no good reason to assume that such outsized growth can be expected.<br /> <h2>No ratholes involved</h2> <p>Whether a house is a good deal financially or not is important, but it&#39;s not the only factor.  The non-financial aspects are also important--in fact, they are often the determining factors in people&#39;s decisions to buy a house.  If you want to buy a house because you find one you want to live in and can afford, then by all means do so.  But if you&#39;ve previously been misled by the fuzzy notion that money spent on a mortgage is money &quot;invested&quot; but that money spent on rent is money &quot;down a rathole,&quot; now you know how to do a valid analysis.</p> <a href="http://www.wisebread.com/what-your-house-is-really-worth" class="sharethis-link" title="What your house is really worth " rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing apartment apartments buy buying a house rent Tue, 16 Sep 2008 03:14:53 +0000 Philip Brewer 2430 at http://www.wisebread.com Manage your fixed expenses http://www.wisebread.com/manage-your-fixed-expenses <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/manage-your-fixed-expenses" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/gas-meters.jpg" alt="Gas meters" title="Gas Meters" class="imagecache imagecache-250w" width="250" height="151" /></a> </div> </div> </div> <p>When you think of people ruining their lives with foolish spending, it's easy to focus on the little things that add up--the meals out, the hefty bar tab, the daily Starbucks habit, and the retail therapy (whether for new clothes, new shoes, or the latest must-have electronic gizmo). The fact is, though, that these expenses (although they can make it tough to save for the future) are not the ones that ruin people's lives. It's the fixed expenses that do that.</p> <p>By fixed expenses, I mean any kind of expense that you can't immediately adjust if your economic situation changes. For example, the property taxes that you owe stay about the same even if your income drops--fixed expense. Your income taxes, on the other hand, fall automatically if your income drops--variable expense.</p> <h2>Typical fixed expenses</h2> <p>Most of your biggest budget categories (except for groceries) probably go to various sorts of fixed expenses:</p> <ul> <li>Debt payments: mortgage, student loan, car payment, consumer debt...</li> <li>Lease payments: apartment, car, self-storage unit...</li> <li>Services contracts: cell phone service, burglar alarm service, lawn care service, fitness center membership...</li> <li>Municipal fees: water, garbage, sewer...</li> <li>Insurance: home, auto, health...</li> </ul> <h2>Relatively fixed</h2> <p>There are other expenses that, even if they're not actually fixed, are <strong>relatively</strong> fixed in the sense that you'd have to completely change your life or abandon something of considerable value in order to quit paying the money. Tuition, for example falls into this category--you could quit paying next semester, but doing so would mean abandoning your degree. For many people, child care is another example--eliminating that expense involves deciding that one parent will be out of the money economy for an extended period.</p> <p>Also in this category are &quot;circumstantial&quot; expenses, such as a large monthly outlay for gasoline that could be changed, but only with some sort of major lifestyle change: a new job closer to home, a new home closer to work, or a some change in how the commute is handled (carpooling, using mass transit, bicycling to work, a more fuel-efficient vehicle).</p> <p>Utility bills are often thought of as fixed, but some could be turned off in an emergency, and some of the rest can be reduced simply by using less of whatever the service is.</p> <h2>Good times versus bad</h2> <p>It's very easy to convince yourself to accept high fixed expenses. Something that you'd be able to afford someday (a big house, an expensive car, a big-screen TV) can be had <strong>now</strong>--and the extra cost may be perfectly reasonable.</p> <p>For example, suppose you want a $1400 big-screen TV. You could save $114 a month in a high-interest savings account paying 5% and be able to afford it a year from now. On the other hand, if you borrowed the money at 12% and paid it off over the course of a year, you'd have to make monthly payments of $124. That extra $10 a month can seem very reasonable, if you think of it as what you're paying to have a big-screen TV for a year. And, after all, at the end of the year you've got a big-screen TV either way.</p> <p>This sort of thinking, which does only modest harm during good times, is absolutely ruinous during bad times. A two-income family that suddenly has to get by on one income will succeed or fail entirely on the basis of its fixed expenses. If the fixed expenses are low enough that one income can cover them with enough left over for food, then everything will probably be fine. If not, the family sinks inexorably into debt.</p> <h2>The upside of bad times</h2> <p>In good times, it's very easy to feel like high fixed expenses are unavoidable. Many thrifty people spent years trying to save up enough money for a down payment on a house, only to have home prices rise even faster than they could save. They can be forgiven for thinking that they had no choice but to overextend themselves if they ever wanted to buy a house.</p> <p>In bad times, that logic is largely reversed. Deciding to stay in an apartment for another year or two and save up a larger down payment will probably translate into more options, a nicer house, smaller payments, and a lower total cost. This is hard for someone trying to sell a house, but very nice for someone with low fixed costs.</p> <h2>Fixed cost illusion</h2> <p>It's easy to feel that you simply have to accept your fixed costs. They are, after all, fixed. This thinking is a mistake. Any of your fixed costs can be changed. Some of the changes require a long lead time. Others may entail some expense. Others can be changed cheaply, but only if you're willing to accept a changed (often reduced) lifestyle.</p> <p>During good times, it's often possible to &quot;grow into&quot; high fixed expenses. A year or two of tight budgets and slightly precarious finances can--after a raise or two, after some consumer debt is paid down--leave one in a pretty comfortable situation. When bad times threaten, though, that strategy leads to disaster.</p> <p>I don't know what direction things are going for the economy, but I think the risks are high enough that it's worth aggressively managing your fixed expenses:</p> <ol> <li><strong>Know what your fixed expenses are.</strong> If your budget has some fixed and variable expenses lumped together into the same category, break them out separately.</li> <li><strong>Know how long they're fixed for.</strong> Know when your cell phone contract expires. Know when your lease is up. Jot the dates down on your budget.</li> <li><strong>Make a plan for reducing them.</strong> The debt fraction can be reduced simply by paying down some debts, but consider more drastic changes. Consider moving to a cheaper place when your lease is up. Consider selling a car. Sell enough stuff that you don't need a self-storage unit. Save up enough cash that you can safely raise the deductible on your car insurance.</li> <li><strong>Create some contingency plans.</strong> What will you do if you lose your job? What will you do if your spouse loses his or hers? What will you do if the price of gasoline doubles, heating costs triple, and food costs just keep going up?</li> </ol> <p>Contingency plan creation has a double purpose. Not only are they useful to have in case some particular misfortune comes to pass, they can provide some incentive to go back and put some oomph into your plan to reduce your fixed expenses.</p> <p>Those little expenses that add up to keep you from paying down debt and saving for the future are a problem in the long term, but they don't lead to people being broke, homeless, or in bankruptcy. It's the fixed expenses that do that. Manage your fixed expenses, and you can ride out the bad times--and can safely indulge in some of those little variable expenses that give real pleasure.</p> <a href="http://www.wisebread.com/manage-your-fixed-expenses" class="sharethis-link" title="Manage your fixed expenses" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Personal Finance Frugal Living fixed expenses mortgage rent utilities Sun, 17 Feb 2008 23:27:47 +0000 Philip Brewer 1811 at http://www.wisebread.com Renting is cheaper http://www.wisebread.com/renting-is-cheaper <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/renting-is-cheaper" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/framed-house-2.jpg" alt="Framed house" title="Framed house" class="imagecache imagecache-250w" width="250" height="199" /></a> </div> </div> </div> <p>Everybody has seen a rent-versus-buy analysis. On one side you add up the mortgage, taxes, insurance, and maintenance costs (being sure to adjust for the tax write-off of the mortgage interest). On the other side you add up, well, just the rent, really. Then, at the end of 30 years the homeowner has a house and the renter has... nothing. Here's a different way to look at it.</p> <p>What's the value of a house owned free-and-clear? Market value is one aspect, but market value has been kind of wonky just lately. Wanting to find another way to come at the value, I figured I could value the house by calculating how much extra the renter has to pay each month, once the mortgage is paid off. Then I could compare that stream of (avoided) payments to the value of an investment that would provide an equivalent stream of income. The value of the house would be the same as the value of that hypothetical investment.</p> <p>For example, if the homeowner's taxes, insurance, and maintenance comes to $300 a month when rent was $500 a month, then ownership is saving the owner $200 a month--and $200 a month is worth at least $48,000 and quite possibly as much as $60,000. (That is, you could invest $60,000 in a diversified portfolio and pull out $200 a month, probably forever. If you only had $48,000 invested and you pulled out $200 a month, it would last a long time, but maybe not as long as a house.)</p> <p>So, I was doing that analysis recently, but trying to be a bit more comprehensive--including all the extra expenses of homeownership, and making it specific to my own situation, which I knew would tilt things a bit toward the renting side of the comparison, because I've got a great apartment with certain amenities included in the rent.</p> <p>So, in my analysis, I put these things in the cost-of-owning column:</p> <ul> <li>property taxes</li> <li>maintenance</li> <li>insurance (after subtracting what I pay for renter's insurance)</li> <li>water</li> <li>sewer</li> <li>garbage</li> <li>heat (included in the rent here)</li> <li>basic cable (also included in the rent here)</li> <li>recycling fee (paid by homeowners but not renters around here)</li> </ul> <p>(Homeowning friends kept mentioning other expenses that one or another of them paid, such as lawn mowing, snow plowing, and burgler alarm service, but I didn't include those because I figured I'd generally do those things for myself (or do without them), rather than pay cash.)</p> <p>After talking to friends and relations to get estimates for those costs and then adding them all up, I was shocked to discover that you could <em>give me a house for free</em> and I couldn't live in it as cheaply as I can live in my apartment.</p> <p>Now, maybe some of my estimates were on the high side. In particular, my estimate for maintenance of $2000 a year is probably higher than most people would estimate--but I was trying to include not just fixing things but also each year's share of the major expenses (new roof, new windows, new doors, new garage door, new furnace, new air conditioner, new appliances, repainting, refinishing floors) that you might have to pay only once every 15 or 20 years.</p> <p>Of course, a house might well be a nicer place to live. A house will almost certainly be bigger than our apartment, have a yard, a place for a garden, probably a garage--all things we don't have. And we realize that we've been really lucky--sane landlord, few noisy neighbors, good maintenance, well-kept grounds--all things that could change at any time. (Of course neighborhoods can change around a homeowner, too. And while if things go downhill here we can just move, a homeowner might find himself stuck trying to sell a house in a neighborhood that has gone downhill.)</p> <p>If you can afford to live in a house, and you want to, then by all means buy a house. (Especially if you can't find an apartment that's both excellent and cheap like ours.) But take a close look at the relative costs, not just a simple-minded rent-versus-buy analysis.</p> <a href="http://www.wisebread.com/renting-is-cheaper" class="sharethis-link" title="Renting is cheaper" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/topic/personal-finance/real-estate-and-housing">Real Estate and Housing articles from Wise Bread</a>.</div></div> Frugal Living Real Estate and Housing apartments buy buying a house real estate rent Tue, 04 Sep 2007 20:38:45 +0000 Philip Brewer 1104 at http://www.wisebread.com