A few weeks ago, I was asked to speak about money to the teenaged girls in our church congregation. Thanks to all of you and your many good comments on this blog since January, I felt like I knew what kind of information would be most interesting and helpful to these girls who are just on the cusp of adulthood.
Here's what we discussed:
1. Getting a job and saving 50% of what you earn while in your teens. I also shared with them examples of impressive teenagers I've known through the years and the amounts of money they've been able to save in their bank accounts by the time they graduated from high school.
2. The cost of tuition at local and out-of-state colleges and universities. We even took a look at the cost of elite schools like Harvard and Stanford, just so they would know.
3. Typical salaries of standard jobs: surgeon, fire fighter, grocery store clerk, pilot, flight attendant, lawyer, school teacher. . . and what the monthly take-home pay (after federal taxes) would be for each of these jobs. So. . .is a college education really worth the time and money invested for your particular profession?
4. How much adult life costs: housing, groceries, transportation, utilities and insurance. True to one of my previous examples of teaching children about money, I brought in $3,000 (which is a typical take home salary if you make $50,000/year -- the average salary in Las Vegas) in cash -- in $10 bills. Together we paid the bills of a typical family in southern Nevada. Much to their surprise, we ran out of money, long before we ran out of bills. This was very eye-opening to this lovely group of girls.
5. How compound interest works. We walked through how compound interest works in your favor if you're saving money or investing, but how it works against you if you're paying off a loan or a credit card bill. We also discussed how the length of the loan (or investment) and the interest rate influence your payment (or return) and the total you will pay (or earn) over the lifetime of the loan (or investment).
It was a fun night, and I felt like the girls were right with me. But I'd love to know what YOU would have said to them? What do you wish someone had told you at their age?
Showing posts with label Housing. Show all posts
Showing posts with label Housing. Show all posts
Sep 27, 2010
Sep 20, 2010
What Would You Do With a Windfall? (Carole)
But one day she mentioned that they were going to have to borrow most of their down payment from her parents. She was unbelievably embarrassed to do so, because now her parents would know that she and her husband had blown the entire amount! I don't know how they spent all that money. I do recall they had a ski boat and an old truck to pull it with and their kids had a lot of cool toys, but beyond that I couldn't see where it had all gone.
I've often thought of my friend during these past 25 years. What COULD they have done with that much money that would have been smart? In reality, the possibilities were endless, but here are three super frugal choices.
1. Bury it in their backyard or put it in a safety deposit box. In 5 years they would still have had their $50,000.
2. Put it in the bank. In the mid 1980's an average money market account earned 7.71% (these were the high interest Jimmy Carter years -- great if you had money to invest, horrible if you needed to borrow it) and at the end of five years they would have had over $73,000.
3. Buy a house. In the 1980's, $50,000 would have been a hefty down payment on a starter home.
What would you do if you suddenly found yourself with a large amount of money right now?
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Jul 5, 2010
The Burden of Student Loans (Carole)
I ran across this video a few weeks ago on CNN. Go ahead and watch it, and then I'll comment.
I've mentioned before on this blog, that my husband (and I, although the debts were not for my schooling) came out of graduate school with $60,000 in student loans. This was back in 1986. We lived extremely cheaply and only paid for tuition out of our student loans. We were able to earn enough money during the summers and through my job (as a lowly secretary at the university -- so nothing amazing) to pay for our actual living expenses. And, I might add, we never went on food stamps. I'm troubled by this growing trend. But that is another subject for another post.
It is easy to forget while buried in school and taking out student loans, that the day will come when all that money (with interest) has to be paid back. Typically your re-payment begins 6 months after graduation. This date arrives faster than you can imagine. Most loan repayment amounts are several hundred dollars per month, but if you've got debt for graduate school they are often well over $1,000 per month. That is a hefty portion of your brand new salary. Can you really make enough money to live on after your student loan payments?? And most student loans stretch over at least 15 years. That is a long time to be paying back this money.
Repaying student loans is no different than any other debt repayment. Set up a debt snowball and pay it off as fast as possible! But it is best to have a plan before getting into the student loan quagmire. Here are a few ideas to contemplate:
* Go to a local college or university. As a state resident, your tuition is usually about half of what it would be if you are from out-of-state.
* Become a state resident before you attend the school of your choice. A friend of ours who was planning to attend the dental school in Las Vegas moved here a year early, got a job and established residency. He saved himself $15,000/year or $60,000 total.
* Get a bachelor's degree at a college that will not require you to live away from home or pay high tuition. Save student loans for graduate degrees, not a basic college education.
* Apply for any and all scholarships possible. Keep on top of these year to year so you don't lose them. Many students lose these only because they didn't renew them on time.
* Are any grants available for your program? You never have to pay back grant or scholarship money.
* Do everything necessary to be at the top of your class. Top students are often given research or teaching jobs that pay most or all of your tuition.
* Choose your school wisely. Do you really have to have your degree from Harvard?? Think about the debt you will incur (as this fellow in the CNN video didn't). Ask a mature adult who is good with money if this seems like too much money for your educatiaon.
* Determine if your chosen career path is worth the tuition money you will spend. Last fall I heard a caller on the Dave Ramsey Show tell how she and her husband had over $200,000 in student loans for chiropractic school, and now he hadn't been able to find a decent job and they were getting very very frightened for their future. Dave Ramsey informed her that (despite claims from chiropractic schools) these types of doctors do not make the same amount of money typically that an MD does. He felt this couple had way too much debt for the earning potential of a chiropractor. Do your research and make sure it is accurate. Talk to people who are in your field to find out accurate salaries.
*Consider the location of your school. Is it an expensive place to live? Will your school debt be much, much greater because you have to live in New York City or Boston? The mid-west is typically pretty inexpensive as are parts of the south.
I'm certainly not against education in any way! In fact we tell our children that a bachelor's degree is a minimum and that a masters degree (at least) in their field will probably be necessary to compete in today's job market. But don't fool yourself or "blue sky" these kinds of important decisions. Student loans can add a significant financial burden that will follow you for half of your working life if you're not careful.
Like always, plan ahead and live frugally. You'll always be glad you did.
I've mentioned before on this blog, that my husband (and I, although the debts were not for my schooling) came out of graduate school with $60,000 in student loans. This was back in 1986. We lived extremely cheaply and only paid for tuition out of our student loans. We were able to earn enough money during the summers and through my job (as a lowly secretary at the university -- so nothing amazing) to pay for our actual living expenses. And, I might add, we never went on food stamps. I'm troubled by this growing trend. But that is another subject for another post.
It is easy to forget while buried in school and taking out student loans, that the day will come when all that money (with interest) has to be paid back. Typically your re-payment begins 6 months after graduation. This date arrives faster than you can imagine. Most loan repayment amounts are several hundred dollars per month, but if you've got debt for graduate school they are often well over $1,000 per month. That is a hefty portion of your brand new salary. Can you really make enough money to live on after your student loan payments?? And most student loans stretch over at least 15 years. That is a long time to be paying back this money.
Repaying student loans is no different than any other debt repayment. Set up a debt snowball and pay it off as fast as possible! But it is best to have a plan before getting into the student loan quagmire. Here are a few ideas to contemplate:
* Go to a local college or university. As a state resident, your tuition is usually about half of what it would be if you are from out-of-state.
* Become a state resident before you attend the school of your choice. A friend of ours who was planning to attend the dental school in Las Vegas moved here a year early, got a job and established residency. He saved himself $15,000/year or $60,000 total.
* Get a bachelor's degree at a college that will not require you to live away from home or pay high tuition. Save student loans for graduate degrees, not a basic college education.
* Apply for any and all scholarships possible. Keep on top of these year to year so you don't lose them. Many students lose these only because they didn't renew them on time.
* Are any grants available for your program? You never have to pay back grant or scholarship money.
* Do everything necessary to be at the top of your class. Top students are often given research or teaching jobs that pay most or all of your tuition.
* Choose your school wisely. Do you really have to have your degree from Harvard?? Think about the debt you will incur (as this fellow in the CNN video didn't). Ask a mature adult who is good with money if this seems like too much money for your educatiaon.
* Determine if your chosen career path is worth the tuition money you will spend. Last fall I heard a caller on the Dave Ramsey Show tell how she and her husband had over $200,000 in student loans for chiropractic school, and now he hadn't been able to find a decent job and they were getting very very frightened for their future. Dave Ramsey informed her that (despite claims from chiropractic schools) these types of doctors do not make the same amount of money typically that an MD does. He felt this couple had way too much debt for the earning potential of a chiropractor. Do your research and make sure it is accurate. Talk to people who are in your field to find out accurate salaries.
*Consider the location of your school. Is it an expensive place to live? Will your school debt be much, much greater because you have to live in New York City or Boston? The mid-west is typically pretty inexpensive as are parts of the south.
I'm certainly not against education in any way! In fact we tell our children that a bachelor's degree is a minimum and that a masters degree (at least) in their field will probably be necessary to compete in today's job market. But don't fool yourself or "blue sky" these kinds of important decisions. Student loans can add a significant financial burden that will follow you for half of your working life if you're not careful.
Like always, plan ahead and live frugally. You'll always be glad you did.
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Jun 23, 2010
Small Spaces - Part 2 (Merrick)
In my last post about small spaces, I talked about how we made more storage space before the house was built. Today I want to talk about making more storage space after your house is built, because this is probably much more applicable to all of you.
When we bought our house, our laundry room looked like this (not the best picture, but it's the best that I have. Basically the room had one shelf and one hanger rod..that's it):
Today, it looks like this:
After three years of living in this condo, it was stuffed to the gills. With the addition of a baby, we just needed more storage space. We had hoped to sell our home before the baby came along, but when it didn't sell, we were forced to turn every bit of unused space into storage space.
We bought the materials at home depot, they cut all the boards for free, my dad drove up for the weekend, we borrowed a table saw, and I painted it with the free white touch-up paint that our builder gave us when we moved in. Now we have a customized laundry room, all for around $150.
By using all the empty and unused space above the washer and dryer, we now have a place to store all my paintings (of which there are a lot, as you can see), diapers, toilet paper, the sewing machine, laundry detergent, and bunch of other things that didn't have a home. Most of these used to sit on the floor, and there is nothing worse than watching your floor space shrink by the day as more things get stacked next to each other. So not only do you not lose square footage, you also increase the value of your home with off-the-ground storage space. Win-win.
Now, if you don't have a handy-man dad like me that can build an entire shelving unit from scratch, home depot has a lot of pre-made shelving units that pretty much only require a screwdriver and a hammer to install. IKEA also has complete storage systems, or even simple single shelves you can easily install and create extra storage space. And all of it is really pretty cheap.
Having a small space is no excuse not to be organized, have food storage, or have plenty of storage space. All it takes is a little creativity and a few nails.
When we bought our house, our laundry room looked like this (not the best picture, but it's the best that I have. Basically the room had one shelf and one hanger rod..that's it):
Today, it looks like this:
After three years of living in this condo, it was stuffed to the gills. With the addition of a baby, we just needed more storage space. We had hoped to sell our home before the baby came along, but when it didn't sell, we were forced to turn every bit of unused space into storage space.
We bought the materials at home depot, they cut all the boards for free, my dad drove up for the weekend, we borrowed a table saw, and I painted it with the free white touch-up paint that our builder gave us when we moved in. Now we have a customized laundry room, all for around $150.
By using all the empty and unused space above the washer and dryer, we now have a place to store all my paintings (of which there are a lot, as you can see), diapers, toilet paper, the sewing machine, laundry detergent, and bunch of other things that didn't have a home. Most of these used to sit on the floor, and there is nothing worse than watching your floor space shrink by the day as more things get stacked next to each other. So not only do you not lose square footage, you also increase the value of your home with off-the-ground storage space. Win-win.
Now, if you don't have a handy-man dad like me that can build an entire shelving unit from scratch, home depot has a lot of pre-made shelving units that pretty much only require a screwdriver and a hammer to install. IKEA also has complete storage systems, or even simple single shelves you can easily install and create extra storage space. And all of it is really pretty cheap.
Having a small space is no excuse not to be organized, have food storage, or have plenty of storage space. All it takes is a little creativity and a few nails.
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Jun 21, 2010
Why You Want a 15 Year Mortgage (Carole)
There are 4 excellent reasons to have a 15 year mortgage:
1. You will build equity in your house much faster, since each monthly payment has a larger percentage of your money going toward the principle.
2. You will own your house (FREE AND CLEAR) in 15 years. You'll be amazed at how quickly 15 years passes in your adult years.
3. You will save tens of thousands of dollars in interest on a 15 year mortgage compared to a 30 year mortgage. More about this in a minute.
4. Interest rates are typically .5% lower on a 15 year mortgage.
Take a moment to visit a mortgage calculator . Type in your own mortgage information (full amount of your loan and interest rate) using a 15 year time line and then do it again with a 30 year time line. Have the calculator figure out your amortization schedule and scroll down to the bottom to see how much interest you will have paid to your lender over the life of your loan. You'll see that even though your monthly house payment will go up a bit with the 15 year mortgage, you will save more than HALF of the interest $ you would have paid with a 30 year loan!
30 year mortgage on $150,000 at 7% interest. Your monthly payment would be $1097.75. During the 30 years that you pay on your loan, you will pay your lender $209,263.35 in INTEREST. (This means you will have paid way more than double the original price of your house). Ugh.
15 year mortgage on $150,000 at 7% interest. Your monthly payment would be $1348.24. During the 15 years that you pay on your loan, you will pay your lender $92,683.63 in interest. So even though your monthly payment went up by $250.49, your overall savings on this loan is $116,579.72. Fantastic!
Yes, you can do this on your own by getting a 30 year mortgage (with the lower monthly payment), but paying at the 15 year payment rate. This plan gives you wiggle room if you ever hit some hard times and need a lower monthly payment to fall back on. Just make sure you're the kind of person who is very disciplined and will keep to the 15 year schedule.
Remember, housing is one place you want to be very, very careful with your money. Your ability to save yourself hundreds of thousands of dollars is very real. Take the time to do your homework -- and reap unbelievable rewards.
1. You will build equity in your house much faster, since each monthly payment has a larger percentage of your money going toward the principle.
2. You will own your house (FREE AND CLEAR) in 15 years. You'll be amazed at how quickly 15 years passes in your adult years.
3. You will save tens of thousands of dollars in interest on a 15 year mortgage compared to a 30 year mortgage. More about this in a minute.
4. Interest rates are typically .5% lower on a 15 year mortgage.
Take a moment to visit a mortgage calculator . Type in your own mortgage information (full amount of your loan and interest rate) using a 15 year time line and then do it again with a 30 year time line. Have the calculator figure out your amortization schedule and scroll down to the bottom to see how much interest you will have paid to your lender over the life of your loan. You'll see that even though your monthly house payment will go up a bit with the 15 year mortgage, you will save more than HALF of the interest $ you would have paid with a 30 year loan!
Here is an example:
30 year mortgage on $150,000 at 7% interest. Your monthly payment would be $1097.75. During the 30 years that you pay on your loan, you will pay your lender $209,263.35 in INTEREST. (This means you will have paid way more than double the original price of your house). Ugh.
15 year mortgage on $150,000 at 7% interest. Your monthly payment would be $1348.24. During the 15 years that you pay on your loan, you will pay your lender $92,683.63 in interest. So even though your monthly payment went up by $250.49, your overall savings on this loan is $116,579.72. Fantastic!
Yes, you can do this on your own by getting a 30 year mortgage (with the lower monthly payment), but paying at the 15 year payment rate. This plan gives you wiggle room if you ever hit some hard times and need a lower monthly payment to fall back on. Just make sure you're the kind of person who is very disciplined and will keep to the 15 year schedule.
Remember, housing is one place you want to be very, very careful with your money. Your ability to save yourself hundreds of thousands of dollars is very real. Take the time to do your homework -- and reap unbelievable rewards.
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Jun 17, 2010
Small Spaces (Merrick)
About two months before Philip and I got married, we bought our first home. It was a condo in an unfinished complex, and when we found it, the building was about four months from being completed. We purchased the two-bedroom condo, and would excitedly drive over once a week to see the progress. Our building is three stories, and as we visited the construction site, we realized that the workers always worked on the top floor first. From then on, we would scope out the condo's on the top floor, and then we would know what projects awaited our home the following week. This gave us a little advantage.
When we visited the third floor one day, we saw they were installing shelves in the bedroom closets. Upon seeing the layout of shelving, we decided they were wasting so much space and thought we could do better. Because our shelves wouldn't be installed for another week, we went home, designed a better shelving layout that used almost the exact same amount of wood, drew up a little picture, and then called the builder and asked if he could do our shelving layout instead of the generic one. Of course he said yes.
In our tiny condo we have very little storage space, but because of this easy adjustment, we nearly doubled our shelving space, and were now able to fit our dresser in the closet, which tripled our storage space. No extra cost, and no need to buy expensive shelving units.
Many people with small apartments or homes complain about the lack of storage space. But are they using their space the very best they can? Are they utilizing every inch of space? By simply asking our builder to make a small adjustment, we made the most out of our pretty average size closet. This is only one of the ways we have made the most of our small space. I'll show you a few more ways in the next post.
Until then, tell me a few ways you are frugally making the most of your space, whether big or small.
When we visited the third floor one day, we saw they were installing shelves in the bedroom closets. Upon seeing the layout of shelving, we decided they were wasting so much space and thought we could do better. Because our shelves wouldn't be installed for another week, we went home, designed a better shelving layout that used almost the exact same amount of wood, drew up a little picture, and then called the builder and asked if he could do our shelving layout instead of the generic one. Of course he said yes.
In our tiny condo we have very little storage space, but because of this easy adjustment, we nearly doubled our shelving space, and were now able to fit our dresser in the closet, which tripled our storage space. No extra cost, and no need to buy expensive shelving units.
Many people with small apartments or homes complain about the lack of storage space. But are they using their space the very best they can? Are they utilizing every inch of space? By simply asking our builder to make a small adjustment, we made the most out of our pretty average size closet. This is only one of the ways we have made the most of our small space. I'll show you a few more ways in the next post.
Until then, tell me a few ways you are frugally making the most of your space, whether big or small.
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Jun 15, 2010
When is it Right to Refinance a Mortgage? (Carole)
First the disclaimer: I am not an expert. However, we have refinanced our mortgages a couple of times over the years and so I do have some experience with this subject. At the end of this post, I'll link to some websites that explain things in much greater detail.
Here are the basics:
Pros of Refinancing your Mortgage:
1. Lower your monthly payment
2. Can shorten the length of your mortgage (changing from a 30 year loan to a 15 year loan)
Cons of Refinancing your Mortgage:
1. You return to the BEGINNING of your mortgage cycle -- meaning that your are at Payment #1 again.
2. Because you are on Payment #1 again, the portion of your monthly payment that goes toward paying the principle goes back to its smallest amount and your payment portion for interest goes back to its largest amount.
3. The lender charges closing costs for lowering your interest rate. You didn't think the bank was going to give you 10's of thousands of dollars for FREE, did you? Expect to pay at least $2,000 in closing costs. Obviously the more money you're borrowing, the higher your closing costs will be.
4. There are many other fees (beyond closing costs) associated with refinancing. To some degree, it is like you are buying your house all over again. Remember how fun that was?? Taxes, insurance, and prorated insurance will most likely be due also.
Don't refinance if you're selling the house soon. Go to Bankrate refinancing calculator and see how much your monthly payment will be with your new loan. Subtract that from your current monthly payment and see HOW MANY months it will take you to save the money you will have spent on closing costs, fees and taxes from your refinance. Will you own your house long enough to make up this $ difference?
Be careful with ARMs (Adjustable Rate Mortgages) right now. Home loan interest rates are currently so low, that the chances that your mortgage payment will adjust up in a year or two are very good. With the economy where it is, this could be dangerous for your financial future.
If you do refinance, go for a shorter length mortgage: 15 year instead of 30. You will save 10's of thousands of dollars over the life of your loan with just this one change.
Further reading:
Noodling Over a Mortgage Refinance
When is it Right to Refinance Your Mortgage?
Refinancing Basics
Here are the basics:
Pros of Refinancing your Mortgage:
1. Lower your monthly payment
2. Can shorten the length of your mortgage (changing from a 30 year loan to a 15 year loan)
Cons of Refinancing your Mortgage:
1. You return to the BEGINNING of your mortgage cycle -- meaning that your are at Payment #1 again.
2. Because you are on Payment #1 again, the portion of your monthly payment that goes toward paying the principle goes back to its smallest amount and your payment portion for interest goes back to its largest amount.
3. The lender charges closing costs for lowering your interest rate. You didn't think the bank was going to give you 10's of thousands of dollars for FREE, did you? Expect to pay at least $2,000 in closing costs. Obviously the more money you're borrowing, the higher your closing costs will be.
4. There are many other fees (beyond closing costs) associated with refinancing. To some degree, it is like you are buying your house all over again. Remember how fun that was?? Taxes, insurance, and prorated insurance will most likely be due also.
Good Advice
Most experts agree that you need to be able to reduce your loan interest rate by at least 2.0% to make it worth all the fees you will be charged. Don't refinance if you're selling the house soon. Go to Bankrate refinancing calculator and see how much your monthly payment will be with your new loan. Subtract that from your current monthly payment and see HOW MANY months it will take you to save the money you will have spent on closing costs, fees and taxes from your refinance. Will you own your house long enough to make up this $ difference?
Be careful with ARMs (Adjustable Rate Mortgages) right now. Home loan interest rates are currently so low, that the chances that your mortgage payment will adjust up in a year or two are very good. With the economy where it is, this could be dangerous for your financial future.
If you do refinance, go for a shorter length mortgage: 15 year instead of 30. You will save 10's of thousands of dollars over the life of your loan with just this one change.
Further reading:
Noodling Over a Mortgage Refinance
When is it Right to Refinance Your Mortgage?
Refinancing Basics
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Jun 1, 2010
The Not So Big House (Carole)
I am a house-lover. Just ask my girls how many model homes I dragged them to when they were growing up, or how many decorating books and magazines I've purchased over the years. I currently subscribe to several decorating/organizing type magazines and usually read them cover to cover every month. I have several notebooks filled with idea clippings I've saved over the years, just in case I have a chance to start a new project in my own house. It delights me to see how many blogs out there are devoted to making the most of one's house. All these young women, just starting out in life, fixing up their homes and apartments and sharing their fun ideas and successes with the whole cyber universe. I love to see the colors people use, the furniture arrangements people come up with, and some very clever renovations -- I love it all! We do not have cable TV in our house, but if we did I'm sure I'd be glued to the home design and decorating shows all day long (hence, we do not have cable).
Out of all the thousands of articles and books I've read about homes over my 26 years of marriage, the one book that has had the most impact on my thoughts is The Not So Big House by Sarah Susanka. It is one of my favorite reads about making a house a home. I discovered it soon after it was published back in the late 1990's and have followed its concepts ever since. I think its ideas fall right into line with a frugal lifestyle!
This book is all about LOVING your house. But Ms. Susanka approaches this subject from a unique angle -- although there have been many copycats since her book came out. She is an architect and discovered over the years as she worked with hundreds of clients, that people are most comfortable and content in cozy, small-ish spaces. She tells of a large and grand home built by some friends of hers. This mini-mansion was specifically planned with a super-duper LARGE living room and dining room to someday host their daughter's wedding reception. However, when that festive event finally arrived a few years later, they found that all 100 of the guests gathered in the kitchen to visit and eat and left the grand, showy rooms nearly empty! I bet you've attended a few parties just like this! People like to be in rooms that contain your life and that have a warm, welcoming feel to them -- and this includes you functioning in your own home.
The title of this book might lead you to believe that it deals with reducing your carbon footprint (and there is a bit of that), but that's not her real message. Her message is about making wise choices in your home that will greatly enhance the pleasure, comfort and convenience you find there. This book (and her subsequent 8 books on related subjects) advocates keeping your square footage to a reasonable amount (4,000 square feet or less) and better using your financial resources to create lovely areas that add character, personality and storage to your home. She highly recommends adding architectural details (moulding, railings, stone. . .) to bring charm and real beauty to your rooms, rather than just wanting
big, big, big spaces that end up feeling cool and/or bland. She recommends noticing the view from one room to the next (lining up doors properly -- if you were building a house, having complimentary color schemes, etc) that entices you to enter another warm and welcoming room and that brings a feeling of harmony throughout your home.
Her ideas are simple but thought-provoking and help you understand how to get the most pleasure for your housing dollar. I hope you'll seek her books out at the local library and find your own inspiration on how to create the house of your dreams.
Out of all the thousands of articles and books I've read about homes over my 26 years of marriage, the one book that has had the most impact on my thoughts is The Not So Big House by Sarah Susanka. It is one of my favorite reads about making a house a home. I discovered it soon after it was published back in the late 1990's and have followed its concepts ever since. I think its ideas fall right into line with a frugal lifestyle!
This book is all about LOVING your house. But Ms. Susanka approaches this subject from a unique angle -- although there have been many copycats since her book came out. She is an architect and discovered over the years as she worked with hundreds of clients, that people are most comfortable and content in cozy, small-ish spaces. She tells of a large and grand home built by some friends of hers. This mini-mansion was specifically planned with a super-duper LARGE living room and dining room to someday host their daughter's wedding reception. However, when that festive event finally arrived a few years later, they found that all 100 of the guests gathered in the kitchen to visit and eat and left the grand, showy rooms nearly empty! I bet you've attended a few parties just like this! People like to be in rooms that contain your life and that have a warm, welcoming feel to them -- and this includes you functioning in your own home.
The title of this book might lead you to believe that it deals with reducing your carbon footprint (and there is a bit of that), but that's not her real message. Her message is about making wise choices in your home that will greatly enhance the pleasure, comfort and convenience you find there. This book (and her subsequent 8 books on related subjects) advocates keeping your square footage to a reasonable amount (4,000 square feet or less) and better using your financial resources to create lovely areas that add character, personality and storage to your home. She highly recommends adding architectural details (moulding, railings, stone. . .) to bring charm and real beauty to your rooms, rather than just wanting
big, big, big spaces that end up feeling cool and/or bland. She recommends noticing the view from one room to the next (lining up doors properly -- if you were building a house, having complimentary color schemes, etc) that entices you to enter another warm and welcoming room and that brings a feeling of harmony throughout your home.
Her ideas are simple but thought-provoking and help you understand how to get the most pleasure for your housing dollar. I hope you'll seek her books out at the local library and find your own inspiration on how to create the house of your dreams.
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Apr 26, 2010
Saving for Both Short and Long Term Goals (Carole)
Melanie, a faithful FWWL reader, asked about saving for both Long Term and Short Term goals at the same time. Haven't we all been there? If you sit down and think of all the things you really should/want to save money for, it will probably be a mighty long list. Where do you start? Most people don't have the personal discipline to prioritize their wants and needs, so they just buy everything on credit the moment they want it and soon find themselves in deep financial trouble.
There is a better way and it works every time.
First -- Write your list. Take a couple of days or weeks to work on it, as it often takes some time for all your past ideas to come to the surface. Take this time to decide what you REALLY want and need.
Second -- Divide your list into both Long Term and Short Term financial goals.
Long Term Goals might include:
Emergency fund (3 - 6 months of take-home pay saved in cash -- this money is used to cover unexpected car repairs, household repairs, major medical expenses, and possible unemployment),
A down payment on a house,
A new car paid for with cash.
Some of these long term goals aren't that exciting, but they will bring stability and safety to your future financial life. Definitely worth the effort.
Short Term Goals might include:
A new piece of furniture,
Re-carpeting a room,
A vacation.
Remember financial goals are about both wants AND needs.
Third -- Now comes the hard part. Prioritize your Long Term Goals. 1, 2, 3. . . Same with your Short Term Goals.
You will quickly see that you cannot possibly save toward all of these at the same time, unless you have a great deal of extra money sitting around. My husband refers to this as trying to "ride your horse off in all directions at once." (He's said this to me many times over the years). If you try to spread your savings money too thinly, you will make very little progress on anything and will quickly get discouraged.
I suggest that you choose #1 from your Long Term list and #1 from your Short Term list and save for only those two. Decide how much money each of these goals needs to bring them to fruition. Then look to see how much money you can reasonably put toward each goal every month. Make yourself a chart (I LOVE CHARTS!) with completion dates. Tape the charts up somewhere you'll see them every day, so that you will keep these goals in the front of your mind. Take it from someone who has saved for dozens and dozens of things over the years -- the first few months of saving pass very, very slowly. But before you know it, it's been 6 months and your saved $ amounts begin to look pretty substantial. Those big numbers are highly motivating to keep moving forward! I've been saving up for a set of custom doors leading from my dining room to my kitchen for quite some time and just passed the $5,000 mark (these are expensive doors) and it feels GOOD. I'm ordering them soon!
The Short Term Goal will probably max out within only a few months and you can go buy whatever fabulous thing it was you wanted to get -- with cash! Celebrate not only by making your purchase, but also write across your chart in big red marker "SUCCESS!" and begin wallpapering your bathroom with these as you achieve each one OR fold up the chart and place it in your journal for future motivation. Then move onto Short Term Goal #2. You may find that some of your short term goals (possibly items #4 and below) begin to look a lot less interesting as time goes on. You'll be glad you didn't impulsively buy these items on credit and now 18 months later you're still paying for things that aren't important to you anymore. Delaying a purchase often causes your rational thinking to take control again or for you to simply change your mind. The VISA people hate that.
Your Long Term Goal may take you a few years to accomplish, but you'll get there too! It may seem like a slow process at times, but there is absolutely no other way to achieve your long term financial goals. This is where you see the value of keeping your monthly fixed expenses low. The more expensive your daily life is, the harder it is to save for your future or any extra lovely things.
By following this technique you will join that rare breed of people who save money to protect their futures and pay cash when they buy something substantial! Let me be the first to say it, "YOU are amazing!"
There is a better way and it works every time.
First -- Write your list. Take a couple of days or weeks to work on it, as it often takes some time for all your past ideas to come to the surface. Take this time to decide what you REALLY want and need.
Second -- Divide your list into both Long Term and Short Term financial goals.
Long Term Goals might include:
Emergency fund (3 - 6 months of take-home pay saved in cash -- this money is used to cover unexpected car repairs, household repairs, major medical expenses, and possible unemployment),
A down payment on a house,
A new car paid for with cash.
Some of these long term goals aren't that exciting, but they will bring stability and safety to your future financial life. Definitely worth the effort.
Short Term Goals might include:
A new piece of furniture,
Re-carpeting a room,
A vacation.
Remember financial goals are about both wants AND needs.
Third -- Now comes the hard part. Prioritize your Long Term Goals. 1, 2, 3. . . Same with your Short Term Goals.
I suggest that you choose #1 from your Long Term list and #1 from your Short Term list and save for only those two. Decide how much money each of these goals needs to bring them to fruition. Then look to see how much money you can reasonably put toward each goal every month. Make yourself a chart (I LOVE CHARTS!) with completion dates. Tape the charts up somewhere you'll see them every day, so that you will keep these goals in the front of your mind. Take it from someone who has saved for dozens and dozens of things over the years -- the first few months of saving pass very, very slowly. But before you know it, it's been 6 months and your saved $ amounts begin to look pretty substantial. Those big numbers are highly motivating to keep moving forward! I've been saving up for a set of custom doors leading from my dining room to my kitchen for quite some time and just passed the $5,000 mark (these are expensive doors) and it feels GOOD. I'm ordering them soon!
The Short Term Goal will probably max out within only a few months and you can go buy whatever fabulous thing it was you wanted to get -- with cash! Celebrate not only by making your purchase, but also write across your chart in big red marker "SUCCESS!" and begin wallpapering your bathroom with these as you achieve each one OR fold up the chart and place it in your journal for future motivation. Then move onto Short Term Goal #2. You may find that some of your short term goals (possibly items #4 and below) begin to look a lot less interesting as time goes on. You'll be glad you didn't impulsively buy these items on credit and now 18 months later you're still paying for things that aren't important to you anymore. Delaying a purchase often causes your rational thinking to take control again or for you to simply change your mind. The VISA people hate that.
Your Long Term Goal may take you a few years to accomplish, but you'll get there too! It may seem like a slow process at times, but there is absolutely no other way to achieve your long term financial goals. This is where you see the value of keeping your monthly fixed expenses low. The more expensive your daily life is, the harder it is to save for your future or any extra lovely things.
By following this technique you will join that rare breed of people who save money to protect their futures and pay cash when they buy something substantial! Let me be the first to say it, "YOU are amazing!"
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Apr 15, 2010
Re-thinking the Cabin (Carole)
But like any red-blooded American woman I began to think, "Wouldn't that be GREAT to have a lake house??" Or a mountain cabin, or a beach house or a vacation home or whatever this kind of 2nd home is called in your area. Something I'd never considered before in my life, suddenly became something I really wanted in my future. It just sounded so relaxing. . .
Luckily I have a wise mother-in-law. She mentioned to me about 20 years ago that she didn't understand the whole 2nd home idea. I was shocked. I knew she had many, many friends who had cabins and lake houses. How could she think this?? Then she told me why she wasn't interested:
1. You feel obligated to go to the same place -- EVERY YEAR. She wanted the freedom to go somewhere new when she had the inclination to get away -- anywhere in the world.
2. You have to clean it every time you go and again when you leave. On the other hand, every vacation destination pays people to not only clean things up when you leave, but they keep it clean every day that you're their guest.
3. You are always concerned about vandalism (when you're away) and seasonal maintenance. At your vacation destination, you have none of these concerns. You waltz in and you waltz out.
4. Your down payment ALONE on the property (say $20,000) could buy you 50 nights at a hotel charging $400/night. That's one terrific vacation room! If your room was only $200/night you'd be able to vacation for 100 days! And this money doesn't even count your $1000 mortgage payment (and home owners insurance) every month for 15 or 30 years.
I'm not too quick sometimes, but I began to see that her reasons made a whole lot of sense. I've joined her No Vacation House Club. Maybe you see a 2nd home as an investment. That's great. But I'd personally rather have an investment that didn't require me to clean toilets and kill mice.
To borrow (and alter) my college's motto: The World is My Vacation House.
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Apr 2, 2010
A Peek at the Promised Land (Carole)
A few weeks ago, Tara commented that she didn't see the point in being frugal, frugal, frugal just so she could be a millionaire when she and her husband are 80! What is the fun in that?? Maybe some of you have had the same thoughts as you've thought about coupon-ing, garage sale-ing, eating at home. . . Hopefully, I can give you a glimpse at where this whole Frugal Life thing is really headed.
If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years. We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money. We paid minimum payments for a number of years, and then we got religion. We paid off our car in about 8 months and our student loans in about 2 years. So we paid off all our consumer debt in right around that 3 year mark. We weren't making tons of money and we had 3 children. We were extremely average. You could probably pay things off faster than we did.
Our next step was paying off our house. We knew a couple of families our own age (early 30's) who had paid off their houses. We were AMAZED. Could we do that too?? How long would something like that take? We owed about $160,000 on our house at the time. As a little family we confronted this monumental financial goal with everything we had. We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house. Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle. We often gathered our 3 girls into the room while we marked off the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!! Did we starve through this time? Live on nothing? Never leave the house? No, we actually took a few pretty decent vacations along the way and fed and clothed everyone. Probably saw a few movies too. But we stuck to our house payback schedule. We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail. That is a moment never to be forgotten.
We paid that house off in 1996. In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district). We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice). We paid off this new mortgage in about 2 years. I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing. I can't even explain it. It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen. The last $30,000 was paid off about 5 months earlier than scheduled -- both times. When you get to that point, let me know if this happens to you too!
So, when you've paid off all of your debt -- in under 5 years probably -- how does life look? It is an amazing place to be. Think of the amount of money you bring home every month in your paycheck. Now think of how much it would cost you to live with no major bills. No credit card payments, no car loans, no student loans, no house payment. Can you even wrap your mind around that?
You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes. That's about it. Hmm. How much would that add up to in a month? Not very much. All the rest of your take home pay is YOURS. Wow.
What will you do with it?
Saving is a big thing. Putting as much money as you can into tax-free or tax-deferred programs is very smart.
Beyond that, you can spend it on anything you want. You could buy a new car with cash -- every few months! You could buy a brand new boat in cash, also in just a few months. You could redecorate your entire house. Put in a backyard pool. You can be generous beyond anything you can imagine. Travel to Europe, Asia, Africa -- every few months. All for cash.
You will finally be free. All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU. All in about 5 years.
Enjoy.
If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years. We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money. We paid minimum payments for a number of years, and then we got religion. We paid off our car in about 8 months and our student loans in about 2 years. So we paid off all our consumer debt in right around that 3 year mark. We weren't making tons of money and we had 3 children. We were extremely average. You could probably pay things off faster than we did.
Our next step was paying off our house. We knew a couple of families our own age (early 30's) who had paid off their houses. We were AMAZED. Could we do that too?? How long would something like that take? We owed about $160,000 on our house at the time. As a little family we confronted this monumental financial goal with everything we had. We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house. Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle. We often gathered our 3 girls into the room while we marked off the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!! Did we starve through this time? Live on nothing? Never leave the house? No, we actually took a few pretty decent vacations along the way and fed and clothed everyone. Probably saw a few movies too. But we stuck to our house payback schedule. We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail. That is a moment never to be forgotten.
We paid that house off in 1996. In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district). We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice). We paid off this new mortgage in about 2 years. I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing. I can't even explain it. It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen. The last $30,000 was paid off about 5 months earlier than scheduled -- both times. When you get to that point, let me know if this happens to you too!
So, when you've paid off all of your debt -- in under 5 years probably -- how does life look? It is an amazing place to be. Think of the amount of money you bring home every month in your paycheck. Now think of how much it would cost you to live with no major bills. No credit card payments, no car loans, no student loans, no house payment. Can you even wrap your mind around that?
You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes. That's about it. Hmm. How much would that add up to in a month? Not very much. All the rest of your take home pay is YOURS. Wow.
What will you do with it?
Saving is a big thing. Putting as much money as you can into tax-free or tax-deferred programs is very smart.
Beyond that, you can spend it on anything you want. You could buy a new car with cash -- every few months! You could buy a brand new boat in cash, also in just a few months. You could redecorate your entire house. Put in a backyard pool. You can be generous beyond anything you can imagine. Travel to Europe, Asia, Africa -- every few months. All for cash.
You will finally be free. All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU. All in about 5 years.
Enjoy.
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Feb 19, 2010
Save Big Money When Buying a House - Part 2 (Carole)
Once you have your personal mortgage payment (24% or your monthly take-home pay) number in hand, it is time to go looking for a house. Here are a few ways to buy a house for less:
- Buy a foreclosure. In today’s sad housing market there are some amazing deals to be made on beautiful homes that are being foreclosed on. Foreclosures happen every day in every state. However, right now, there are thousands (if not millions) of homes in foreclosure (take a peek at HUD homes too -- they are merely foreclosed homes that had an FHA loan). The previous owner could no longer afford the monthly payment and the bank has had to take ownership of the house back. In a foreclosure you buy the house from the bank. The bank does not want to own the house and they are often willing to sell it at a substantial discount in order to get it back into a mortgage where they can make money off the interest again.
- Buy a Short Sale. A short sale is similar to a foreclosure, except that the owner still technically owns the house but is behind on their payments and will soon go into foreclosure unless they sell it. The delinquent owner is trying to convince the bank to let them sell the house to a new owner for less than they paid for it and have the bank eat the difference between the old loan and the new loan – rather than the owner still owing that money to the bank (BEWARE: the seller will be taxed on the "forgiven" part of their home loan -- that can be extremely expensive. Doing a short sale also goes on your credit report). It is a horrible thing to be a seller in this category, but the new owner gets a great deal – sometimes saving 50% on the house.
- Buy a modest home in a great neighborhood. Remember the old real estate saying: Location, Location, Location. This is ALWAYS TRUE. The value of your house is always going to be tied very tightly to where your house sits. If you have a modest home, but it sits in a beautifully cared for, desirable neighborhood, it will be worth more than if you have a gorgeous home in a declining neighborhood or next to a gas station or freeway. Be very aware of what surrounds the house you buy. Good neighborhoods tend to see their home values increase over time and your demure home will climb right along with it – at a much faster and higher rate then a great home in a medium or declining neighborhood.
- Buy a fixer-upper. If you buy that modest home in a good neighborhood AND it needs some work – you are getting a home run. (As long as the work to be done is not too extensive.) I’ve known many, many people who have moved into a house that had a nice location, but it needed some new paint colors, some lawn care and maybe a few new roof tiles. The price for a house with these kinds of problems goes WAY down – often tens of thousands of dollars. Old kitchens and bathrooms especially drive a house price down like nothing else -- remember this tip when you're selling yours. If you’re willing to put in a bit of elbow grease, you can really get a nice home at a cheap price and turn it into your dream house.
- Stay put: Another way to save big money on a house is to stay put. Buy a house that meets your needs and live in it for 50 years. The house will appreciate around you. Even in a less than desirable neighborhood. Buy something modest and make it work. Those children who need so much space when they’re teens, move out sooner than you’d guess. Before you know it you’ve got an empty nest. Might as well let them share bedrooms and bathrooms for a few years (it builds character!) and not end up with the mega-house to heat and clean after they’ve all move out. Inflation will work in your favor as long as you are not constantly restarting your 15 or 30 year mortgage by moving. One of our older relatives bought a home back in the 1930’s for about $12,000. His daughters sold it when he passed away in the 1990’s for over $400,000. Real estate – over enough time – does go up.
- Have a long-term plan: I have a good friend who has owned 4 homes in the nearly 20 years I’ve known her. They have lived the last 8 years in a FABULOUS home in one of the very exclusive guard-gated neighborhoods in our area. From what I hear, their house is paid for. But they had a plan – all those years ago on how to get there. House One: When their oldest child was very small, they purchased a HUD home. Take a look at the last link for the rules on buying a HUD home. It was a small home in a medium-level neighborhood. But they paid pennies on the dollar of what it was worth. They redid some tile, painted it inside and out and fixed up the yard and sold it 3 years later for tens of thousands of dollars more than they bought it for. House Two: They found a builders close-out house in a brand new neighborhood that was being sold $25,000 below the cost of other similar homes, because it was the last one of its kind and the builder just needed to sell it. They put in a nice yard, and kept it in good shape and 3 years later they sold it for tens of thousands of dollars more than they paid for it. Are you seeing a pattern?? House Three: They built house #3 and the husband acted as general contractor (saving tens of thousands of dollars). He used every connection he had among builders, carpet sellers and such to keep his cost very low. This house was in a guard-gated community near the airport. So, even though it was in an upscale neighborhood, the noisy location kept the lot prices low. This was a beautiful home with many designer amenities, but all installed following a strict budget. They lived in this house for about 5 years – and you guessed it, made a killing when they sold it. House Four (current home): Again they built this home and acted as their own contractors. This house is massive and spectacular. And paid for. All because they had a plan and were willing to put in some work to get there.
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Feb 16, 2010
Save Big Money When Buying a House - Part 1 (Carole)
Your house is probably the most expensive single item you will ever buy. Because of that, it only makes sense that it can also give you a tremendous opportunity to save a ton of money when you buy it. If you save 50% on a $20 blouse you only save $10. If you save 50% on a $200,000 house, you save $100,000! That is some serious saved cash. Conversely, being reckless or uninformed when buying a house can cost you the same kind of money.
Here is an important, basic piece of information that can help you save money when buying a house:
The 24% Rule:
Your monthly mortgage should be no more than 24% of your monthly take-home pay. That means if you bring home $2,000/month then your monthly mortgage payment should not be more than $480. If you bring home $5,000/month then your monthly mortgage payment should not be more than $1,200. Take the time to figure out your own monthly take-home paycheck amount, and then multiply that dollar number by .24 to determine your upper limit for a monthly mortgage payment.
Here is a simple mortgage calculator that will help you easily figure out the total amount you should spend on a house and still keep your mortgage payment within your money limit.
What if you already own a house? Do the calculations anyway, and see where your mortgage payment falls compared with 24% of your monthly take-home pay. Do you own a house that you can truly afford or is it too expensive?
It’s good to know this information.
Interestingly, when David and I purchased our first home back in 1989, the rule-of-thumb on house payment percentage was 18%. That is substantially different from today’s conventional wisdom of 24%. I would guess there were a lot fewer foreclosures and short sales back in the 1980’s with that 18% number. If you’ve ever been a homeowner, you know that your mortgage payment is not the total cost of home ownership. In addition, there are:
1. Property Taxes
2. Homeowners Insurance
3. Home Repairs
Just these three expenses add up to thousands more $$ every year. Owning a house is certainly a worthwhile goal, but it is also expensive. Be wise.
I have only been a casual observer of homebuyers over the past couple of decades, but I think this raise in percentage from 18% to 24% has less to do with the rising cost of housing than with people’s desire to buy something bigger and fancier than in years past, and the personal motivation of most realtors and bankers to convince you that you should. Our first realtor (back in 1989) told us that we could afford to buy ANY house in the town we lived in! Wow, those were heady words -- I still remember them 21 years later!! Who knows, maybe we could have. But with three small children, student loans and a large business loan, we knew this would be a huge financial mistake! We stuck to the 18% rule and bought something nice, but normal. Many realtors will tell you anything. However, after they earn their hefty commission, you are on your own to pay that huge monthly payment.
Amazingly, many of those who are currently facing foreclosure or a short sale bought homes that were priced FAR ABOVE the reasonable 24% rule. Some folks purchased homes that require a monthly mortgage payment of nearly 50% of their take-home pay! That is simply too much to be paying for a roof over your head. Illness, reduced salary, job loss or an adjustable rate mortgage can push you into financial ruin very quickly with a house payment in this range.
You just might want to consider using the smaller 18% number when purchasing your next home. This will go a long way toward keeping your financial future secure. Remember, the lower you can keep your monthly bills, the more money you can set aside to cover those inevitable rainy days and still carefully invest for your FABULOUS future.
In my next post I will share simple ideas for saving big $ when buying a house.
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Feb 10, 2010
Save Big Money on Rent (Carole)
You will remember, that I am endorsing the idea of living WAY below your take-home pay. When you’re young and your income is probably at its lowest point for your earning life, that probably seems nearly impossible. However, there are ways. . .
The first one I want to mention has to do with reducing (or even eliminating) your housing costs. “How can this be??” you ask. Let me share some time-tested ideas.
When my husband was in graduate school we lived exclusively on my piddly secretary income. We were determined to only use student loans for tuition. My annual salary was about 1/3 of what we now make every month. Ha! Of course, money was worth a bit more back then and life in the mid-west is always cheaper than in the west. But still. We were living on extremely limited funds. To say the least.
That meant no money for rent.
So, we had to figure out some other way. Let me interrupt myself here to say what a blessing it was that my father-in-law insisted that David and I put together a budget for our 4 years of graduate school before we got married. He wanted to make sure that we had a plan for how we were going to survive until we were done. This exercise was when we realized we couldn’t afford a roof over our heads. At least not a very nice one in a safe area of town. So, like I said before, we got creative, and this is what we did:
- House sat for an elderly woman who was serving a religious mission for one year. She didn’t really need rent money, and was mostly wanting a clean, responsible couple to watch her house and keep the heat on while she was away. We paid her $50 per month – that was really cheap even back in the early 1980’s. Since her house was fully furnished, we also didn’t have to buy any furniture.
- House sat for a couple that took an extended vacation. They actually paid us to keep their house looking lived-in while they were away. I think we fed their cats too. This was a beautiful home and she was an incredible housekeeper. I learned a lot from living in her home. I still fold my towels like she did.
- House sat for a couple who were selling a 2nd home. This 2nd home was the MOST DARLING little bungalow. It was cozy and cute in a nice neighborhood. This was our first non-furnished place, so we finally had to break down and get some furniture --used, of course. It was fun to finally have a few things of our own. The house sold because a potential buyer loved that I was baking bread and knitting when she came over. We lived there rent-free for several months.
- House sat for a woman who was beginning to shows signs of senility. She was sweet and lovely, but extremely forgetful. Her two grown children wanted someone in the house to make sure she ate her meals and could call for help if something went wrong. She lived in a very upscale neighborhood right on Lake Michigan, and we lived in her lovely attic for free for about a year and a half. Right through graduation!
- We had other friends who were grounds keepers on a medium sized estate just on the edge of town. They lived in a darling little carriage house with only minimal duties of mowing the grass and watching over the property while the owners were frequently out of town. They not only lived rent-free, but made a decent little salary. All while the husband was in school.
- Another friend of ours was a single fellow who lived with a very elderly gentleman who needed someone around to help him with daily tasks and just wanted some company in the evenings. This friend not only lived rent-free, he also had free groceries. He had this job through 4 years of dental school. And amazingly when the sweet man passed away a few years later, he left his beautiful house to our friend. Tom still lives there with his own family.
After school was done, we still didn’t have any money. And we had a baby. We moved to a small town in the middle of nowhere for David’s first job and amazingly found more opportunities to house sit. Because we had learned that word-of-mouth is the best way to find rent-free opportunities, we started asking around. Within a week a businessman in this small town called us up (sight unseen) and wanted us to live in a house he had been trying to sell for over a year. It was a large ranch-style home on a beautiful street. We stayed about 4 months until the house sold. Word spread that we would make a house look nice and smell nice, and we got a 2nd house-selling gig right away. That house never sold, but I don’t feel responsible for that failure J -- it had a bad location. We lived there for many months.
By now we had our 2nd baby on the way and it became difficult to convince people how clean and attentive we could be with TWO children running around their house. But we weren't ready to pay rent yet, so we turned to the time-tested apartment manager job. This opportunity came through the newspaper. We managed a small complex with about 20 units. This was certainly a lot of work, but I learned a lot and we enjoyed the free rent for another 10 months. Finally, we moved to a larger city for a new job and managed a complex of 100+ townhouses for about 4 months. I found that VERY hard to handle with 2 tiny children. But by now we felt we could afford rent and found a nice duplex (where we negotiated the rent price down a few hundred dollars per month – we’d learned as apartment managers that all rent is negotiable) and lived there until we finally bought a house.
The bottom line here is that we lived in BEAUTIFUL places that we could never have afforded -- for nothing. We saved thousands and thousands of dollars over an almost 5 year period of time just because we thought outside the box and asked around. You just never know. . . Living frugally is a lot more exciting than you'd guess.
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