New Goal: I want to buy a house with cash! (or, I hate debt)

I feel somewhat hypocritical talking about debt as a bad thing, seeing as I never went into it. It’s a little like a skinny teenager lecturing a Weight Watchers group. True, I have no debt… BUT my parents paid my college tuition. BUT my parents let me live rent-free while I was in grad school. BUT I grew up in middle-class, affluent America, with all the comforts and privileges therein, and I didn’t pay for them.

The truth is, if I had had to pay for all the blessings I’ve been given, I’d be indebted up to my eyeballs. From orthodontia to college to eating out to my car, there’s no way around it: I’ve been given a lot. But instead of asking me to pay for it, it’s as if someone’s wiped my slate clean, forgiving all I could have owed. I get to be debt-free, not because of hard work, but because of grace. This is true in other areas of my life, too, but I digress.

What I’m getting at here is that I know I’m no expert, no authority. I know people in debt have many reasons and situations that have gotten them there, and many times, it’s the same kinds of things I’ve done. No judgment here, OK?

But I HATE debt.

I hate that it traps people, I hate that it takes away people’s homes, I hate that it makes us spend more than we should or buy things we can’t wait for.

After more than a year in the PF world, I’ve only just now read Dave Ramsey’s Total Money Makeover. I’m not saying I see eye-to-eye with him on everything, but a couple things he writes really, really clicked with me. Things like paying off all debt with gazelle-like focus. Things like having an emergency fund in place. Things like not buying a brand-new car unless you have the liquid funds to do so. Also:

*Our society accepts debt as normal.
*Going into debt = paying interest = a larger purchase price at the end.
*There are a lot of things I don’t need; it’s possible to live on less.

Which leads me to the culminating announcement: I’ve made a change to my future home-purchase goal, and here’s my new plan:

When I buy, I’ll put down the largest down-payment I can afford (formerly aiming for 20%, now thinking closer to 50%, though 100% would be ideal and obviously would not require a mortgage).

If I do need a mortgage, it will be a 15-year. I will not purchase the home if my monthly mortgage payment is more than 30% of my monthly take-home pay.

My sidebar goal will stay at $50K, as that’s my 2008 goal. But I’d secretly like to get it up to $60K by December. A lot of people would say this is crazy, that going into debt for a home is not wrong (I agree!). But I’m thinking this: I’m still young, I have a great living situation, I have few expenses.

Why not set higher goals like these? Why not dream of a life with no debt?

Photo: sugu

How Movies Set Us Up To Want

If you, like me, find yourself more interested in movie characters’ real estate or wardrobes than the plots or story line, you’ll appreciate this post over at Escape Brooklyn.

In it, she cites a recent MSN Money article that points out the discrepancies between what movie/tv characters have and what they supposedly do for a living.

Among the examples are Eva Mendes’s character in Hitch, a gossip columnist with a $5,000/month-rent New York Loft and Ann Hathaway’s Andi in The Devil Wears Prada, who gets loads of free designer clothes at work.

I’d add the following:

Gilmore Girls: A beautiful Victorian house, all meals ordered or eaten out & gorgeous, new clothes every season… all on an innkeeper’s salary? OK, they couldn’t pay for Yale, but even still!

27 Dresses: Katherine Heigel’s character lives in a beautiful, vintage apartment in NYC. Her sister visits and calls it “cute.” I think we all know that had to cost a pretty penny. And she’s someone’s assistant.

The truth is, as a manager in the Chicago area making a mid-level salary, I can’t even afford a two-bedroom condo in my area. So do you think movies set us up to want more so that we’ll spend? Or is allowing us to pretend we can afford X, Y & Z part of a movie’s magic?

Money Hacks Carnival #11

I recently joined a newer PF community, Money Hacks, and their eleventh carnival is up at Save and Conquer.

My post, The Way to Wealth: Rudeness?, is included.

Among my favorites:
8 Ways That I Can Save Money (I’m a sucker for a good list) and Are You Ready to Buy a New House (probably no for me, sadly–only been at my job a year and have varying thoughts on future plans).

What Do You Think Will Happen to Rental Rates?

A friend of mine is moving to Charlottesville, Virginia, in a few months, so I was looking online at apartments in that area. (Full disclosure: I figured it’d make a great back-up plan if I decide to move)

Can I just say one thing: Moving to the South sounds like a better and better option. Why spend $1000 to rent a one-bedroom in Chicagoland when I could pay $500 to share an adorable place with a friend in Virginia?

Who decides these outrageous rentals, and do you think they’ll drop if real estate prices keep falling? Or will they go up since more people are renting than buying, so there’s a more competitive market?

Mission: Financial Indy, Part Two

RENT: I decided to start paying my parents $500 a month. Why this amount, when I was looking at a condo for $1100? First, I’m only renting a room, for the sake of comparison. I don’t have free access to the kitchen, and I can’t have people over whenever I’d like. This is very convenient and comfortable, and I love my suite, but $500 seems fair.

WORKING FOR DAD: I’ve mentioned before that I work part-time for my dad’s company. Since last fall, it’s been paying me $500 a month. So in the interest of getting my dad to approve the whole me-paying-rent thing, I suggested a compromise.

SOLUTION: He’s taking me off the payroll. I’ll still work for him, and he’ll still let me live here. It’s a good deal for everyone: I feel like I’m contributing, he has a lower payroll and we’re both happy.

Plus, I take comfort in knowing I’m not charging him much by living here. They’d still heat my room if I didn’t live here, and my water/electricity is minimal. I’m hardly ever home, to be honest!

My New Budget

Yet another byproduct of the great “will she or won’t she” moving debate has been a reevaluation of my savings plan. I’ve decided, effective immediately, to start saving more aggressively. Because I enjoy Excel and its charts so much, here’s a snapshot:

Savings: my Roth and my regular stock portfolio
Giving: tithe, charity, gifts
Rent: I’m going to start paying my parents rent, even if they don’t want it. I haven’t figured out how I’ll get them to take the money yet, but I’ll keep brainstorming.
Fun: entertainment, clothes, dining out
(other) Necessities: toiletries, services (i.e., doctors’ appointments, cheap and infrequent haircuts, work on the car, etc.), diesel for my Jetta, groceries

Where Will I Live (con.)

I hardly know where to begin with what’s happened in the past few days.

First off, I didn’t take the apartment. {Insert heavy sigh.} I loved it, but bottom line: I was scared to spend so much. My whole body tensed up a little when I thought about removing the cushion in my budget, and I was worried about not being able to save aggressively anymore.

Instead, I started thinking more seriously about buying. Oh. my. gosh.

I told the agent that I was considering rent-to-own options, and she told me that the condo owner would be more than willing to do that. I asked for a figure: it was way high.

FYI: I’m closely connected with a real estate brokerage , so I asked them if they could run comps on similar properties that have sold within the last six months (so I’d know if this price was reasonable). Turns out nothing has sold, and at least three homes have been listed for two+ years. Interesting. This little inquiry also led to their wanting to know what kind of homes I wanted, if I had an agent representing me, what my must-haves were.

So. I now have a real estate agent (them). They’ll refund half my co-op, if I were to go with a property on the MLS. Today, the managing broker spent a couple hours going through listings to show me what’s available and what’s a good/bad value. O. my. gosh. AGAIN.

I came home and told my parents the latest news, and Dad (my brilliant financial planner, if ever there were one) says now is just not a good time to buy. No matter what the comps say or what people may think, he’s convinced properties will only go down in this area for the next few years. He says I should wait two or three years, save more money and then, maybe, I should think about buying.

Who knows what tomorrow will bring.

decisions, decisions

OK, so on the plus side: the apartment was even more beautiful in person, and its location is perfect. I could walk to the grocery store, the train, the entire cute downtown. Add to that the all-new kitchen, the enormous walk-in closet in the bedroom, a fully renovated bathroom that looks like a page from a designer magazine and parking space that’s included, and this apartment is my dream come true.

Of course, there are negatives:  Though parking is included, it’s a bit of a walk from this unit, which would be a pain on cold days or when carrying packages. I hate the idea of climbing up and down three flights of stairs to do laundry. It’s not the top floor (like I thought I was) and might be noisy with hardwood floors in a vintage building. Most of all, though, this place is at the highest price I could afford, and it doesn’t include electric, cooking gas or cable.

I’m nervous about not having a cushion in my budget. The smart, frugal, pf-blogging side of me says: wait for something about $200-$300 less. This smart side has found and contacted another unit owner in the building about a possible rent-to-own option.  This smart side hates the thought of throwing $13000 away when I don’t have to.

But the fun-loving, wouldn’t-it-be-cool side says: go for it! You’ll figure something out, even if it means eating less or living without cable.

Decisions, decisions.

Have I Found the Apartment?

So forget everything I said about not moving out. I have found an a-ma-zing apartment: it’s in the town I want, in the vintage-style building I want, on the top floor, filled with hardwood floors, offering all stainless steel appliances. It’s also still available, I just got confirmed to me this morning. I really, really like it, and I haven’t even gone to visit yet.

Let me rewind to yesterday: even though I haven’t been planning to move out, especially not by a specific deadline, I have been flipping through Craigslist still, just out of habit. If something looks good and doable in my price range (actually more like $200 or $300 less than my price range, just so I could still feel frugal), I’ll contact the poster for more info. Yesterday I went to visit two places. At the first, a neighbor noticed us (my brother came with) waiting outside and came over to see who we were looking for. “I’m renting my place, too,” he said. Turned out, he was asking $850 for another one-bedroom ($825 if I’d do a one-year lease), when the guy I was waiting for wanted $875. I told him we’d stop over when we finished our appointment. The more expensive unit had a kitchen with 20-year-old appliances and a dingy bathroom; the $850 was all renovated (isn’t that crazy?). Both, though, faced the busy expressway directly–a big negative.

The second place was in the town I LOVE and in a quiet, historic neighborhood. The landlord wants $740. It was hard to see the potential with the absolute filth and squalor the current tenant was living in, but it wasn’t too bad. Negatives: carpet everywhere–even in the kitchen, a hideously ugly lobby/entryway and a creepy basement where the laundry was kept.

So the verdict: a no-go on both.

Then, late last night, scrolling through old postings for the town I love, I found this gorgeous one. It’s perfect, offering everything except an in-unit laundry (but free machines in the basement, I guess). Price: $1100, not including electric, cooking gas and phone. This is the highest I would pay for a one-bedroom, as it still allows me to put away a chunk of money in savings each month.

I think I’m going to go see it.

Why I Live with My Parents, at Age 25.

Back in November, I wrote about my wanting-to-get-my-own-place situation and how I was looking at apartments, determined to be more independent, ready for this next step. Several of you gave me excellent advice and suggestions that really encouraged me in this direction.

I scrolled through Craigslist every day or so, comparing what was out there. I even scheduled another viewing in December, which unfortunately the contact person bailed on. I’ve been looking, really. And I’ve been thinking about it.

A lot.

After getting advice from dozens or more people, here’s what I’ve decided:

It makes more sense for me to stay home right now.
This isn’t because I’m scared or immature or something related. I’ve just stared at the cold, hard facts:

(1) I work 12 miles from my parents’ house. Most days (winter blizzards not considered), it takes me under 30 minutes to commute. Wherever I would end up moving in my price range, I’d be the same distance or farther, meaning less time and more money wasted.

(2) Also, my parents have plenty of space. They’ve given me my own suite, really–I am not down the hall or right next to them. They give me independence and are happy to have me staying with them. As a benefit to them, it makes my working for my Dad’s company much easier, since I usually do so on weekends/evenings.

3) Financially, I will be able to reach my down-payment goal much, much faster by living at home.

(4) This option gives me the most flexibility and freedom.

I know what people say about boomerang children. I know it seems terrible to inconvenience one’s parents, and in some cases it is. But really, my parents love having me. I love living with them. Just because I live here at 25 doesn’t mean I will live here forever. This is for now.

I’ve also decided that I will be sensitive to a need to change at any point: If my parents feel differently, I will take the hint right away. If at any point I need to move out because of a job transfer or something else, I can.

Last, to help myself gain the financial responsibility everyone says you learn from renting/owning, I am budgeting a chunk of money each money towards rent. On top of my regular monthly savings, I’m temporarily adding this extra sum to my down-payment fund each pay period. I figure when I do move out, the real estate market will have improved and I’ll be able to afford something I really like.

Excepting the cost of housing (and the auto insurance policy Dad won’t take me off of), I am completely financially independent, so this works for me. I think I will start paying him for the insurance, though.