The Rent vs Buy Argument

With my whole mold dilemma going on it has me revisiting the idea of buying.

I’ve been in the real estate business for about seven years now doing mainly rentals and I’ve always thought that buying and renting are personal decisions. For the most part they are, but with everything happening in my life right now, I’m leaning towards buying.

I’d say it’s also heavily dependent on your financial situation. For some, renting is the only option.

Here Are The Benefits Of Renting.

1)It’s Flexible.

I like the idea of having a lease that’s short term. Either 6 months, 1 year or 2 years, it’s nice to know that you’re not fully committed to a property. I can leave at the end of my lease if I’m unhappy or if it becomes too expensive. You can usually leave mid-lease if you’re able to find a takeover tenant that qualifies. Overall, I believe that the flexibility is great for people who travel for their job, relocate or need something that offers financial flexibility. (Example: if you work on commission and earnings change year to year)

2)Initial Costs Are Low.

Most of the time you can find an apartment without a broker by contacting the property management directly. Websites like Apartments.com, Zillow and Trulia make this possible.

Even if you have to pay a brokers fee, it’s usually no more than 1 months rent. Up front fees include security deposit which could be as low as $500 to 2+ months of rent.

Compare that to your closing costs which are 2%-5% of a homes value plus a 20% down payment! Not everyone has that kind of money available.

3) Allows You To Stay Liquid.

And that brings me to my next point, if you’re you’re able to put together a down payment and closing costs, that means you have the financial opportunity to pursue other investments.

Generally it’s said that a home isn’t a good investment. The only value you really get is a roof over your head at a somewhat stable cost. It gains an average of 4-6% value each year depending on your location and that’s with inflation plus the updates you’ll need to put into it. Compare that to the stock market, the Dow Jones historically has gained 8-9% each year. So stock would be a better return but is more volatile than buying a home.

Pitfalls To Renting

1) Neighbors

Generally, you’re not in control of who your neighbors are and they are a lot closer to you when you’re renting. Renters usually are in apartment buildings where neighbors are sharing walls and tight living quarters. If you buy, you can choose the neighborhood and even a property that is more isolated with less risk of a nuisance neighbor.

2) Absentee Landlord.

The owner of a rental is obligated to make the apartment habitable and make reasonable repairs to the apartment. Somehow that doesn’t motivate some management companies to act correctly and do basic work like fixing leaky pipes or sealing drafty windows. I would say most landlords, even those with massive wealth, would rather wait for the attorney letter demanding repairs than make major repairs of their own free will. Repairs tend to cut into their profit and they hate that.

The Benefits To Buying

1) Tax Incentives

The tax incentives for buying a home and getting a mortgage are pretty nice. It’s almost like a rebate on part of your purchase, that’s how good of an incentive it is. You can write off your closing costs, mortgage interest, and any major repairs on your house. My dad once told me his housing tax incentive was equivalent to a $6000 tax credit.

It’s also a great way to shield your income from tax obligations if you’re in a higher tax bracket.

2) Control Over The Property

As I learned with my whole mold situation, I have no control over my environment as a renter. Mold is literally growing underneath my floorboards and I had no idea and no control. When issues arise, the landlord can choose how they want to fix problems and sometimes they go for the quick fix.

By owning a home, you have complete control over the property. And can choose the best and most efficient option to repair. You can do your own repairs, if you’re skilled enough, and you can make changes to the finishes as you wish.

3) Building Equity

Like I mentioned before, buying a home isn’t the best option for an investment when you’re looking for a high return but you’re still building equity and personal wealth by paying off the principle of your mortgage.

There is some flexibility if you want to increase your liquidity for investments or capital ventures but they involve more risk. Once you’ve paid a significant enough percentage of your principal balance, you can apply to refinance and get a personal loan, apply for a line of credit against your home or for a second mortgage. This is a bit more risk, since defaulting could result in foreclosure, but this allows banks to lend money to you at a better and lower interest rate.

Pitfalls To Buying.

1) Fluctuating Costs

The nice thing about renting is that you always know what your rent is going to be. It’s not a surprise and any repairs that need to be done, the landlord is supposed to be able to fix. Housing costs for a renter should remain stable.

Compare that to a home, which depending on the condition you bought it in, may have some major renovation costs down the road.

My parents have owned their house since 1991 and I’ve watched them pour money into it like it was a bottomless pit. Over the 30 years they’ve owned their home they’ve done a bathroom renovation, built a bathroom out, windows replacements, insulation installments, kitchen demolition and renovation, roof work, landscaping each summer, boiler replacement, basement refinishing, installed backyard and front yard pavers, tree removal, central air installation and bought new laundry appliances. This is an exhaustive list.

After all that work, I don’t feel like my parents came out with much of a profit. There were definitely months where they had to go into debt or take loans to make these payments. They bought their home in 1991 for $190K and it’s probably worth $450-500K at this point. But with 30 years of inflation and renovation costs, it’s not a particularly great deal.

2) Less Flexibility

Because the initial costs to buy and sell a home are so high, including closing costs and broker fees, buying a home is impractical if you plan to move within 5 years.

A home is more of a long term investment just to break even with the costs.

If you’re a person that’s constantly relocating or unsure of where you’ll be in 5 years, renting is a better option.

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Overall, for me the choice seems to be leaning towards buying. The uncertainty of renting is starting to wear on me.

Buying is one the biggest financial decisions of your life so take your time and weigh all the options.

Here’s a great buy versus rent calculator. You can find out which is a financially better option. I’ve always used it to consider whether my apartment was a good deal.

Happy real estate shopping! 🙂

How To Save Tons Of Money On Groceries 6 Easy Tips!

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I remember being a kid and my mom dragging me around town to 3 or 4 different stores hunting for a deal. She was so knowledgeable on what things cost and what was expensive, I can still envision her picking up an item at the store, furrowing her brown in complete disgust and saying, “oh no this I too expensive.” Or embarrassing me by haggling aggressively with the cashier, insisting that the orange juice was $.50 less.

Even now when she stays over to help me with my kids, the first thing she does is ask whether I need groceries. She definitely loves saving and helping others save. Considering groceries make up a major expense right after mortgage/rent and transit, saving groceries and saving money on food shopping is big deal. It’s a controllable expense that fluctuates.

So here are our best tips on saving:

Price comparison shopping

The key is to know what’s on the market that week. The best way to find out is through the circular or save on food weekly flyer. You usually get the weekly circular on Sunday in the Pennysaver. Nowadays most stores also post it online. She’d get CVS, Walgreens, and a bunch of local supermarket circulars and compare pricing. I was never really that great at this since you need a strong memory to write down the lowest price and where the item you want to buy is. She would compare 4-5 stores and just know which one had the best sale.

Her keychain is full of those shopper club cards. Her goal is to get those in store discounts. She signs up for all of them. So after combing through each and every circular, determining what to buy from each store and creating a list, she sets out to make her purchase. There’s no greater satisfaction than swiping your shopper club card at the register and seeing all the saving deducted from your total. She can easily save $10-$15 by comparison shopping. My mom even goes as far as returning items, if she finds out another place offers a better deal. It’s one of the best ways to save money grocery shopping.

Couponing

Couponing is another way to save on groceries if you’re able to do it consistently. The weekend Pennysaver would include the PG saver which included exclusive coupons from Proctor Gamble. She would collect all her manufacturers coupons and keep it in a binder organized in folders by expiration date and ALWAYS remember to use them before that date. You can find most of these coupons online too. Checkout these websites for grocery coupons, just click and print.

https://www.coupons.com

https://www.pgeveryday.com/offers

https://www.retailmenot.com

My mom also knew which stores would double coupons, meaning the actual store would match the coupons savings. That way she could double the savings. If you’re unsure of which stores do this just ask at the register.

Some pitfalls to couponing would be buying more than you need or buying things you didn’t need just because you had a free coupon. I remember eating the most random food because she had a coupon for it. It would sit in our refrigerator because no one wanted to eat it. Or we would have stocked up on certain items because she had several coupons for them and they go bad or expire before they’re used. You kind of have to keep an eye to avoid wastefulness and not get too coupon happy for things you don’t need.

Shop off brand

For things you don’t have coupons for, you can always shop off brand to save here and there. Things like cereal, ice-cream, household products etc. My Husband hates when I shop off brand. There’s always been an association that off brand items are lessor quality and that’s not necessarily true. A lot of them are of equal quality to the branded items. Really, they are the same but something like Frosted Flakes has gone through a lot of marketing to make it more profitable but also more expensive. And even if it is a little lesser quality, you generally get more quantity for what you pay for. Considering how much less off brand is, buying it consistently will save you a lot over time.

Bulk Shopping

I love Cosco and BJs. Buying in bulk is literally my favorite thing to do. I can get lost in those stores. For a small membership ($59) a year, you can buy wholesale size everything. I really don’t think you can ever have too many paper towels and toilet paper. Usually the wholesale shopper clubs also have the monthly coupon books, so between the coupons and the wholesale value, there’s a lot of savings to be had. One caveat is that you can easily find yourself overbuying or buying things you don’t need at these stores. Self control and budgeting is a must. Besides that, definitely a good option to shop non-perishables.

Subscription purchases

I love Amazon a little too much and am part of their prime membership like most people. Recently they launched a subscription service for repeat purchases. Certain household items you can buy in repeat with a 5% discount. If a shipping order has 5 items that you subscribed to, then you get 15% off. For baby items ??, you get 20% off if they are in a shipment with 5 other subscription. So I pretty much use this service for most of my household stuff, dish detergent, lotion, shaving cream, baby wipes etc. And considering that Amazon pricing is already competitive, these subscription prices are basically a steal. The subscription order comes once a month and you can adjust how often the products come, whether they come every month or every 2 months, etc. I absolutely love this service and would highly recommend it for moms unable to make it to Target or Cosco.  Click the link below to try a 30 day trial and get started on subscriptions.

Meal planning

This one is a huge way to save. And if you can’t do any of the other cost saving techniques, I would advise to follow this one. Because if you don’t plan your meals, you won’t have food and you’ll be more tempted to eat out. Eating out frequently becomes very expensive. Trust me. Meal planning is basically cooking in bulk once or twice a week so that there is always dinner to choose from. You might make a big crock pot meal and a big pasta meal.  You can store it in the fridge and then divide it into portions for dinner and lunch the rest of the week. Planning for your meals rather than cooking on the fly is much more productive and less frustrating than waiting until the last minute to cook when you’re already hungry. Perfect things to make in bulk: stews, chili, and pasta. You can roast a whole chicken and then pair it with rice and vegetables the rest of the week, then take the chicken scraps or dark meat at the end and turn it into a soup. You can make lentil soup or split pea soup in bulk. The possibilities are endless but planning your meals will save energy, time and money

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It’s amazing how much money you can save. Groceries make up 10% of a household’s expenses. Me and my husband we easily spend $7200-$8500 a year on groceries alone. It doesn’t feel like that much when your spending $60 here and there over the weeks, but we can definitely use the savings.

But you can also use saving time and investing in Instacart as an option for the time strapped mom. Couponing and comparison shopping is not for the weary but for those in a financial pinch, you can use these tips and watch the savings stack up.

Tags: Bulk buy food, bulk shopping online, where to buy in bulk, grocery coupons, discount codes, save a lot prices, how to extreme coupon.

How to Budget: Personal Finance Basics


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How To Budget And Personal Finance Basics

I used to sit with my dad as he combed through the finances, his brows furrowed in concentration. Little did I know that on those mornings I was subconsciously learning how to budget and personal finance basics. They say we learn everything from our parents.

He’d sit on a stool at our open kitchen and just devour the information over a cup of joe. I was curious. Why did he devote all this time to his spreadsheet? Was this a work project?

He went over how he calculated all the household expenses and income and balance it all. He kept tabs on check balances and even his car depreciation.

It kind of went over my head. I was busy just trying to figure out what I wanted for breakfast or how to laze around for the day. I honestly spent a majority of my 20s not knowing much about my finances or how much I made. I always worked during college and had a plethora of jobs after. I could afford the things and experiences I wanted, but I didn’t really know how much was being spent; how much was wasted or saved. To this day I wonder how much I could have been saving during this time.

The first time I had to budget I just made a list of the income and combed through every single expenditure that I made. Then at the end, I subtracted the expenses from the income. Every coffee I bought, every lunch I ate out, and every trip to Target I took was recorded. It hurt. I literally cringed when I realized how much was being wasted.

I mean, did I really spend $50 on coffee this month??

And what was that subscription on my card? They’ve been charging me for over a year!

I realized I could be saving thousands a year and making more out of my money if I accounted for it all and held myself responsible on how it was spent. However, I realized this wayyy too late in the game; the money was already spent. I felt really bad after realizing how much was wasted. Part of me didn’t want to keep going and budgeting, that’s how bad I felt.

Now It’s been 4 years of budgeting. 3 years. I keep it all on a spreadsheet. Google Spreadsheets :). I can track how much my income has increased in those 3 years. I can track how much my overall spending has been by category. I can brainstorm on ways to cut costs or increase income. I can make long term goals like paying off all my debt and estimate the last payment date.

Omg I love spreadsheets!

And I don’t spend hours upon hours on it. I pretty much spend a half hour tracking my spending twice a month. Once in the middle and again at the end. Literally ONE HOUR a month. I recommend setting mid month goals and then reassessing for the latter part of the month if your unclear or are unable to meet your goals.

Below is a simple sample of what you can do.

Income

Take home Salary $2500

Expenses

Rent $-700

Food $-250

Transportation $-200

Internet $-50

Electricity $-50

Phone $-70

Misc (shopping/medical related costs/eating out) $-600

Credit card payments $-100

Student loans $-150

Total expenditures= $-2170

Savings $330

Tip: Put your savings towards credit card debts and student loans to make the payoff date faster. Or save part of it for an unexpected expense.

I wouldn’t say budgeting will fix any money problems overnight but it will definitely give you a sense of control over your finances, plan for a rainy day and create a long term plan with goals. But personal finance and gaining control of your spending/earning is the first step.

Websites like Mint and Money Trackin can help you keep it all if you’re not crazy about the spreadsheet idea.

Update: I have saved sooo much money this way, literally thousands of dollars. It’s a very simple strategy but it 100% works. It’s all about motivation, perseverance and keep up with the tracking.

Feel free to comment below on your goals or feedback on your budget!

Check out my other post:

The Biggest Financial Decision You’ll Ever Make

The Inside Scoop on Swagbucks. Is It Legit?

How To Save Tons Of Money On Groceries 6 Easy Tips!

Review: “The Total Money Makeover” by Dave Ramsey

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I have a confession to make.  I am in debt.  I am in debt up to my eyeballs.  At this point I have almost 50K in student loans.  Me and my husband are also wasteful spenders.  We kind of already know this but also ignore it.  You name it, we spend on drinking, restaurants, unnecessary bullsh*t that we don’t need.  We have no real money because of our debt. So I picked up “The Total Money Makeover” By Dave Ramsey. I decided to make a review and summary on the financial advice that he gave.

So I picked up “The Total Money Makeover” because I love the topic of money and managing my money and wanted to see if maybe there was a better way to go about it. We’ll let me just tell you, at first I was skeptical some of the changes he suggested, like selling your car or getting rid of your car lease in exchange for a used fully paid car.  It seemed severe.  But I did the math and Dave’s formula for money success made sense! This review is going to cover exactly how Dave Ramsey did that.  And maybe it isn’t the fastest way, its likely the easiest and clearest way for the Average American.  Total Money Makeover is such a great book to read for financial literacy.

Key Highlights In This Review:

Debt Free- means no payments either for student loans/ car payments/ credit card etc.  Most people have this but Dave says “Imagine you didn’t have to pay those payments, how that would free up your income.”  In my opinion, he has a pretty decent though challenging system for clearing these debts.

Budget- goes into some detail about eliminating wasteful spending and avoiding “Keeping Up With The Joneses” mentality.  Me and Hubby don’t really need to be going to the fancy restaurant every week and taking Snapchat pics titled “Love BAE!”  Yes, I indulge in that behavior.  I am one of those people.  Wasteful spending is probably the first place you can tackle any money issues.

Emergency Fund- Most people rely on credit cards if a large emergency were to pop up.  If a spouse loses a job or a major medical bill/car bill hits you unexpectedly.  My dad had always told me that you should have at least 6 months savings for this reason, so I knew this was good advice when I read it.

Saving for Retirement/Debt Free/Home Buying and Beyond-Dave’s math makes sense.  Once you no longer have to pay off debt, that frees up your income A LOT.  I actually haven’t gotten to this point yet but it all seems very solid.  It would be really nice to have the freedom to plan your retirement and maybe even save to pay your house upfront!  

Overall, “The Total Money Makeover” is recommended for others to get a grasp on their finances.  At the very least it should assist you with a plan to get out of debt. 

 “The Total Money Makeover did have some limitations.  

It’s really not going to be of any use unless you are willing to downsize/ change your lifestyle/ commit several years of your life to debt reduction/ if your spouse had a spending or gambling problem. 

I also thought that the ending was really rushed in terms of getting to major wealth.   Getting to the point of living off investments and no debts would require tremendous sacrifice for 15-20 years.  The last chapters doesn’t explain distribution of wealth well enough to feel obtainable. 

One last gripe in this review are that the stories that were used to support his theories and ideas.  He used about 30 stories.  I hope this isn’t petty, but there wasn’t enough minority representation.  It was mainly middle class White Americans with average or above average income who had  fallen into bad debt from their own misspending.   I’m Latina/Asian mix and the only representation of my race was a single Latina mom who had 2 kids:  Really?!  Come on, Latinos could have been better represented.  Also the stories with the single income family with homemakers also made me cringe, that’s also unrepresentative of a majority of families now. 

But overall it’s a great step towards financial planning as well as financial responsibility.  It’s a great book to read for those just starting to get a grasp on their spending.

So there you have it, after reading this book, I was able to talk to my husband put a budget together and make a solid plan for knocking out that 50K student loan in 1 year as opposed to 5.  This was better than student loan refinancing that would still take 3 year at at least 3%.  I also realized that the mutual fund I had was useless if I was spending 6% interest a year on a 50K loan.  Cashing out and being broke is better than  stringing myself along with debt. Will keep you guys updated on my progress.  

If any of you have read this book, feel free to share your thoughts in the comments below. Let me know what you think about my review!  

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Check out my other book reviews!

Motivational Book Club: The Defining Decade: Why Your 20s Matter, by Meg Jay
Motivational Book Club: The Subtle Art Of Not Giving A F*ck By Mark Manson
Motivational Book Club: 7 Habits of Highly Effective People by Stephen Covey
My Favorite Dating Book: Why Men Love Bitches