Living Within Your Means vs. Taking a Leap of Faith

[MorningStar]

We definitely have to move this summer.  We have been in a two bedroom apartment for 12 years and we have four kids.  We have stayed where we are so we could save money, get out of debt, stay out of debt, etc. and we've been trying to save enough to supplement my income when we move away from my piano students.

 

We have been shopping for houses and it's torture.  The stuff that is in our price range has something wrong with it to the point that we would have to put a lot of money in it and it would no longer be affordable.  The houses that are what are family needs will make payments very painful and it's absolutely terrifying to me.  I don't know how long it will take to get established and have the amount of students I need.  Even if I get back to where I was, the payments will still be a stretch, but with the way things are, they will only be more expensive next year.

 

Right now rent has gotten insanely expensive here too.  Even a three bedroom apartment in our town is over $1900.    Of course, to rent a house is even more.  We want to live within our means, but it seems like we have to make a move that will be extremely difficult for us and cause a lot of anxiety as to whether we can make the payments.

 

Our apartment manager said they are going to be remodeling our place, so either way we will have to be out the end of the summer or possibly early fall.  It's becoming harder and harder to live within our means.  We'll have a higher payment, higher utilities, and then we're sure our health premium will go up again like it does every year.

 

Any good advice? 

[Guest]

We definitely have to move this summer.  We have been in a two bedroom apartment for 12 years and we have four kids.  We have stayed where we are so we could save money, get out of debt, stay out of debt, etc. and we've been trying to save enough to supplement my income when we move away from my piano students.

 

We have been shopping for houses and it's torture.  The stuff that is in our price range has something wrong with it to the point that we would have to put a lot of money in it and it would no longer be affordable.  The houses that are what are family needs will make payments very painful and it's absolutely terrifying to me.  I don't know how long it will take to get established and have the amount of students I need.  Even if I get back to where I was, the payments will still be a stretch, but with the way things are, they will only be more expensive next year.

 

Right now rent has gotten insanely expensive here too.  Even a three bedroom apartment in our town is over $1900.    Of course, to rent a house is even more.  We want to live within our means, but it seems like we have to make a move that will be extremely difficult for us and cause a lot of anxiety as to whether we can make the payments.

 

Our apartment manager said they are going to be remodeling our place, so either way we will have to be out the end of the summer or possibly early fall.  It's becoming harder and harder to live within our means.  We'll have a higher payment, higher utilities, and then we're sure our health premium will go up again like it does every year.

 

Any good advice? 

 

My advice:  If the monthly payment is a stretch, don't buy the house.  There are more expenses that come with house ownership than just the mortgage and property taxes.  You are better off moving to another apartment, even if it is more than what you pay now.  The reason you choose a house over an apartment is to gain equity.  Paying rent goes poof - doesn't earn you anything on investment.  Paying mortgage gets you a piece of the house little by little.  But, that equity is a very long-range goal... because, you can't liquidate that equity unless you sell the house.  So, if your ability to pay on that mortgage is risky, your equity is also at risk... because, if you foreclose on that house, you can't cash in on your equity.

 

My next advice:  The monthly payment on a mortage can be lowered through a good credit standing.  If credit standing can be improved through the summer, you might be able to lower the monthly payment enough to have a comfortable mortage.  30-year mortages are really, really long-range.  15-year mortages are much better.  But a comfortable 30-year mortage, although not as good as 15-year, is better than renting an apartment.

 

My next advice:  A lot of times, we have have-to-haves in looking for houses that sometimes we miss the diamond in the rough... a house can be repainted, an extra sink added, kitchen cabinets replaced, granite counters installed, wood floors to replace the carpet.  These things you don't really need to live in a house.  But, a leaky roof, busting old pipes, cracked foundation, having to add another bathroom... those things you need to deal with to live in the house.

 

Also, location can sometimes uncover diamonds in the rough.  A part of town you thought is too far can be a possibility if the city plans on building a road there.  For example... there's this town north of Houston that used to be the boondocks.  Houses there were very very cheap even after beltway 8 started construction.  Now that beltway 8 finally reached that area, it has become a ritzy place and an easy commute to downtown Houston...

[MorningStar]

Thank you.  The way things are now, a larger apartment would cost more than a house payment.  Either way, we can't really afford it.    We will probably move 45 minutes away from here where it is cheaper, but inventory has been so low, it's not cheap enough.  We can't save fast enough to keep up with inflation, so we feel like the longer we wait, the less likely we will be able to buy a place next year. 

[pam]

Thank you.  The way things are now, a larger apartment would cost more than a house payment.  Either way, we can't really afford it.    We will probably move 45 minutes away from here where it is cheaper, but inventory has been so low, it's not cheap enough.  We can't save fast enough to keep up with inflation, so we feel like the longer we wait, the less likely we will be able to buy a place next year. 

 

The apartment may cost more than a house payment, but a house usually costs more when it comes to utilities.  And as anatess mentioned, you have the cost of repairs that you don't have when renting an apartment.  So in the long run you could be coming out even.  

[MorningStar]

That's true.  But the house payment we would be looking at is about $1650 and 3 bedroom apartment over $1900, leaving us still needing a storage unit for my husband's construction stuff.  He is extremely handy, so that helps.  If we end up renting for that much, we will not be saving money anymore, making it even harder to ever buy a place in the future.  We have saved over $10,000 so we would be able to supplement my lost income. 

[Guest]

Thank you.  The way things are now, a larger apartment would cost more than a house payment.  Either way, we can't really afford it.    We will probably move 45 minutes away from here where it is cheaper, but inventory has been so low, it's not cheap enough.  We can't save fast enough to keep up with inflation, so we feel like the longer we wait, the less likely we will be able to buy a place next year. 

 

Finding an apartment is just as tricky as finding a house.  There are very many negotiable things that one thinks one can't live with...

 

And, as far as inflation goes... it's not going to go down just because you bought a house.  So, if you can't afford the mortgage now, you won't be able to afford it when healthcare costs rise next year.

 

So, there's really only 2 ways to go about it... Decrease costs or increase income... or both.  Revisit your budget, the house listings, and the rentals, and see how you can accomplish one, the other, or both... It needs to be done, regardless of whether you buy a house or rent an apartment.

 

And a 2-bedroom place for a family of 6 is not so bad.  It's a temporary arrangement as kids fly the coop... We're a family of 6 in a 3-bedroom house in the Philippines... but then we had 2 cousins and grandma staying with us... plus the maids...

[MorningStar]

Finding an apartment is just as tricky as finding a house.  There are very many negotiable things that one thinks one can't live with...

 

And, as far as inflation goes... it's not going to go down just because you bought a house.  So, if you can't afford the mortgage now, you won't be able to afford it when healthcare costs rise next year.

 

So, there's really only 2 ways to go about it... Decrease costs or increase income... or both.  Revisit your budget, the house listings, and the rentals, and see how you can accomplish one, the other, or both... It needs to be done, regardless of whether you buy a house or rent an apartment.

 

And a 2-bedroom place for a family of 6 is not so bad.  It's a temporary arrangement as kids fly the coop... We're a family of 6 in a 3-bedroom house in the Philippines... but then we had 2 cousins and grandma staying with us... plus the maids...

The way things are here, people won't rent to you if you have more than two people per bedroom.  Our manager has been very kind to let us continue to stay here.  We were due with our second when we moved in.  Meanwhile a family with two kids got kicked out because their toddler made too much noise. 

 

We're trying to figure out how to increase income since decreasing costs seems impossible at the moment.

[pam]

Sometimes it's not about the number of people you have in a bedroom it's the gender of those people in the bedroom.

 

Perhaps it's a cultural difference between the states and the Philippines but  most people I know have a problem with the two genders sharing bedrooms as they get older.

 

Or maybe it's just me.  When my kids were getting closer and closer to becoming teenagers, I realized that having the 3 of them in the same bedroom just wasn't going to work.  My daughter needed privacy as well as my 2 boys when it came to dressing etc.

 

While I really couldn't afford moving into a 3 bedroom as a single mom, I did it anyway to allow the privacy I felt was needed.

[pam]

And morningstar is correct. There are some places that have laws and/or policies regarding the number of people per room.

[Guest]

Sometimes it's not about the number of people you have in a bedroom it's the gender of those people in the bedroom.

 

Perhaps it's a cultural difference between the states and the Philippines but  most people I know have a problem with the two genders sharing bedrooms as they get older.

 

Or maybe it's just me.  When my kids were getting closer and closer to becoming teenagers, I realized that having the 3 of them in the same bedroom just wasn't going to work.  My daughter needed privacy as well as my 2 boys when it came to dressing etc.

 

While I really couldn't afford moving into a 3 bedroom as a single mom, I did it anyway to allow the privacy I felt was needed.

 

In the Philippines, gender is only an issue if they're not siblings... but, in our house, the boys stay in one room, the girls in the other as we had cousins staying with us.  The maids don't sleep in any of the bedrooms.  I have cousins that had mixed gender siblings in the same bedroom.  They don't dress in the bedroom.  They dress in the bathroom.  And the bedroom is not the private place... it's the sleeping place and where all the stuff is stored.  The girls talk girl stuff and the boys talk boy stuff somewhere else.

 

But yes, if it's a regulation, you can't do anything about it... so it wouldn't matter if you're renting or buying, the problem is the same.  $1650 (I assume that already has tax and insurance with the mortgage) versus $1900, I'd go with $1650, but set aside the $250/month in the bank for house incidentals - not spend it.  Because... sooner than later, you're gonna need it.

[MorningStar]

A friend of mine was just told by her landlord that they aren't renewing her lease now that they know they have three kids in their two bedroom.    I understand - they think the place will get trashed, but it's so hard to keep things affordable!

[pam]

In the Philippines, gender is only an issue if they're not siblings... but, in our house, the boys stay in one room, the girls in the other as we had cousins staying with us.  The maids don't sleep in any of the bedrooms.  I have cousins that had mixed gender siblings in the same bedroom.  They don't dress in the bedroom.  They dress in the bathroom.  And the bedroom is not the private place... it's the sleeping place and where all the stuff is stored.  The girls talk girl stuff and the boys talk boy stuff somewhere else.

 

 

 

Well that's where the cultural difference comes into play.  :)

[Jennarator]

Is there low income houseing around? Most cities have some ind of affordable houseing.  Not all of them are bad....

[yjacket]

My advice:

 

Move, not just to a different place but a different location, different city, different state, etc.

 

3 bed apt. for 1900 means you either live in DC, NY, SF, LA or one of those extremely high cost of living places.  I have a house I'm about to sell (4/3) and the most I could get for rent is 1200 in a decent area.  Plenty of really good places to live exist in the US with decent jobs.

 

The rule of thumb for buying a house used to be 20% down + 6 months living expenses.  In general, if you don't have that one should not buy a house.  10k in savings is not much when you've got a house.  New HVAC 6k+, roof 6k+, plan at least 100 a month in maintenance.  Make sure you are truly comparing apples to apples.  With a house, you have insurance, taxes, mortgage insurance (if you don't have 20% down).

 

In general having a 30 year mortgage is a fool's game, the same with rent.  The average time to move is 7 years.  7 years into a 30 year mortgage one has paid very little into the actual principle, in addition if housing prices go down one can be stuck in an area for a long period of time with a mortgage.  The only way a 30 year mortgage works is through the magic of inflation and moreso wage inflation to be specific.  But it requires a lot of assumptions. Assumption 1) Wages will increase making the payments less painful, 2) Work 30 years without a substantial job layoff or major life crippling event 3) stable location.  In today's society those are a lot of assumptions.

 

I own 2 homes, 1 completely paid for 1 half paid for (about to sell)  so I certainly believe buying a house is the way to go, but it requires the right circumstances to do so.

 

Buy the cheapest house you can possibly live in and pay that sucker off, 15 year, double payments, etc.  You will be amazed at how fast you can accumulate wealth when you have a house 100% paid for.  I thank HF everyday that for whatever reason I had the foresight and inspiration to not mortgage up.  If I had mortgaged up, today I would be in a very desperate situation, even more than I already am.  You never know what kind of a screwball, life will throw at you and the best way to deal with it is to be as prepared as possible.

 

Good luck, I used to live in an extremely high cost of living area; I can definitely understand some of the pain.  I knew my income level could never get to the level of comfortably affording what I hoped for.  My ultimate solution was to move.

[MorningStar]

Thank you for the advice.  We are approved for a VA loan so we wouldn't have to pay PMI or a down payment, but it's a good point about how much you should have in savings anyway.  Ugh.  It has taken us many years to save what we have now.  We would need $60,000 to have 20% around here and by the time we would get anywhere near that number, the 20% would be even more.  This house we looked at has gone up $50,000 in two years.  If we could stick it out with payments for that long or maybe three, that could give us the money to do a big move, but it would be a gamble.

 

I'm not sure how things have changed with the healthcare laws now, but if my husband changed jobs, he typically has to wait 3-6 months before he has insurance.  We really can't go without insurance right now.  He also doesn't have the sort of job where people fly you out for interviews.  He is in maintenance and even with the job he has, it was a month wait after filling out the application, two weeks until his first interview, and another two weeks until his next interview.  153 people applied for the job. Our kids qualify for Medicaid, but we don't. 

 

There's also affordable housing to buy once in a while through a program, but nothing comes up that has enough rooms due to the rules again about how many people per bedroom. 

 

I just need to become rich and famous real quick. 

 

Jenna, years ago I looked into low income housing and there was a two year waiting list.   They also have rules about how large your place has to be and it still ended up being more expensive than where we are now because we would have to have a 4 bedroom and because we are not severely low income.  We have three boys and a girl, so they would require our daughter to have her own room, two boys could share a room, one boy would have his own room, and then we would have our room.  And we would still need a space to store my husband's construction stuff.  We just can't have big table saws and stuff in an apartment. 

 

We've been told many times by friends and relatives to just bite the bullet and buy.  "Take a leap of faith." 

[pam]

 

 

We've been told many times by friends and relatives to just bite the bullet and buy.  "Take a leap of faith." 

 

Taking a leap of faith doesn't mean to do it blindly either.  I don't think it means that going into an apartment or a house that is far above your means entails that money will magically appear because you took a leap of faith.

[mdfxdb]

Sounds like your income is not in line with your needs.  That being said, you might consider moving someplace where the cost of housing is cheaper.

[Bini]

I don't know where you are or how far and wide you're willing to travel, but I understand that Texas has great real estate in comparison to other states. You get a lot of house/property for your buck. Maybe look into that.

[estradling75]

Taking a leap of faith doesn't mean to do it blindly either.  I don't think it means that going into an apartment or a house that is far above your means entails that money will magically appear because you took a leap of faith.

 

Leap of Faith means...  That the Lord has told you to do something and you don't know how its all going to work out but you do it anyways..

 

Leap of Faith does not  mean you leap and then while you are in the air you tell the Lord you expect him to catch you and protect you from your foolishness.

 

So Morningstar the question is what has the Lord told you to do?

[The Folk Prophet]

Leap of Faith means...  That the Lord has told you to do something and you don't know how its all going to work out but you do it anyways..

 

Leap of Faith does not  mean you leap and then while you are in the air you tell the Lord you expect him to catch you and protect you from your foolishness.

 

So Morningstar the question is what has the Lord told you to do?

 

Exactly. If the Lord tells you to jump off a cliff you jump. Otherwise, it's a pretty stupid thing to do. Walking around with an, "I have faith so I can walk into busy traffic without looking" attitude is a pretty severe misunderstanding.

 

As it applies to the OP, the cost of living is increasing. My suggestion for an application of faith is to look for legitimate means to increase income. Make wise choices in those regards and then dig-in, sacrifice, and go to work to do so with faith that the Lord will assist.

[MorningStar]

Leap of Faith means...  That the Lord has told you to do something and you don't know how its all going to work out but you do it anyways..

 

Leap of Faith does not  mean you leap and then while you are in the air you tell the Lord you expect him to catch you and protect you from your foolishness.

 

So Morningstar the question is what has the Lord told you to do?

That's the hardest thing.  I have prayed and prayed about our living situation and I have never gotten an answer except years ago when told to stay here.  That answer was hard because I was so terrified of getting kicked out.  We would get a new apartment manager and I would have to have the awkward conversation again and tell them we were over our limit.  We have lucked out having managers who were OK with it, but they would never let someone new move in who had three or more kids.  Every time there is any kind of letter on our door, I always fear they are telling us to leave.

 

Now we don't have that option of staying because they will be remodeling.  We have to move.  I don't know where.  I get answers about all sorts of other things, but not this.    Whenever I think about moving away from this town, especially from my students, I just can't stop crying.  This little girl told me, "There's this house that's almost finished around the corner from us that looks really nice."  Yes, I'm sure it's at least $700,000.  Even a tiny 3 bedroom 1 bath in this town is $400,000 or more.  Bizarrely, when we were looking for a two bedroom apartment years ago, this was the cheapest deal around.

 

 We were paying $835 when we first moved in.  Now that they have added w/s/g, raised the rent, and added a month to month fee (we felt we couldn't sign a 12 month lease), we're paying a little over $1500.  We still manage to put $500 in savings a lot of months (and then there are car issues where we have to take some money out), which is why I think we could manage a $1650 payment.  If I had to watch a child during the day too, I could.  Or maybe start a little music preschool.  That's the kind of stuff I can't do in my apartment. 

[MorningStar]

P.S.  I wouldn't say I'm doing this blindly.  We've been in this apartment for 12 years and repeatedly made the decision not to buy.  Then the housing crisis happened, so we were glad we didn't. 

[Guest]

P.S.  I wouldn't say I'm doing this blindly.  We've been in this apartment for 12 years and repeatedly made the decision not to buy.  Then the housing crisis happened, so we were glad we didn't. 

 

Does your current location have intangibles that you can't let go of?

 

In your situation, I would move.  I have a 3,000 sq foot house and I pay just under $2K of mortgage... and a high school diploma here can afford that mortgage if you're in things like construction and technology.  There's no State Tax nor City/County Taxes... just the 7% sales tax and the property taxes (I paid about $1200 last year).

 

Lots and lots of people are doing the travel job in North Dakota.  They fly there and work for 3-weeks straight, then they're off for 3-weeks straight... They have more work than workers, so you can work double-shifts on your 3-weeks and get overtime pay... come home and relax for 3 weeks... and make 6-figures.  And that's just for drivers (driving water barrels to and fro)... maintenance guys would probably make more...

[pam]

Does your current location have intangibles that you can't let go of?

 

In your situation, I would move.  I have a 3,000 sq foot house and I pay just under $2K of mortgage... and a high school diploma here can afford that mortgage if you're in things like construction and technology.  There's no State Tax nor City/County Taxes... just the 7% sales tax and the property taxes (I paid about $1200 last year).

 

Lots and lots of people are doing the travel job in North Dakota.  They fly there and work for 3-weeks straight, then they're off for 3-weeks straight... They have more work than workers, so you can work double-shifts on your 3-weeks and get overtime pay... come home and relax for 3 weeks... and make 6-figures.  And that's just for drivers (driving water barrels to and fro)... maintenance guys would probably make more...

 

I've known a couple of guys that did that. They made a killing in wages.

[Bini]

I bet that's good money. I wouldn't like the time spent away from family but you do what you gotta do. A friend of mine, her husband is a rigger out of state, and he's gone like most of the year but brings home good money. Physically demanding though. I know she worries about his health and safety as he remains in the trade.