**If you missed the first posts in the How to Budget/Living within your Means Series - you can catch up here:
- Part I -Reasons for Accruing Debt
- Part II - Income & Calculating a Safety Factor
- Part III - Basic Needs
- Part IV – Is a Car Payment Avoidable?
Housing is another budget item that often has more to do with pride and appearance than it does with basic needs. Just because you want to live in a mansion with a private pool, does not mean your income can support the payment that comes along with that much house.
There is nothing wrong with choosing to spend extra money on your housing payment if you have it, but this series is all about taking the blinders off of your spending so that you can choose where and how you are spending instead of being trapped in payments and spending habits that you can’t afford.
To realize what is a true basic need, you need to step back, understand the minimum it will cost to provide for your basic needs, recognize your spending motivations, and learn to acknowledge the difference between a need and a want.
Price Shop your Housing Budget
Renting
To get a baseline cost for what you must pay to shelter your family, call apartments in your area and price shop the cost to rent an apartment.
Also, when asking about apartment sizes, don’t be fooled into thinking everyone needs their own room. It may be nice, but it is not necessary. Kids can double up and will be just fine. In fact, it may even build stronger sibling relationships if the kids room together.
Next, pull up craigslist again and take a look at houses for rent in your area. In some cases, houses may be less expensive than apartments for the initial monthly payment. However, houses tend to have fewer utilities included, so your maintenance/utility fees may be higher.
Owning
It may seem counter intuitive to think that buying a house is less expensive than renting; however, that is often the case – especially when interest rates are as low as they are today. From my own experience, owning has been less expensive than renting. In my area, Westminster and Arvada, Colorado:
- Rent for a 3 bedroom apartment runs $1,100 – $1,400.
- Two 5 bedroom houses for rent near us are $1,250 and $1,375 each.
However, if you were to buy a house (obviously depending on location, size, age, condition, etc.) you could pay less than for an apartment or renting a house. Here are four houses for sale right now with links to photos and possible payments. All payments assume $0 down, 4.5% interest, mortgage insurance of $100/mo and $200 for taxes and insurance each month.
- $160,ooo on Decatur - approx payment = $1,110
- $152,000 on Otis – approx payment = $1,070
- $190,000 on 108th - approx payment =$1,260
- $139,900 on 92nd – approx payment = $1,010
Personally, I’ve found that owning a home is a great investment and definitely worth checking into. Yes, you will need decent credit to qualify for a loan, but prices are rock bottom, interest rates can’t go much lower than they are now, and values of homes are almost guaranteed to rise in coming years. You have to pay for shelter one way or another. If you rent, there is no chance you will recover any of that money. If you own, there are decent odds that you will get some of those monthly payments back at some point.
Utilities
You’ve probably already accounted for most utility fees during Part III – Basic Needs, but now is a good time to make sure you’ve considered everything. Including:
- Heat (cooling is a luxury, not a need)
- Electricity
- Water
- Sewer
- Trash Service
- Lawn Maintenance
- Repairs (if you own)
If you had extra money to spend, would you put it into a car payment or toward a large house?
**Stay tuned for How to Lower your Bills.
