This chapter is about managing your expenses for housing. In the last chapter, the author outlined an expense plan that was budgeting 70% for living expenses (35% of which is for housing). With that in mind, she outlines the steps and monetary considerations that one should consider when choosing housing. As you can tell from my post in Step 3, my budget is already over 70% for living expenses (basically all my money goes to living expenses), and 50% of my monthly income goes to housing. So I read this chapter with a grain of salt, but I was surprised by the author’s advocacy for renting.
Step 4: Rent or Buy?
The first part of the chapter is about sticking in budget and she has this cute anecdote about when she first moved to NY and she was shocked at the price of apartments, but she was making a 6-figure salary and so I just laughed. The author knows that it is difficult to live in the city (or boroughs) and yet, no tips for how to save money or alternate places to live so as to stay on budget. (What about the lepers that live on <40k a year???) Lemme guess…there isn’t any place to live in the city for the type of budget she’s describing. I’m renting a room, not even an entire apartment and yet it is still sucking the life out of my budget. How am I supposed to live anywhere else??
Some thoughts I have about moving:
1) Live with friend in 2br apt., approx. housing savings: $150. (still not within budget!) (FYI for non-New Yorkers, going by legal means, property management will not rent to an individual unless they make over 40x the monthly rent per year.)
2) Move to NJ (lower housing costs, but I would still need to live with someone, pay taxes for living in NJ and working in NY, pay extra for commuting on PATH and NY Metro).
3) Move out of NYC and the surrounding area altogether and find a new job (uncertainty about living situation all around).
4) Move back home with my family (save on rent, potentially get a new job in separate field).
So I wrote my life goals in Step 2. That was fun. One of those was to own a home in 10 years. Jokes on me because I would actually like to own a brownstone in NYC –I like the permanency and freedom of decorating however I want, plus you don’t have to worry about moving constantly or dealing with a super. (Yeah, the location that’s impossible to afford). Putting aside the fact that this might not work out in my life, the author gives super important information about what homeowners can expect when buying a home.
- Down payment
- Real estate taxes and insurance
- Monthly mortgage payment
- Closing costs: lawyer fees; home appraisal fees; property survey fee; home inspection; pest inspection; local property tax; local sewer fees; homeowners insurance premium; title insurance; realty transfer fees and clerk fees recording the transfer of deed and mortgage; misc.
- Moving costs
- Home maintenance over the course of living in the home
Now that I have that reality check in my face, I’m strongly considering renting for the rest of my life. The author was hinting that the money used to buy a home could be spent investing, but she’s going to speak more about that in further chapters. To be fair, the author doesn’t seem to be a fan of buying because there are so many up-front costs. It depends on what my overall life goals are. I’m not planning on having kids, but I’m also not planning on moving outside the greater NYC area. So I don’t necessarily need the white picket fence, but I want permanency. Despite the fact that the target audience is not a poor publishing person, the author does share some insightful points about the positives of renting (or at least not buying a home) that I didn’t even consider when I was writing Step 2. I like knowing all the pieces of the puzzle and being able to see how they will fit together in my future life. But damn, if it isn’t hard.