Monday, November 21, 2011

Savings Idea #1. Move.

We sold our house this year. In this economy that might not seem like a good idea, but people are still buying houses, and our “cozy,” 75-year-old, historic Cape Cod 5 miles from the Capitol was worth as much as a colonial with twice the land (and 50% more square footage) 25 miles out. Our new home also happens to be minutes from Jon’s job, saving time and money.

Consider your living space; could you save money and time by either moving to a cheaper place, a spot farther from the city center, or by moving closer to work or grandma’s house? In DC, the traffic is so bad that if you live 20 miles from work it can take you more than an hour to get there (eating up extra gas), meaning your stay-at-home partner is struggling an extra couple-of-hours-a-day with the twinfants. By moving 10 minutes from work, Jon is able to be home quickly for emergencies, as when I’m pulling my hair out over simultaneous screaming fits. Don’t forget to deduct the cost of movers and fees for selling your house (figure about 10% of the total sale price).

If you’re unsure about the value of your home, a reputable realtor can give you an estimated valuation and what your take will be after fees and liens. You can also research recent sales at various realty sites online for free (we liked I can tell you that if you’ve been in your home more than 10 years, you can still make a nice chunk of change in highly desirable areas, such as inside the Beltway, in DC, or in historic neighborhoods.

However, if you live in a rental, consider buying now. Prices for homes have plummeted even in recession “proof” DC, interest rates have never been lower, and you’ll definitely save by paying a predictable mortgage instead of rent which is hiked up every year. Warning: Avoid hassles and forget about short sales; it can take months or years to buy them. Foreclosures actually on the market can be a good deal if you don’t mind a fixer-upper (many of these have been closed up for years and may have major problems such as mold, or minor problems such as missing toilets and light fixtures).

If you don’t want to buy now, look into other rentals near work that may have introductory deals, such as one month’s free rent. These deals are especially popular at the end of the summer and in January.

Aside from getting a larger space for your growing family, moving might result in long-term savings. By moving 10 miles closer to work, you can save $10 every workday on travel costs by (50 cents[i] a mile times 10 extra miles each way; $0.50x20 miles=$10). That's $2500 a year saved. When we moved, our car insurance dropped a bit, too. We are also saving on heating; our old, oil-run boiler cost several hundred a month for heat and hot water. Before buying or renting, call the utility company and request a one-year average of electrical, gas, or oil costs. Hundreds a month in savings is thousands a year, or tens of thousands over the life of your mortgage.

We increased our mortgage by less than those savings, so we came out slightly ahead, if we ignore the incidentals such as movers. By deducting the costs associated with maintaining an old home, lower taxes, more efficient appliances, and the lower market-pricing at stores outside the Beltway, we know we’re definitely saving money.

[i] The IRS currently figures gas, wear-and-tear, and other travel costs for driving at 50 cents a mile.

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