Can We Really Afford To ‘Move Up’?

Moving up or moving into trouble? Earlier this year my husband and I encountered this very question. We had always talked about moving into a new home after we married, one that was “ours”. But could we really afford to take on a higher mortgage payment? After all, we had been living way outside our means and had only just figured out how to make ends meet in our current home.

Sure, on paper we could afford a higher mortgage payment if we subjected our budget to the ol’ slash-and-burn treatment. But could we actually tolerate a tighter budget to reach our dreams of a new home? We didn’t want to assume we could handle it or that “we’ll just make it work”. We needed to know we could handle it before we committed to higher housing costs.

Here are the two ways we gave a new mortgage a “test-run”.

Take it for a spin

Seeing a mortgage payment on paper and actually living with that payment are two different things. In order to be sure you can handle the higher payment it’s important that you try living with it before you commit to it.

First, figure out the difference in cost between your current housing payment and the “new” mortgage payment. Make sure when estimating this new payment that you err on the side of caution and go high.

Example:

New Mortgage Payment (w/ taxes, insurance, etc)	$1400
Current Housing Payment	$800
Difference	$600

Set up an automatic transfer to deposit the difference ($600) each month into a high-interest savings account like ING Direct. No dipping into it, it is essentially spent, just like the new mortgage would be. By saving this amount in addition to paying your current housing payment you are now mimicking the effect the new mortgage payment would have on your budget.

This experiment helps you in two ways:

You experience and learn to adjust to a higher mortgage in “real life” (instead of just on paper)
You build up savings dedicated for moving/new home ownership costs

In the example above, you would have saved up $3600 (plus the interest) if you stuck to it for 6 months. If you can handle testing out the “new” mortgage for 4-6 months, without running up bills or needing that extra income, you can feel pretty confident about taking on a higher payment. If not, rethink if you can really afford it.

Work that budget

Not only will you need to adjust your budget to allow for the higher mortgage but you will also have to prepare for the other potential costs related to moving into a new home. What household bills can you expect to change? For example, how will your utilities be affected? You will need to look at all your expenses and estimate how the move might increase or decrease certain areas and reallocate your income accordingly. When we went through our budget we identified many areas that would need to be increased after the move.

To find the additional money needed your budget will need to be scrutinized. Where can you trim the fat? The money needed for the new mortgage and related expenses must come from somewhere, and we aren’t talking about relying on your credit cards. Evaluate what is essential or most important to you and work aggressively to cut spending in all other areas. Rework your budget, funneling the money you cut from those areas into the categories that need more cushion.

Remember – you still need to be figuring in debt payments and savings goals into these budgets. You should avoid falling behind on those goals in order to reach this one. If you can’t find the money in your budget without scaling back on your savings or debt payments then really think if it is in your best interest to make this move.

We now feel confident that we have the ability and the discipline to handle the costs of “moving up”. We are no longer simply guessing that we can afford it or going by the assumption that we will be able to “just make it work”. We know we can because we have been living it.

Since we have already been budgeting for our new mortgage, the “lifestyle adjustment” many people experience when they have less disposable income should be minimal for us. At first, not having that money in the budget was difficult but we have worked through the aches and pains and are comfortable now. I’m just glad we dealt with that struggle beforehand instead of after the commitment of the new mortgage.

The best part of all of this is that we have been able to save up a tidy sum in our ING account to purchase items like solar screens and a sprinkler system without having to go into additional debt after the move.

The Carnival Review #8

I decided to change the format of my weekly carnival reviews so that my favorite articles are featured first. I hope you all like the change!

Here are some of my favorite posts from the carnivals this week:

Five Words That Sum Up Our Debt Payoff Success @ Blogging Away Debt - A concept that is very simple yet sometimes so difficult. This is advice definitely worth repeating.

Apple Hacks @ Cheap Healthy Good - Awesome ideas on how to use apples for all sorts of things, including ripening tomatoes and teaching someone how to bunt.

Talking the Talk with Your Almost Elderly Parents @ Life Lessons of a Military Wife - Have you thought about having “the talk” with your parents about planning for the future? As awkward as it might be it is something we all need to do at some point.

How to be a Frugal Gardener @ The Frugal Panda - This is a large list of ideas on how to save money when gardening.

Spontaneous Versus Planned Giving @ Free Money Finance - I’d say we do a combination of spontaneous and planned giving. We know we will be giving a certain amount each month to charity, it just varies on when we do that.

Make sure to go check out these wonderful carnivals!

123rd Carnival of Personal Finance – The Boo! Edition @ The Dough Roller - we made editor’s choice this week with my horrible interview story!

Festival of Frugality #97 @ Nature Moms

Carnival of Money Stories #31 @ Stop the Ride

Carnival of Debt Reduction #110 @ The Amatureist Financial Journey

Make It From Scratch #36 @ And Miles To Go Before We Sleep…

Carnival of Recipes – Small World Edition @ A Readable Feast

Image Source: jewe

Tightwad Wednesday – Cheap Postal Scale & Crumb Cookies

Each week, I will test out two tips from the The Complete Tightwad Gazette, and on the following Wednesday I’ll review how they went and evaluate if it is worth my time/effort/money to continue with it.

I think both the challenges I tried this week exemplify what being a tightwad is about. One uses items around the house to replace a seldom used gadget and the other makes use of food that typically gets tossed to make something truly yummy. Resourcefulness at it’s best!

Cheapskate Postal Scale

This trick is supposed to help you figure out postage by determining whether or not a letter is under 1 oz (only needing one stamp). Page 115 of the Gazette states:

You need a 12″ ruler, a pencil, and five quarters. Put the ruler on the pencil so that it is centered over the 6″ mark, or in the center. Place the quarters (which weigh 1 oz) on the 3″ mark. Center your sealed envelope on the 9″ mark (the 3″ and the 9″ marks are the same distance from the ends of the ruler.) If the quarters don’t move you know your letter is under 1 oz.

The first thing I noticed was that the 5 quarters didn’t add up to 1 oz on my fancy-smancy food scale. Thinking something might be wrong with my quarters I got new ones. Nope. The 5 quarters came in at 7/8 oz every time. I added a penny on top and bingo, I got 1 oz. I figure it is better to weigh over than under anyway.

I weighed my 3 test envelopes:

Light envelope = 3/8 oz
Envelope w/ Coupons = 7/8 oz
Envelope w/ Coupons + receipts = 1 1/8 oz

I couldn’t for the life of me find a pencil in my house so I used a pen for this experiment instead.

Envelope 1: When I placed the letter on the ruler he quarters didn’t move. It was pretty obvious that it was under 1 oz so no surprise there.

Envelope 2: When I placed the envelope on the ruler the pen moved a bit (probably because it is round) so I had to rebalance. The quarters were not moved but this time I could see that the ruler was bending a little. I’m happy to see that it indicates less than 1 oz but it seems so close that it could be hard to trust.

Envelope 3: When I placed the receipts on top of the envelope to simulate a letter weighing over 1 oz the quarters actually rose off the table! I was shocked! I tested it several times and saw the same results. Even with it only being a little over 1 oz it seemed to work.

Although the results of my testing indicate that this cheapskate scale works I still feel a little uneasy with it. Maybe that’s because my quarters didn’t add up to exactly 1 oz or because I don’t have the comfort of seeing real numbers. It appears to accurate though. I think this works well enough to use in a pinch and it’s better than buying a postal scale if you don’t do a lot of mailing. Try it out for yourself. I bet it works for you, too!

Bread Crumb Cookies

This recipe came at the perfect time. We have been experiementing with off-brand bread for a few weeks now, trying to find one that measures up to our favorite Nature’s Own 9-grain loaf. The one we tried last week, Honey Wheat-berry, was not a hit. It was too soft and overloaded with wheat-berries. Very odd texture. I had several slices leftover from this loaf just begging to be transformed into something else rather than thrown away.

Bread Crumb Cookies from The Complete Tightwad Gazette (p. 132)

1 1/4 cups flour
1 1/4 cups sugar
1/2 tsp salt
1/2 tsp baking powder
1/3 cup cocoa
1/2 cup milk
1 egg
1 1/2 tsp vanilla
2/3 cup melted shortening
2 cups bread crumbs

Sift together dry ingredients. Combine wet ingredients and add to dry mixture. Add melted shortening and bread crumbs. Drop by spoonfuls onto an ungreased cookie sheet. Bake at 350 degrees for 15 minutes or until done.

This is a remarkably easy recipe. For the breadcrumbs I simply tore the soft bread into small pieces. I could have used the crusts but I decided against it (it is a cookie, after all) so I put the crusts in the freezer to use as topping on a savory dish.

I used butter flavored shortening because it was what I had around. I made tablespoon size cookies and baked them as directed, for 15 minutes.

Bread Crumb Cookies At first, I didn’t like them very much. I thought the first batch was too crunchy and I’m not the biggest fan of chocolate cookies to begin with. But after baking them for only 10-12 minutes I found they were softer and much better.

They have grown on me. These cookies are light and not very dense. They remind me of a crumbly cake. Surprisingly, they seemed to get better overnight. I had one for breakfast this morning and it was downright delicious!

I was a little nervous about using the bread that I did. I thought that all the wheat berries would hurt the cookie but it didn’t really. It was odd but then it reminded me of chopped nuts. It added that texture without the price. I bet it would be more cookie-like with white bread though.

I love that this recipe because it can be used with healthful breads like whole wheat. What a fantastic way to “disguise” it from children who dislike wheat.

This recipe is going in my file because it is inventive. I think I will try to make a non-chocolate version next time. This is a great way to use up stale bread and give your family a treat at the same time.

Stay tuned for next week’s Tightwad Wednesday challenge where I will be testing out:

Seasoned-Rice Mix p. 425 (light Rice-a-Roni)
Tomato Soup p. 424

If I Were Debt Free…

I was tagged by Rocket Finance to participate in the “If I were debt free” meme. This meme, started by DebtFREE-Revolution asks:

What would YOU do if YOU were debt free?

Right now, Eric and I are debt free except for our mortgage. We managed to pay off our credit card balance and our car loans this year. So debt free for us would mean that we would no longer have our monthly mortgage. Our mortgage takes up about a quarter of our monthly income. So I get to imagine what it would be like to not have to pay a mortgage and have 25% more money left in our bank account every month. Nice.

I know that as a personal finance/frugality blogger I should dutifully respond that I’d save it. But to be honest, I’m not sure if that is the case. Don’t get me wrong. I would likely put MOST of it in savings, but definitely not ALL of it.

The first thing I’d do is get our emergency fund up to a full 6 months salary. I’d get that fully funded so we are ready for anything that comes along.

After that goal was met, I would put 75% into savings/investments, 5% to cushion the budget a little more, and the remaining 20% would be used to enrich our lives.

That 20% would not be for things, mind you, but for experiences.

My long lost love I miss going to cooking classes. A new class schedule came in the mail yesterday and I was excited that one of my favorite chefs was hosting a few classes in November. Then I realized that we don’t have the money for these professional classes now that we are close to moving so I threw the flyer away. The sadness was fleeting, thankfully, but I do want to be able to go to a class or two again one of these days.

I know my response to this meme might be colored by my cooking class withdrawal and the fact that we have been in “saving overdrive” for the upcoming move. But I do think that extra 20% could help us remember to “live a little” which is something we haven’t been doing much of recently. Perhaps we could take a few classes together, go out to a nice dinner once a month, and go to the foodie events we enjoy.

After the dust settles from this move I might have take another look at our budget and see if I can spare a dime towards this “enrichment” project.

Now for the tagging – I think I will tag Kyle at Rather Be Shopping and Make Love, Not Debt.

Image Source: jwalsh

I Want You To Make It From Scratch!

You can do it! I’ll be hosting the 37th edition of the “Make It From Scratch” Blog Carnival next week!

I’m really looking forward to seeing all the wonderful ways people stretch their dollars by making things from scratch.

Making things on our own isn’t just about saving money; it’s also about being creative and resourceful in our everyday lives. There is something uniquely satisfying and impowering in creating something yourself. I’m looking to put together a great edition that will hopefully inspire you to create or try something new in your life.

Now, I KNOW you all are creative when it comes to saving money! Do you have any recipes, crafts, sewing, household remedies, or other frugal “do-it-yourself” projects that you would like to share? Blog about it, submit it, and be included in the carnival!

If you would like to participate, please send in your submission using the form here. The deadline to be included in next Tuesday’s edition is Sunday, October 28th at midnight EST. Archived posts are fine, but please only one post per blog per week.

Be sure to check back here Tuesday, October 30th, when MIFS #37 goes live!

Thanks everyone!

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