Please Stop Buying Houses

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In the last year, over a dozen people I know have either bought a house or started the housing hunt. Yes, everyone’s financial, locational and emotional stage in life is different, but one thing is consistent across the country and that is the state of the economy. We are due for another recession in the next one to two years–and that is the time when house prices drop and it becomes a buyer’s market. Right now we are in a seller’s market most places. That is certainly the case in Nashville–where you have to make a bid on a place the day you view it. L.A. may not be that extreme, but it is definitely in a real estate bubble. In other words, if you buy a house today, it will probably be worth less than what you paid in about three or four years. That means you will have to wait until the next time the market peaks to regain the value you paid for it–as many as ten years, all the while throwing money at a mortgage on a house that is underwater. It is impossible to know whether you are at the very top of the market, just as it is impossible to know whether you are at the bottom until after the fact. With that in mind, post recession is also a good time to buy depending on the circumstances. But if you take a step back and think it through, take your emotions out of it–I think we can all agree that the worst time to buy would be just before a recession. Yes? No? Maybe so?

I suppose this doesn’t matter much if you’ve found the place you plan to live until you die; but for the rest of us, it is not a good position to put yourself in. Yes, there are exceptions–maybe you bought an extreme fixer up, so no matter what, it will be worth a little more when you’re done with it. Maybe you bought in a neighborhood Unknownthat is on the rise or booming already and so the prices are “recession proof” in a lot of ways (think Silverlake, for you Angelenos). But for the most part, the prudent thing to do would be to wait this out and buy after the next recession hits. For those of you needing encouragement to hang on and do so, here are some things to remember. In modern times, a recession hits the U.S. economy every 7-10 years and the last time our government declared one was in December of 2008. That tells us we are almost eight years out since the last one. Can you wait two more years to buy a house that could be, in some cases, 50% cheaper? It is also very common to have one during or just after an election year. The two events often coincide and that is not only because of the economic cycle’s numerical pattern, but a lot of times newly elected officials like to get them out of the way at the start of his or her Presidency so that they can add it to their list of accomplishments in office and prevent it from becoming the focal point of his/her time in office.

I found this four part series by William Cowie (1, 2, 3, 4) on the seasons of the economic cycle to be extremely enlightening. I also urge you to google something like, “When will the next recession hit?” and read the countless articles posted on the subject. Let the experts convince you, if I am not doing a good job! As I’ve stated before, just because you’ve saved enough to buy a house, doesn’t mean you should. Timing matters too. And what a great opportunity to save a little more and maybe have some extra money to renovate a corner of the house, afford an additional bedroom or put a larger chunk toward the down payment.

Speaking for myself, it is very hard to wait. I want to buy at the end of this year when we return to Los Angeles to prevent another short term living situation like the one we’re in now. The thought of unpacking everything, knowing it will be packed up again in a few short years makes me frustrated. But both my husband and I agree that it is a small price to pay to save thousands of dollars on the house we will eventually buy. I urge you to consider your own circumstances and if they will allow you to wait, even if it means prolonging something you really want–like convenience and comfort.

Budgeting Encouragement

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Last night my husband and I sat down and made up a budget for the month of June. As much as I love finance, calculations and planning, I have never wanted to do a budget until now. It feels restrictive and like it would be very hard to predict all the ways you could spend your money a month in advance. I spent the afternoon yesterday preparing for it by looking around online and in books for the right form to suit our needs. Let me tell you, there is no shortage of options out there. We settled on this one, put together by Dave Ramsey’s team. Dave Ramsey is local to the town in Tennessee where we temporarily live and actually attends our church–so I have been more interested in his stuff than usual. We were also given one of his books and encouraged to form a budget by our real estate agent friend who is helping us prepare for when we buy a house in the future.

In our search for the right tool, we toyed around (and wasted far too much time) with an app called HomeBudget, which was really neat because we could both have it on our phones and update it in real time and the changes would show up on the other person’s device. I liked it for its handheld, adaptable quality, but it wasn’t well organized for our purposes and we ended up deleting it.

imagesDave Ramsey’s method is to start with your monthly take home pay and make a list of your expenses until every dollar is accounted for. In other words, you subtract each item from your income until the outcome is zero. This is harder than it sounds! Well, unless you have debt, in which case any excess would probably go there. For us, we really struggled knowing what to do with the remaining figure. I was upset knowing we had this amount leftover every month, but somehow it never felt that way. Where did it all go?

We left it alone last night after it got too late to talk about it anymore and I played around with the numbers some more this morning and managed to find areas where the money could work for us. The things that surprised me most about this process were that it feels really good to have a plan in place, not restrictive like I always thought. Plus, if you are debt free and earn a decent living, you can be generous in certain categories where you want to be, which takes some pressure off the, “but what if I’m window shopping and see this cute thing, and it’s on sale and I won’t be back in this area again” thoughts. (Tell me I’m not the only one with this kind of excuse in her head.) I also learned that it is not nearly as hard to plan ahead for purchases as I imagined. Now this is something specific to my personality type, but I usually know in advance when I want to get something for the house, or for our son or myself. And what a great opportunity to use the 30 day rule to think about an item before purchasing it. We always know when we’ll be out of town at least a month in advance, so we can add extra money to the gas budget or for acommodations. Even things like dentist appointments and haircuts we see coming, and it is all in our iPhone calendar anyway.

I want to encourage people who are feeling hesitant like I was to start this process. It doesn’t take long to fill out a form once you settle on the right one. If you are married, it is a nice bonding exercise between you and your spouse. Being the one who loves discussing frugality, I assumed I would be more into it than my husband, but he was all about it and took charge of the whole thing. That was really exciting for me! Lastly, and certainly the greatest benefit is that if you are having trouble staying on track with your money, this will guide you in the right direction. Dave Ramsey says to give it three months to get it right and know you will do it wrong at first. Each month you reevaluate and see where you spend more than you thought and adjust accordingly. I am looking forward to seeing where we can improve, cut back or be more generous. If you know of any good budgeting programs for other readers, please share in the comments below!

 

 

 

How Routines Can Save You Money

I am not a routine gal. I like my schedule to be constantly changing and am bored easily by the repetitive nature of routine. My husband is the opposite. This is one of the many ways we compliment each other!

One of the things I can be stubborn about in terms of allowing routine, is making sure our meals are diverse week to week. I tend to not repeat a recipe for months at a time, try to introduce new ones weekly and even if I’m buying the same ingredients (let say, chicken and rice), to switch it up in an interesting way. It occurred to me this week that this habit could be costing me. I have a weekly budget for grocery shopping and always have a hard time sticking to it. I upped it by a bit since moving to Tennessee because we started buying mostly organic. And man, can that be expensive!

But the killer around here lately, has been my laziness in preparing meals because of morning sickness with my second pregnancy. Two weeks ago, I had a successful week of cooking and it was because I kept it really simple. Meat, starch, vegetable. Done. I enjoyed every meal and felt full and healthy after eating it. This week I asked myself, “why don’t I do that every week?” Buy five meats, a variety of sides and call it a day? My hesitance only comes in the predictability of it and that–gasp!–I’ll probably be repeating some of the same meals week to week. This all came to head last week when I had to throw out some salmon cakes I bought because they were never used (i.e. the thought of them made me want to throw up). I only bought them because I had made regular salmon the week before and was trying to switch it up. What a silly reason to buy something you don’t even want!

I imagine buying the same or at least similar things week to week would offer predictability in the cost and you’d know when you were straying from your budget a little more easily. We’ll give it a test and see if that’s true.

This is just the start of me adapting to a new idea of routine and examining where in my life it could make a financial difference to change. What budget friendly routines do you have in your household?

 

Don’t Buy A House Just Cause You Can

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Eric and I are ready to buy a house. We have been for awhile, so much so that before we knew we were leaving L.A., we were in the process of setting up our first meeting with a real estate agent to discuss numbers. Then the news came that we had to come to Tennessee for a year, and that turned out to be a blessing in disguise in terms of timing. I suspected at that time, what I know for sure now: that L.A. is in a housing bubble. In other words, the prices are higher than they should be. Don’t believe me?Read here, here or here for more expert opinions. It’s sort of hard to predict when a bubble will burst, but it’s fair to say a professional might be able to tell you the window in which it could happen, as the first article I linked to does.

We watched The Big Short this week and all of the guys who bet against the housing market before the 2008 crash knew it was coming in the next few years, just not precisely when. That movie is a financial nerd’s blockbuster. I highly recommend!

So now the question we have been asking ourselves is when do we buy? Being out in Nashville makes it very complicated to buy a house in California before or as we return. We wouldn’t have the luxury of living nearby to view a house the day it hit the market. Or be able to take our time to carefully select. And it also seems unlikely that we would fly out every time we saw a house we liked. Plus, what if the houses are still overpriced by the year’s end when we are set to come back? The thought of returning to L.A. only to rent again and likely in a non-ideal neighborhood is somewhat defeating, but most likely what we’ll have to do. It’s hard to be ready to do something, but know it wouldn’t be the wise choice to do when you want to. Dave Ramsey constantly says, “Emotional maturity is the ability to delay pleasure”. And I think that is exactly right.

Am I ready to be a homeowner? You betcha. Am I ready to feel settled with our family in one place? Yes. Do I want a little more room? Yes. A place I can change according to our wants, needs and taste? Yes!! Does that mean we’re going to be doing all those things this year? Barring a huge housing market collapse, probably not. And that’s okay. It gives us more time to save, more time to explore ideal neighborhoods and schools and figure out where my husband will next be working. How complicated would it be to buy a house while transitioning from one job to another? I guess people have to do that a lot when they move for work, but it sounds like a headache. Which job do you put on the application? The one that’s ending or the one that’s beginning? What if there is a gap in between jobs and we have no income for a few months?

It’s worth noting that while Tennessee is generally more affordable than California, we’d be in a similar situation if we were buying here. The Nashville area is H-O-T and prices are rapidly increasing. It’s probably the wrong time to buy here as well, unless you plan on staying in the same house a long enough time to recover from overpaying.

Timing seems to be one of the biggest factors in successful homeownership, but often has nothing to do with why the average family makes the purchase. I hope we can be patient and end up loving where we land. And please, if you are considering buying right now, know that I am not a financial advisor and there are plenty of other resources you can utilize to find the best choice for your situation.

Whole Foods On A Budget

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The key to shopping at an expensive grocery store is knowing what to buy and when to buy it. Unless you are fairly wealthy, you probably don’t do all of your grocery shopping at Whole Foods. But who wouldn’t want to? Fresh meats, gorgeous vegetables, unique brand names that look tasty… when I lived in LA I went there every few months. But since moving to Tennessee, I find myself returning week after week. Maybe it’s the familiarity– it’s the only grocery store in my town that we also have in California, so I like that. Maybe it’s cheaper here than there, but it doesn’t appear that way to me. My main draw are the produce and meats, which are higher quality than the other major grocery store chains I’ve toured so far. Most vegetables here are gross. They wilt within a day of taking them home or already look like a wreck on display. It’s sad.

Awhile back I found this thread on Reddit, posted by a former Whole Foods employee who kindly listed out what products were worth buying there and what to skip. I don’t exactly follow this, because like I said, desperate times. Plus he keeps referring to Aldi, which is a chain we have here–but it’s not everywhere. I recently read SoCal is getting thirty five stores soon, so congratulations to you if you live there! They are Trader Joe’s owned, so get excited, frugalites.

If you shop around a variety of places enough, you should be able to tell who has the better deal on what. Know your stores and know them well. For example, I wanted to make chocolate chip cookies tonight, but when I went to Whole Foods today, I noticed chocolate chips were way over priced compared to other places (between $4-5). I could sacrifice this non-necessity to get a better deal and make them another time. The same thing happened a few weeks ago when I was about to grab my go-to caesar dressing and noticed the price ($5+!) and put it back. If you know you’re making a run somewhere else soon, there’s no point in shelling out an extra dollar or three. Save it. Be flexible.

Know when things go on sale and try to plan your outing for that day. At this Whole Foods, sales tend to be on Friday and weekends. I pick what I’m going to make based on what meats have a deal. So that means I have to relax my dinner plans a bit and be willing to change it up on the spot. There are plenty of frugal people who will tell you to do the opposite–plan your grocery list down to the penny and don’t stray–that is a good mindset for budgeting in general. It just depends on what you’re looking for in your food experience and if you are going for quality or quantity. You know where I stand. Happy shopping!

How Far Will You Go For A Deal?

chairI’ve mentioned before that I can be a little crazy when it comes to stalking an item online to get the best deal. These past two weeks, Target has been pulling on my heart strings with this dining room chair. It’s base price is $59.99 and it’s been on sale (on and off) ranging from $41.99 to $50.99. I don’t know how they choose what days to have it for sale and what days to pull it, but it changes A LOT. They also offer a 10% discount on top of the sale price, but that comes and goes as well. I’ve seen it drop to 5% on some days, and disappear entirely on others. Needless to say, to keep up–you have to work it. To add to the complexity, this deal is only available in stores, but you can only get the discount if you purchase online and select “in store pick up”. Seems simple enough–and it would be–if any one store had the number you needed available. Unfortunately, I had to make five trips to four stores in order to get all the chairs I wanted. And this was spread out over a two week period. I’d check one day and they wouldn’t be in stock–the next they would. I’d order two online and show up to the store to find out they actually only had one in stock (this happened twice). I’d learn one was in stock in a somewhat convenient location–it was one of the days the discount wasn’t in affect.

I ended up buying a total of four, though I’d like two more at some point. The first two were at the sale price of $41.99 with the 10% discount. The third was at the less good, but still fine, sale price of $50.99 plus 10% off. The last one I ordered was at the same figure but I waited a few days to pick it up. Just because I like to be thorough in everything I do; before heading out to the store that day, I checked the price online. It had dropped back to the $41.99 sale! Since your credit card isn’t run until you actually pick up the item, I thought it should be no problem to show them the new sale price on my phone and get the chair for that rate instead of what I had reserved it under. Sure enough, when I got there, the nice lady and her manager helped me out and not only gave me the sale price on the one I was picking up, but on the one I had bought earlier in the week as well! I showed them that just two days ago I had purchased the same chair at a different location for about $10 more. I came prepared with the old receipt because I targetknow that price adjustments are usually honored in most stores if the item you purchased goes on sale within two weeks of buying it. So now both my $50.99 purchases were going to be altered to the lowest sale price I’d seen. Until…she scanned the box and told me the chair was ringing up as $17.98 instead. What on earth?! Why? I didn’t ask, I just handed her the 10% coupon I got for moving and told her I was a nut. Two chairs for less than the price of one. That’s a frugal find, my friends. More of a frugal accident, really.

I left that store incredibly satisfied. As I drove home, my excited mind wandered and started thinking about doing what I had just done with my receipt for the other two chairs I had purchased the week before. It is hard for me to accept paying double for something I know I just got for half off (well, a third of the price actually). I got home and dug through my purse, found the receipts I needed for the adjustment and decided to go to my local Target and give it a try. Pro tip: always save your receipts. For like, way longer than you think you should. Even if you are positive you won’t return the item (like I was with these chairs!). I fluctuate between doing this and not doing this and I am always, always grateful I did in times like these.

I get to the counter at Target to explain to the lady what was happening, what I did at the other location, receipt in hand as proof, and was met with immediate defiance and attitude. Everything from “we don’t do that here”, to “it’s not on sale here”, to “you don’t have the chair on you”, to “we don’t have that chair in stock”. All with a belittling and impatient tone as if I had just appalled her with my request. How unreasonable of me to assume that what one Target does at 11am, another would be able to do at 4pm the very same day! She acted as if they were some independent chain of stores–like they don’t all look identical when you walk in. I was flustered and slightly irritated but tried to keep my cool and correct some of the accusations being thrown my way. She brought over another woman, who backed her up and told me it doesn’t matter what another Target does, they couldn’t do it and that I should go back to the other location if I wanted help (despite the fact that the location that had helped me was not where either of my receipts were from). I started to gather my things when a THIRD employee came up to try to help. He was a manager and had a completely different tone–one you might expect from someone trained in customer service. Incredibly polite, understanding and a good listener. He quietly dismissed the other two and asked me to take my time in re-explaining what I needed and that he would make it happen. I guess I should add at this point I was in tears–partially because both the employees had made me feel pretty upset and partially because when someone is nice to you after you’ve been dumped on, it makes you cry more. Just me? Cool. As I was fighting back tears and trying to tell him what was going on–he interrupted me in a low tone and said “Ma’am, God is with you. You don’t need to worry about a thing because He has got your back.” I was totally blown away. Not accustomed to being in an environment where the majority of people are believers, it was pretty emotional to hear someone say that to you in public. And in a Target, no less. Then a lady with her daughter in the shopping cart walks up to me with a smile, slaps a $25 gift card into my hand and says, “This is for you. Being a new mom is really hard.” and walks away. I don’t think I even said thank you because I was so stunned. I actually think I looked her in the eye and went, “OH MY GOD” and that was it. She obviously saw my tears and that I had a baby in the stroller by me. I was grateful and incredibly humbled by the kindness and generosity of two total strangers. The manager took care of the situation and gave me the price adjustment on both chairs after I was done explaining. I should also add I got $6 off in coupons and a $15 gift card in the process for two different incidents prior to this day–the first being only one chair available instead of two, the second for a false charge on my credit card that was immediately reversed. All that money went toward the chairs.

In the end, that’s $60 a chair that I got for $18 a chair, or $72 (plus tax) spent instead of $240. I’d say it was worth the trouble, but I certainly didn’t enjoy any of it. I had to twice go to the same Target thirty minutes South of me and twice to two different ones thirty minutes North. As previously mentioned, two of those pick ups were disappointments in that I thought I was receiving two chairs and got one instead. And when I say thirty minutes, in Tennessee…that’s actually thirty miles. In LA that would be about five. Then there was the whole situation on my fifth Target outing–I was ready to run out until the manager came along. I wish I could give myself credit in saying persistence pays off, but I’m not sure that’s what it was this time around. Maybe a contributing factor, but there was more at work than what I could control. What crazy things have you done to score a good deal? Was it worth it in the end?