Living within your means

pcdreams · #1 03/12/09, 04:47 PM

So in todays terms can someone explain what this means?

Here is where I'm coming from

say you have 2 people working making minimum wage (for ease well round up to 8/hr)

2 jobs
$8/hr each
2080 hrs per person/per job

========================
$16640 per person/year

total income $33280 = 2774/mth

Assuming

no children

Health insurance $300 --conservative I know

Rent $ 800 /month

Utilities $150

phone $ 30

car payment $ 250

Auto Insurance $ 85

Food $200

Emergency fund $400

Taxes (depending on local).. $300

total remaining $159

This is assuming Renting an apartment. Would it be more responsible to take the leap and buy a house with roughly the same payments, or to continue renting?

People are always quick to tell others to live within their means, but they often don't take into consideration, real world circumstances.

For instance.. if you are to continue renting.. in my eyes thats irresponsible use of funds as you're not getting any equity back when you leave.

On the other hand, Taking on a mortage for a $150k house doesn't make much sense either..

Just some food for thought.

ihedrick · #2 03/12/09, 04:51 PM

When owning a home one also must factor in taxes and maintenance on that home. When renting, the landlord usually takes care of repairs and pays the taxes. I guess it really depends on the person and what they really want.

whinnyninny · #3 03/12/09, 05:13 PM

Equity? What equity? I have a friend who bought a house two years ago that is now worth HALF of what she paid for it, she couldn't sell it if she wanted to. She bought the house but she sure as heck isn't going to have any equity for a long, long time! Haven't we learned yet that house prices do not always go up and could even go down (WAY down in some instances?) Buying a house is no guarantee that you will have equity, and you could even end up in the reverse situation, owing more than the house is worth, if home prices drop.

Also, home ownership can be very expensive. Repairs can really get you. And on a $150,000 mortgage... well, I have a $75,000 mortgage on my new house, and the payments with escrow (tax & insurance) is $785/mo. I have another mortgage on my old house that is $160,000, the payments are $1,300 but only because I get a big break on taxes because of an ag exemption (which I won't be getting anymore since I don't live there, ouch).

Good luck getting approved for a house with an income of $33,000 in this economy, unless you have stellar credit, and maybe not even with that! Sorry, but 2 people on (or near) minimum wage should not feel entitled to home ownership... it's a privilege, not a right.

Stephen in SOKY · #4 03/12/09, 05:19 PM

At that income level is $400/month for emergency fund realistic?

uncle Will in In. · #5 03/12/09, 05:33 PM

If you live within your means with the income you showed, $800 a month for housing isn't within your means. Whether it is rent or purchase payments. If you go over $500 per month you are going to sink when for any of many possible reasons your monthly wages get cut in half for as little as one month. Living within your means means paying cash for all your expenses. Credit cards will break you.

mnn2501 · #6 03/12/09, 05:34 PM

Emergency fund?? no way, not on minimum wage. A more likely expense would be beer and cigarettes. They also most likely will not have any health insurance.

ldc · #7 03/12/09, 05:34 PM

pcdreams, during the last 14 years I've earned between 10-16K per year, working several jobs at a time and taking care of relatives. Before that I earned more money. The last 14 I've been a land caretaker, (one of the jobs) because I didn't earn enough to buy. I would like to have been more permanent, and sure would like to be now, but am not in the right income bracket. The reason I responded is to say to you that you might try something like caretaking, b/c with the right situation you can save a lot of cash and eventually buy something with a big down payment, that relieves your monthly budget. Good luck! ldc

Glenda in MS · #8 03/12/09, 05:43 PM

Quote:

Originally Posted by mnn2501

Emergency fund?? no way, not on minimum wage. A more likely expense would be beer and cigarettes. They also most likely will not have any health insurance.

Why do you think "beer and cigarettes" would be more likely?

Old Vet · #9 03/12/09, 05:48 PM

One of the real world figures is that you must have insurance on your house. Repairs will cost something, taxes will cost you a bundle. In your current finical status I wouldn't go over $400 per month as a mortgage. And that added to your other cost will probity amount to the $800 you now pay in rent. I for sure would get a house that you own even with a mortgage but keep it to where you can make it if something happens to either one of you.

pcdreams · #10 03/12/09, 05:52 PM

WOW!! guess yall read a lot into my post than wasn't intended.

This is not a situation we are in (though were a couple years ago).

I guess my question would be at this point, if you cant rent and can't buy what options would you have? (I like the caretaker idea!!)

Helena · #11 03/12/09, 05:53 PM

It is hard these days. But why a car payment ?? and why a house that cost over $100,000 ?? Now I know the cost of living is different in each part of the country but around here if you look..very hard..you just might find a little place in the $50,000 that actually has electric and indoor plumbing or even less for a "sad" little mobile home with a piece of ground. Not a palace but a roof over your head. Or live without utilities as long as you have a place of your own. Unrealistic ??..depends on how much you want it I suppose. There was a little cabin for sale on the real estate site the other day about a place in Ala for $59,000. I do wish people luck though..I honestly don't know if I would or could afford a house during these times. Land contract is another idea..but look at the small print. Good Luck.

Jennifer L. · #12 03/12/09, 05:57 PM

There are quite a few places in my area that are listed in the local multiple listing service that are under $50,000.

Here's an example: http://www.nnymls.com/public/search/...sting_ID=84245 It's not much to look at but it's a home, and for 20K.

Or this one for 30K: http://www.nnymls.com/public/search/...sting_ID=80209 Mobile home with two acres and a nice old barn as well as a garage.

Or this one for 50K: http://www.nnymls.com/public/search/...sting_ID=81776 Modular home with 5 acres.

You sure don't need a 150K house!

Jennifer

country_wife · #13 03/12/09, 06:13 PM

Quote:

Originally Posted by pcdreams

So in todays terms can someone explain what this means?

Living within your means simply means not to spend more than you make.

A lot of people do this via credit cards, loans, etc. So many people feel they need or worse yet, deserve the newest model of car/boat/rv, the latest in technology (pc's, tv's, blue ray, etc) not to mention cell phones, blackberries, and whatever else is now available, eating out every day, designer clothes... you get the idea.

Many of us here are doing our best to pay off debt (mostly mortgages), grow our own food, shop frugally, and generally live within, or below, our means.

Regarding your example, assuming an area where an $800 rental is a bargain (as in most major cities), then getting by on $200/month in groceries and putting away $400/month in savings, I would consider that person to be living well within their means.

geo in mi · #14 03/12/09, 06:37 PM

I think that HUD advises that no more than 35% of your gross should be spent on your housing needs. Mortgage, insurance, property taxes, and utilities. That would be $970/mo. There are mortgage calculators on the internet that let you plug in a payment to see what size of a loan you could carry, or in reverse, to plug in the mortgage size and see how much the monthly payment would be.

You can, and should go to annualcreditreport.com(not freecreditreport.com) to get a look at your credit record. You won't get your FICO score, but it will be a start, if you need to clean up anything beforehand. Also, you can go to a local bank(not necessarily BOA or CITIBANK--they will probably just refer you to a national credit broker they have contracted) to get started on a loan pre-approval. You need to sit down with a real, local banker for face time. A real banker who makes investments in your own community--and who will hold your note and not sell it for a profit, will be the one to see. Some credit unions are also giving real estate loans now to members.

One possible flaw that I see in your estimate is that you have no calculations for children, loss of one income, savings, or retirement. And probably most lenders will require a down payment, or a deed to the land prior to getting a construction loan.

And you could be like my Depression era uncle-in-law. For years he spent every Thursday early morning scouring the streets of Mishewaka, Indiana--curb day--picking up boards, old windows, bundles of roofing, cement blocks, you name it....whatever everybody else threw out. Eventually he had enough scavenged supplies to build a pretty nice house. But when he died, the family found $30,000 stashed inside the money belt around his waist....

Denise K. · #15 03/12/09, 06:44 PM

Why only work 40 hours a week?? Pick up a second job. Why car payment, drive a 1000.00 beater. No need for a new vehicle. Before you say have you done it, yes I have. We both work OT frequently. Both our vehicles are paid for, my truck is 10 years old. The car is 5 years old (bought for cash when an elderly friend had to quit driving) Sometimes its not easy but don't limit yourself to 40 hours a week!

Common Tator · #16 03/12/09, 07:02 PM

If you are in Springfield MO, (I'm honestly nor sure). There are deals to be had there.

Look at this cute little place I found on Craigslist in the Springfield MMo area. http://springfield.craigslist.org/reb/1071608849.html

Or WOW look at this forclosure with a lovely 2 story house on 3 acres for 25,555! http://springfield.craigslist.org/reb/1071842088.html

That would be a great start for a young couple!

Michgranny · #17 03/12/09, 07:12 PM

You forgot gas, oil changes and repairs on your vehicle, to get to work and back. Then you can times that by two, including insurance, if both are working, you will each need a way to work. You also forgot clothing, haircuts, etc.
Then you have medical deductibles and co pays.
What about cable or internet, you will need some type of entertainment.

I don't think it could be done with $800 month rent. Then when you buy, you have property taxes and property Insurance and are responsible for all repairs!

HilltopDaisy · #18 03/12/09, 07:29 PM

I think this is a very good question, as it gets us thinking about things we might easily forget when trying to budget.

texican · #19 03/12/09, 08:33 PM

Quote:

Originally Posted by Glenda in MS

Why do you think "beer and cigarettes" would be more likely?

In my experience, grownups that are still on minimum wage, have some problems with something... be it education, skills, addictions (smokes, alcohol, drugs).

I wouldn't pay any rent. I'd get a piece of land, and put up a tent, if I couldn't find a free trailer house. I currently have a large travel trailer waiting to come home with me... it's a lot better than a lot of shacks I've lived in... we'll be using it for a dog kennel. 800$/month is almost 10k a year. That'd buy three or four acres around here. A couple years of renting would buy a good chunk of land. Once the land is paid for, you could start building a house. I built my current one for less than 6K. I'm building another one (very slowly), and don't plan on spending more than 30K (for almost 5000sq'). Scrimp, Scrounge, Save.... the 3S's.

Get a better job (hard in todays climate), get more education, more real world skills people need... Folks always need a plumber, not always an English major.

uyk7 · #20 03/12/09, 08:52 PM

Quote:

If you live within your means with the income you showed, $800 a month for housing isn't within your means.

Very few places that I’ve lived have rent much lower than $800/month and those places are usually in trailer parks/bad areas of town.

Quote:

Why only work 40 hours a week?? Pick up a second job.

Why should they work more than 40 hours/week? Oh wait, people need to work 80+ hours/week before they should be able to relax. Of course that would take a toll on their health but with the extra money they would be making they can afford better health insurance and put more money up for emergencies.

Quote:

In my experience, grownups that are still on minimum wage, have some problems with something... be it education, skills, addictions (smokes, alcohol, drugs).

First, the OP didn't mention an age. Second, in many locations the only jobs available are minimum wage or just over minimum wage; that is if you can find a job at all. Where I live there arn't any jobs available locally (within 10 miles).

.