We all know that aiming to live well below your means will help you save more money, get out of debt, and get ahead financially overall. To supercharge this process, you may want to consider attacking your largest expense: housing.
Just being able to save $200, $500, or more each month on housing could put a large dent in your debt repayment or help you seriously pad your savings. Reducing or eliminating your housing expenses might sound difficult, but there are so many different strategies, at least one could work for you.
What’s more is that these options don’t have to be permanent. You can always go back to a more traditional housing situation once you feel like the arrangement has run its course.
See if one of these ways of cutting your housing costs might work for you.
Be Energy Efficient
The eco-revolution is here, and as a result, there are so many ways to save on utilities. A bonus is that some energy-efficient modifications and products can help you earn federal tax credits.
The list of things you can do is long and can get expensive, but there’s some low-hanging fruit when it comes to reducing your energy consumption:
- Stop air leaks with caulk, insulation, or weatherstripping
- Swap out incandescent lights for LED lights
- Turn down your water heater and get a jacket for it
- Plug your devices into powerstrips that minimize idle current usage (or unplug devices altogether)
- Use rainwater barrels for your outdoor water needs
- Air-dry your clothing
- Choose light colors on flooring and walls to minimize artificial light use during daylight hours
- Program your thermostat
- Get alerts for higher priced kilowatt rates during certain hours of the day
You get the point. The more you can minimize your energy use, obviously the more money you’ll save on these costs. Pick a few that work for you, then use the money saved to get ahead in your finances.
Put Your Bills on Autopay
Not only will this small gesture save your sanity, it could potentially save you fees and penalties connected with late payments. You can set up automatic payments to be deducted from your bank account or a credit card account. If you choose the latter, be sure to avoid carrying a balance from month to month and pay your credit card bill on time as well. Otherwise, the interest and late fees from missing your credit card payment could cancel out the benefits of your autopay set-up.
Appeal Your Property Taxes
If you’ve ever gotten those solicitations in the mail from companies that claim to reduce your property tax bill, don’t put it in the junk pile quite yet. According to the National Taxpayers Union, up to 60% of U.S. properties are over-assessed. This means that 60% of Americans could be paying inflated property tax bills.
Many property owners don’t even know that they can get their property tax bill reduced via an appeal process. Because of this, it’s very possible that you are paying too much for your property taxes.
The appeal process to get your taxes can seem daunting, but it’s usually a string of paperwork and deadlines. Of course, you’ll be dealing with government entities so that could add a layer of complexity to the whole ordeal, but it’s not insurmountable.
If you have the time and ambition, it’s a process you could easily undertake yourself. If not, it may be worth hiring help to file and follow up through the property-tax appeal process. If the appeal is successful and your property taxes are reduced, you’d fork over a portion of the savings to the firm or person you hire.
Shop Around for Insurance
If you’ve got home insurance, you are likely to have other policies for vehicles, and perhaps you also have coverage for health and life insurance benefits, too. If you’ve got insurance needs that require multiple policies, you can leverage your buying power to shop around for better rates.
Shopping around for insurance can seem straightforward, but be ready to use your brain to the utmost in this endeavor. Not only will you need to compare prices, but you’ll also want to compare things like coverage amounts, premiums, deductibles, and available riders at the quoted prices.
Fortunately, there are comparison sites and independent insurance agents that can make this task a little easier. Either way you do it, it’s a good idea to check around every once in a while to make sure your current insurance provider is being competitive and offering you the best rate.
Become a DIYer
One of the most costly expenses of owning a home can be maintenance, repairs, and upgrades. Save money by learning to do some things around the house yourself. There are many resources to help you with anything you don’t know much about, from books, to websites, to YouTube. Though it can take more time, you might come out ahead by cutting your own grass or installing your own kitchen backsplash.
If you’ve got complicated jobs that require special expertise and equipment, consider a partial DIY approach. For example, if you’re redoing your bathroom, you might ask the contractor about things you can do yourself to shave the bill down some. Demolition and cleanup of existing fixtures might be the type of work you can handle.
Don’t be afraid to experiment, but definitely be wise about the projects you decide to take on yourself. Finding the right balance between hiring and DIYing can save you time, money, and headaches as a homeowner.
Rethink Your Home Purchase Plan
Getting a conventional mortgage with vanilla terms that include a 10%-20% down payment and a 30-year loan period are all too familiar to the home-buying public. But if you really want to save on the single largest expense in your life, you might have to be a little more flexible than the standard terms accepted on most home loans.
Larger Down Payment
One approach to consider is putting down at least 20% on your home purchase. This will allow you to skip private mortgage insurance (PMI), which can amount to thousands of dollars over the life of your home loan. PMI can eventually go away over the life of the loan when certain criteria is met, but you can save more money by dumping it sooner than later.
Refinance Your Mortgage
Many people refinance their homes in hopes of getting a lower monthly payment or locking in a lower interest rate. Adjusting these numbers downward can definitely save money for some homeowners over the long run.
However, refinancing your home loan is not a silver-bullet solution that will work in every scenario. In some cases, it makes perfect sense to refinance, and in others, it wouldn’t be a good idea. The best thing to do is run the refinance numbers and make a decision. After doing the math, you might actually find that fees and extended loan terms could cause you to lose money rather than save it.
Make sure you fully understand the terms of your refinanced mortgage along with the potential impact on your entire financial outlook. Most definitely, confirm your assumptions about this move with math. If you need help running the numbers, check out this refinance calculator from myFICO.
Pay Cash for Your Home
While not an option for the average American, paying cash for your home is not unheard of. Paying cash for a home would eliminate tens, maybe hundreds of thousands of dollars in interest, mortgage fees, and PMI. If you think you’d like to go for the gusto and pay cash for a home, consider ways to make this feat possible:
- Postpone homeownership until you can save cash for your home purchase
- Purchase a lower cost, distressed property that requires some renovation to become habitable
- Purchase a home where property values are more affordable. This could be in another country or in extremely rural or urban areas
Drastically Change Your Lifestyle
Though these options aren’t for everyone, they are still worth a mention. These suggestions are for those who might be willing to change their lifestyle in order to garner the most savings possible when it comes to housing.
Get a Roommate (or Two)
The home-sharing revolution has caught on, and everyone from young professionals to empty nesters are finding boarders on places like Craigslist and Airbnb. If it works out, it can truly be a good solution to help lower your housing costs. Plus, having a roommate can be temporary or longer term, based on your living preferences.
Again, this option is not for the faint of heart. Adding a roommate to your living equation could be utterly disastrous or surprisingly pleasant, so choose your housemates wisely.
Buy a Multifamily Unit, Rent One Unit Out
Depending on the location and property type in these situations, homeowners can often cover their entire mortgage amount with their renters’ payments. It can definitely have its benefits, but don’t buy that two-flat just yet.
Remember, with this arrangement, you’ll be swimming deep in the waters of landlordship. How it all pans out can be based on so many variables: the landlord, tenant, property, location, and a host of other factors can make this arrangement easy income or a nightmarish headache.
If things go wrong with your property, your tenant doesn't share the burden of fixing things though they live there just the same. There can be costs associated with maintenance and repairs that go well beyond the monthly income your rented unit brings in. You’ll want to have a comfortable cash cushion for incidentals before starting your homeownership journey as a landlord.
You don’t have to join the tiny home revolution to downsize (though it’s not a terrible idea). Downsizing can look different for different people. Downsizing for one person might be moving from the lake-view two-bedroom apartment to a studio in a less ritzy location. You’ll have to decide what downsizing looks like for you and if it will be worth the effort.
While you might not be game for all of these suggestions, you can probably adopt a few that could change your financial situation significantly. Whatever measures you choose to save or eliminate your housing costs, make sure you are ready to deal with the consequences. These consequences can be both beneficial and somewhat inconvenient for your quality of life and your financial health. In the end, you’ll have to determine if it’s worth it.