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America’s Cheapest Family (Part 3): On Housing

America's Cheapest FamilyThis is an ongoing series of book reviews – in parts, on money-related books.

The first is this series is called America’s Cheapest Family – Gets You Right on Money by Steve and Annette Economides. According to them, this is the guide to living better, spending less, and chasing in on your dreams!

Here’s what they have accomplished so far:

    – Paid off a house in 9 years on limited income (average income approx $35k/yr)
    – Paid cash for all their cars
    – Remodeled kitchen without a home equity loan
    – Enjoyed fabulous debt-free vacations
    – Fed a growing family (of 2+5) on a grocery budget of $350/mth
    – Put savings in the bank!

On Housing

“Most people view home ownership as “The American Dream.” Is it really? With careful planning it can be. But if you’re careless of impulsive, your dream can quickly become a nightmare. The bottom line to home ownership bliss isn’t just getting into a house. You must balance the goals of saving money, building equity, and getting a great deal with the time and ability you have to maintain a property.” – Steve and Annette

Don’t over-commit. Your house payments, insurance, taxes, maintenance, and utilities should take up no more then 40% of your monthly net expenditure. They advocate getting a mortgage based on one person’s income in case sickness, disability or unemployment happens.

Home maintenance should be budgeted at 10% of your house payment.

As with a car, do your research on what are houses selling for. If need be, move to a cheaper area and get a place there. Treat it as a temporary thing, and aggressively pay off your mortgage. When you have built enough equity, you can then consider moving back and buying a house near your family, which might be a pricier area.

[Editor’s note: In the US, mortgage interest rates usually range from 6-9% pa. Thus it makes sense to aggressively pay off your mortgage. Currently in Singapore however, a bank mortgage loan is about 2%, lower than the 2.5% your CPF money would earn. Don’t forget too that your first $20k in your Ordinary account earns an extra 1% interest!

Until the bank loan goes above 2.5% (or 3.5% if you have less than $20k), it does not make sense to empty your CPF money into mortgage payments, and lose that extra retirement earnings.]

Consider living in a townhouse/condo, where there is little or no property to maintain. (ie. no lawn to mow or snow to shovel)

[Editor’s note: Majority of Singaporeans already live in high-rise apartments, so this point may not be so relevant.]

If you are a retiree, with a home fully paid for, you might consider renting out your rooms to other seniors or single parents with one/two kids, or older college students. Or if you need help with property maintenance, home repair, cooking or cleaning, consider renting to a young family who could help you out with these.

If you are getting too old to handle living on your own, consider selling your place and moving back with your children, using the money to build an extension to their current house.

Having trouble with downpayment? Re-examine your budget and find areas where you can cut down and save. Opt for free entertainment instead of expensive recreational activities.

If you need to use the services of a contractor or repairman, it helps to get friends to refer one to you. Knowing how they have worked well before for your friend would help you feel more assured.


Others in this series:
America’s Cheapest Family (Part 1): On Grocery Shopping & Budgeting
America’s Cheapest Family (Part 2): On Cars
America’s Cheapest Family (Part 3): On Housing
America’s Cheapest Family (Part 4): On Utilities
America’s Cheapest Family (Part 5): On Debt
America’s Cheapest Family (Part 6): On Staying Healthy, Entertainment & Recreation
America’s Cheapest Family (Part 7): On Vacation and The Final Payoff


America's Cheapest FamilyAmerica’s Cheapest Family by Steve and Annette Economides was checked out of the National Library for the purpose of this book review. It can be found at English 332.02400973 at your Library.

Check online to see if it’s available, and check it out for free!

(Free up some money in your entertainment/education envelopes!)

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