Anybody budget?

[Bulldog]

Does anyone live by a strict budget? I've always had a loose budget, which was okay because I had cushion. I'm looking at buying a house right at the edge of what I can afford, and that would force me to pretty smart with every dollar. I want to know if others live this way, and if you think I'd be smarter to get a slightly less expensive house and have a little more wiggle room month-to-month. For example, is $20,000 of house value worth giving up half your monthly discretionary income?

[CollinEstes]

Yeah I just got married and have to live pretty tight right now as I finish up school. I pretty much just make it out in excel so I just plug in numbers as I get them.

20,000 for a house can be a big difference if you are talking about a 100,000 vs. 80,000 as far as a house goes, but if you are in the 200,000 to 300,000 then I don't think that extra 20 would do much.

[Shajen]

like everything [oot censored word]-related, it depends.

Do you have additional funds available if things get extra tight?

Are you planning on getting a decent raise anytime soon?

It is not a bad thing to be what some call "house poor", as realestate is normally a good investment.

Need a little more info to go on though.

[jackdaniels]

While I would not recommend being "house poor" (can't afford anything but the mrotgage payment and your basics) - I would FOR SURE recommend tightening the belt to get a better/more valuable home. Within less than a year your new house will build up some equity that you can use to ease your expense burden. Also, lowering your monthly expenses in order to make a sound investment is the right way to go if you want to build wealth.

My wife and I still try to live according to our salaries from 4 years ago (when I had JUST finished school and was barely making a living). This has allowed us to make the kind of investments that are now slowly begining to bear fruit (giving us a net worth much, much higher than many of our friends).

There are quite a few sacrifices that need to be made (in the short term) to make this viable. Some examples are taking lunch/coffee with you to work so you don't have to spend that extra $15-$20 per day. Shopping at places like Walmart/Costco/Sams Club for your bulk items. PAying off your credit cards without ANY revolving debt (this also helps you minimize your expenses), etc.. etc...

Most importantly - manage your cash flow so you don't "feel" the crunch. Know how much $$ you will have for each month and plan your expenditures accordingly - don't be surprised by a couple of extra VISA purchases and end the month with debt on your balance sheet.

GL - I think you are doing the smart thing.

[MrWookie47]

I'm a pretty strict budgeter. I keep track of it in Quicken, and it's pretty slick. It's a system that works very well for me. I'd definitely be inclined to buy the bigger house. If you stretch your dollars now, you'll be much happier later.

[drewjustdrew]

$20000 will cost you an extra $120-$150 per month depending on your rate for a 30 year. If you can grow into your payment, I would go ahead and get it. But also, if you can grow into your mortgage, you should consider an ARM or an interest-only loan. They will obviously burn you if rates go up, but if your income goes up even a little in the next couple years ($5000), you should only feel a pinch in the first few months.

[Shajen]

yeah, a 5 year ARM sounds like a good thing for him if he is worried about it.

Anything less than that 6 month arm or something I'd advise against.

[Bulldog]

[ QUOTE ]
Do you have additional funds available if things get extra tight?

[/ QUOTE ]

Yes, I plan to keep three months worth of expenses in cash.

[ QUOTE ]
Are you planning on getting a decent raise anytime soon?

[/ QUOTE ]

Depends on a possible promotion in the next 6-9 months. Three years from now I could be making 10% more than current, or 40% more.

In the higher priced home, I get a new duplex (vs a 15-year old house) with a few hundred more square feet and about the same land, in a better location.

[trying2learn]

you budget boy, dull normal.

[Shajen]

ok, wow. This could be a tough one. Duplexes where I live (near my house) were recently built. They started at $250k, and are now selling the last few for almost $380k. Of course, it varies from place to place, but the trend seems to be that new properties quickly gain equity, more so than older homes. (Obviously, my sample size is pretty small here, but it seems to be a trend all over Atlanta)

The key thing to figure out here I believe is are you willing to sacrifice in the shortterm for what should hopefully be a long term gain?

My wife and I bought a house we thought was slightly out of our budget. A few months into making payments, we realized how wrong we were. Our payment is easily made, we just cut out a lot of unnecessary expenses.

The main thing is if you feel you can stick to your budget and it won't impact you too much financially, then you should be ok either way you choose to go.

Then you can base your decision off which you'd rather live in.

(I swear there's a point in here somewhere)

[Stuey]

I would look for a cheaper house that will be easy to sell quickly and has a good chance of increasing in value. One with good location and a few easy fixer upper projects that would make the resale profitable.

Then do what you can to get the promotion at work. If you get it put the house up for sale and upgrade. If you don't get it put the house up for sale but at a much higher price than if you had got the promotion, you might get lucky.

I don't think it is ever a good idea to feel as if "this" is the last house you will ever want. Stay flexable and open to the idea of moving if you see conditions are good for selling. The next house can always be better.