Tips to Slash your Monthly Housing Costs

Whether you’re a renter or an owner, housing costs likely consumes the largest portion of your monthly budget. The Bureau of Labor Statistics reported that the average American spends $1,574 each month for a total of $18,886 every year. That’s a large chunk of change and such a large expense can make it difficult to afford everything you need to pay.

You should aim to spend no more than 25 to 30 percent of your income on monthly housing costs. Chief financial analyst Greg McBride from Bankrate recommends setting the ceiling for housing spending at no more than 30 percent. If your costs exceed that, it’s likely you’re going to struggle to afford housing costs. Spending more than you can afford on housing can impact your ability to pay for your child’s education, save for a vacation, or accumulate savings towards retirement. Moving isn’t an option if you are on a lease or locked into a mortgage for 15 or 30 years. It’s still possible to cut costs if you’re finding that you’re struggling to make ends meet.

Downsize

The first thing to consider is whether you do have the option to movie or not. You can save hundreds of dollars by moving to a different area or going from a three to a two bedroom, or even a two to a one if possible to cut costs. A smaller apartment or house will be cheaper to heat and cool than a larger home. Every dollar you save by moving to a smaller home is a dollar you can put towards other expenses.

A more drastic, but cost-saving measure, is to sell your home and purchase something smaller and more affordable. The equity you have in your home will give you the flexibility to buy something that meets your needs without stretching your pocket too much. Don’t jump into selling your home without first considering the selling costs, moving expenses, new furniture for a smaller home, storage for larger items, and smaller costs associated with the property such as the condo or homeowner association fees.

Relocate

The cost of living is largely dependent on where in the country or even in your state you live. If you have the option, consider moving to an area with a lower cost of living. You’ll save on more than just housing costs by relocating to a more affordable area. City living costs, on average, $9,073 more per year than living in the suburbs according to a study conducted by the real estate site Zillow. There are variations depending on which area of the country you’re in and which city you’re residing in. Philadelphia is one exception where it is more affordable to live in the city than the suburbs.

Increase your Cash Flow

Moving to a smaller home or to a different area may not be feasible options. Consider having a roommate move in with you to help cut costs across the board. Rent out your spare bedroom if you have one, or turn an extra living space such as a den, finished attic, or basement into a bedroom. If you do live in a one-bedroom, it might be cheaper to move into a two-bedroom and split the expenses down the middle with someone else. Carefully screen potential roommates to ensure they don’t have a criminal history and verify that they’re employed so you have someone reliable to split expenses with.

Negotiate Housing Costs

If you’ve got a mortgage, it might be looking into refinancing for a lower interest and terms that are more favorable to you. Compare rates between lenders to see where the best deal is. Before refinancing make sure you’ll be in your home long enough to recoup costs of the refinance. Renting is a bit more tricky, but look into the rental rates in your local area based on the number of bedrooms before talking to your landlord. If you’re a good tenant and have lived in the rental for a while, your landlord might be willing to lower your rate a bit since you’re making things easier by paying rent on time and not causing any problems in the area.






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