Your Home should be a Blessing, not a Financial Curse (The Story of Buying our First Home):

mansion in the middle of a jungle with swimming pool in the backyard, this dream home can be a blessing or a curse

According to a recent article by CNBC make it, home ownership has dropped significantly for millennials in 2018 as compared to previous generations. Not only that, but of the millennials who do own a home, 63 percent said they have regrets about purchasing. The largest reason for buyers remorse? Hidden costs. In other words, they weren’t financially prepared.

My husband and I were no different seven years ago when we tried (unsuccessfully) to purchase our first home. We’ve done nothing but rent since then. For one reason. Debt.

I will never forget the day we made a handwritten spreadsheet of everything we owed. Our coffee table was scattered with statement after statement as we added one student loan to the next student loan, to the next. I felt like I couldn’t breathe. We owed $120,000. That was just $20,000 shy of the homes we were looking to purchase.

Looking back on everything, it was actually a miracle the nine offers we made on several different homes were never accepted, because if they had been, any house we would have purchased would have destroyed us. Our monthly expenses for student loans alone were through the roof. There was no way we would have been able to make home ownership work on top of that.

The reason most millennials regret deciding to purchase a home, in my opinion, is that they’re in a similar situation to what my husband and I were in after getting married. They’re being crushed with debt (especially student loans), they have little real world financial experience, and they’re too naive to understand how forcefully life can come at you, whether by hidden costs of home ownership or otherwise.

One of those could possibly work – either having a lot of debt, or having a lack of financial sense – but not both. Both combined are a death trap. We would’ve definitely been part of the 63% if we had purchased a home back then. We would have been bankrupt shortly after as well, and our house would have been a curse instead of a blessing.

Fast forward a few years and now we have no debt, a six month emergency fund, a separate down payment, a lot more financial sense, and a plan for our future. We’re actually prepared to purchase a home this time around.

Here is what we learned in the search for our first home (the second time around):

numbers on a blue background to show importance of knowing all of your mortgage expenses

Not knowing all the numbers beforehand can lead to a huge financial mess. It’s smart to calculate preliminary numbers to see how much house you can comfortably afford, but many mortgage calculators online only show you the mortgage payment and interest. They do not show you all the other costs involved when buying a home such as a down payment, property taxes, HOA, homeowners insurance, PMI (if applicable), closing costs, and yearly maintenance (which is on average 1% to 4% of the total purchase price).

There are additional costs to take into consideration just to move. You may require a truck, two or three movers, blinds, a washer, dryer or other appliances, boxes to store your belongings during the moving process, etc. Those all add up quickly. Writing all of these costs down first will help you see a more complete financial picture of what you can afford before starting the house shopping process.

Keeping the monthly costs related to your home as close as possible to 25% of your take home pay prevents becoming house poor. Meaning, the mortgage payment (principle and interest), plus PMI, plus property taxes, plus HOA, plus home owner’s insurance should total around 25% of what you bring in monthly. This keeps payments low and prevents being “house poor.” House poor is when your very nice house straps you financially and prevents you from enjoying the rest of your life. In our scenario, everything totals to approximately 27% of our monthly take home pay.

old room in a house falling apart needing restoration vs knowing when to walk away

Over several months we looked at many different homes. Ones that needed to be renovated, others a few years old, and others that were new construction. With each house, our thoughts were focused on investment potential. We wanted to find a home that we could not only afford, but a home that would also result in a good return for the money. We considered the location, purchase price, repair costs, the HOA fees if any, etc. It may seem odd to look at HOA fees, but if you’re spending, lets say, $2,400/year on the HOA, you are loosing any potential returns that money could yield inside an investment. Two hundred dollars invested monthly at 10% would grow into $41,310 in ten years – almost double the $24,000 given to the HOA in the same time period.

Most of the homes we looked at would not give us a positive return for our investment. Either the renovation cost exceeded the home’s value, or the home was over priced for the area, and therefore we kept looking.

aerial view of a new house being built with framing done

If buying in a new construction neighborhood, certain phases are better than others. We settled on building a new home in a smaller neighborhood. We learned a lot about when to buy; the best times being at either the initial or final phases of construction.

Builders usually offer a lot of incentives when a neighborhood is first being built. These incentives are meant to attract people to start populating the neighborhood, and also give reason to continue building if people are buying. If you buy during the initial phase of a neighborhood, you’ll probably get a good deal because you’ll not only have the opportunity to take advantage of the incentives, but you’ll also be buying when home prices for the neighborhood are at their lowest point.

At the end of the building phase, when the neighborhood is almost completely bought out, the builder wants to clear his/her books and is eager to get the remainder of the inventory sold. This means they will be more willing to accept offers they wouldn’t have accepted during the middle of construction.

couple in paradise at the end of an infinity pool with houses on each side of them in the tropics

Always remember: location, location, location. There is a reason location is always stated three times by realtors. The first “location” is looking at the macro-area of where you are thinking to buy; which city is the most desirable? The second “location” is more narrowed in; where in the city is most desirable? The third “location” is where the house is located in the neighborhood; is it on a quiet and private street in a cul-de-sac?

We looked at all three locations mentioned above before putting in an offer for the home we’re building now and did our best to make sure it will be a good investment in the years ahead.

I hope the tips above help you in your home buying journey, and cheers to finding a home of your own that is a financial blessing.
-Keavy

3 ways to increase your income: How we increased ours $100k

What steps can be taken to significantly increase one’s income? That’s the question on everyone’s mind, and not surprisingly so – the more money you can earn and keep, the more flexibility you have with your choices and the easier many of life’s aspects become.

My husband and I were in a rough spot financially when we got married. I was just beginning my career and my husband was starting his own business. We were making a combined $40k working close to 40 hours/week. That’s not a bad starting point, but our problem was the excessive bills we owed. On top of normal living expenses (food, rent, gasoline, insurance, etc.), we had close to $1,000/month in bills associated with debt. Unless we wanted to live a stressful paycheck-to-paycheck type of lifestyle for the majority of our lives, we needed to increase our income fast. I’ll give you the ending of the story first – our income went from $40,000 a year to $140,000, but it wasn’t a microwave fix. A lot of hard work and sacrifice were involved.

books, paper, and typewriter on table to plan ways to increase your income for financial freedom and success

So what changed? First, I quickly realized the value of time. After being at my company for three months I saw a $0.25/hour raise. I realized this was a consistent theme when speaking with other colleagues who had been there longer than I had, which meant we would only make a dollar more per hour in a year. This did not compensate for the gained experience in the field nor inflation. I began to look at other companies which paid anywhere from $5 to $7 more per hour for only a year’s experience for the same job. I saw my time was worth a lot more.

This is actually why more workers only stay with a company for an average of two years, then move on to another company that pays significantly more for their experience and skills. In my opinion this is why the “good ole days” of staying with one company for 25 to 30 years is over.

When I changed companies, our income jumped from $40k to $55k, a $15,000/year increase, all by finding a company that paid me more for my time.

My husband started to get more work with his business and started to increase his rates as demand went up. This helped us go from $55k to $75k, giving us another $20,000 per year. This took about two years to make happen, but we gained $35,000 in those two years just by increasing our base pay for talents we already possessed and had more experience in.

journal and pen in womans hand to plan ways to make more money

Another thing we did was look for contract work, or work on an as needed bases. It may seem a bit strange to think adding an extra 6-12 hours of work per week could almost double your income, but this is what happened with us. Companies who hire this way will pay large amounts when they are short staffed. In my field this happens frequently. I was able to add a few extra hours of work with another company for a huge financial gain – being paid double, sometimes triple my full time base rate for the same job at another company, working a fraction of the hours. This raised our pay another $30,000 – $40,000 per year.

If you can do this in your field, it could raise your income substantially. If not, offering your skills and talents on a contract basis can bring similar results.

My husband saw this working in my field and started to pick up more work on a contract basis, bringing us up to $140,000 per year in a four year time frame.

The downside to picking up so many extra hours of work? We were working all the time. We didn’t do anything else. Physically we were only able to do this for a short period of time to pay off the remainder of our debt and save six months worth of expenses. For us, the sacrifice was worth it for the short amount of time needed to achieve our goals and become debt free.

laptop, coffee in mug, plant, and phone on white table to make online passive streams of income

We quickly realized being paid an hourly rate is only scalable to the finite amount of time you have in a day. It’s not infinite. We started to look for other ways to make money online, eventually through passive means.

If you are able to put in the large amount of effort it takes at first to get passive streams of income going, you have the potential for a much more scalable income. This is something my husband has been working toward for the past year and is starting to get anywhere from $30 to $100 per month. It sounds small, and it usually is at first, but the rate at which it can grow is exponential.

We started doing this to provide ourselves with a mobile stream of income, not bound by an hourly rate, and could be passive (making money while we sleep). Investments are like this as well, and something we are learning more about.

With all that being said, I hope this gives you some ideas for how you can increase your income as well. Also, to look into passive income/investments for a long term plan.

Cheer’s to finding ways to increase your income that works best for you.
-Keavy

Living on $27k a year in the US for 4 years:

man walking through desert financially free at sunset

To what lengths would you go to become financially free? The answer for us? Living on $27,000/year for four years, cutting out everything we didn’t need in our lives, and becoming laser focused on getting out of debt.

“Visualize this thing you want. See it, feel it, believe in it. Make your mental blueprint and begin.” – Robert Collier

At first, it was hard to breathe or think about the future when facing $120,000 in debt (student loans, car debt, and one credit card).

I still vividly remember my husband saying, “We can do this.” He had laid everything out on paper, all the numbers neatly in charts to show us we could be debt free in 2.5 to 3 years.

This was only possible if we limited our expenses, increased our income, or did both. We decided the fastest route to achieving our goal to becoming debt free was only spending money on the bare necessities. After getting this first part down we did find ways to significantly increase our income.

We knew debt was the problem, and we needed to make some drastic changes to become debt free. But how do you fix it?

Budgeting. Yes, the simple act of writing down our monthly income then subtracting our monthly expenses. Making sure not to go over that budgeted amount. When we wanted to save, it was as simple as keeping our monthly expenses below our monthly income and watching our bank account grow.

After we were done hitting our heads against the wall over how simple that answer was, we got focused. We knew we could have a better future for ourselves and family by sacrificing temporarily, only 2.5 to 3 years. Instead of waiting the 10 to 15 years it would take only paying the minimum payments on our debt, while continuing to live paycheck to paycheck without a plan. We did not want to suffer that long!

Our monthly budget was the key to our success, and how we lived on an average of $27k per year for four years. Here it is below:

$400 – food
$170 – utilities
$750 – rent
$200 – gasoline (for two cars)
$12 – life insurance
$149 – auto insurance
$100 – car repairs
$808 – total minimum payments on our debt
$45 – phones
$45 – internet
$20 – hair cuts
$100 – miscellaneous items

The above monthly expenses total $2,799 per month, or $33,588 per year, which was the amount we lived on when we first got married. This number significantly dropped as we paid off our debt (mostly in the order of smallest to largest). When we were able to get the $808/month in debt payments down to $300 we had a monthly budget of $2,291 per month, or $27,492 per year.

By the time we paid off all of our debt two years and eleven months later we were living on $1,991 per month or $23,892 per year. We continued to live on $23,892 for another thirteen months after becoming debt free. Over the four years outlined above, this gives an average of $27,216 per year.

During this time, we did have a small emergency fund of $2,000 to help with anything unexpected that might come our way. For example: unplanned medical bills or a large car repair. We saved our emergency fund first before paying off any of our debt to mitigate going into further debt. This helped us a lot! It kept us focused as well as a little more at ease when tackling our debt.

When we saw how successful we were at eliminating debt we decided to apply that same intensity to increasing our income, and were able to by $100,000/year. This allowed us to pay off the last $60,000 of our debt in a year, quickly grow our savings from the initial $2,000 to a six month emergency fund of $12,000, start giving more, and investing in our future.

We were able to prove to ourselves anything is possible when you put your mind to it, take steps to make it happen, and give yourself no way of retreat.

I want to encourage you and let you know it is possible, and can be done! We are proof it can!

Here’s to becoming debt free, and having an amazing financial future ahead!
-Keavy

New Year, New Beginnings, and Saving Money:

The purpose of this blog is to share with you everything I have learned about saving money, becoming debt free, and getting on the path to financial freedom.

I’m excited to share these passions and more with you.  My hope is that I help you not only save more money in many areas of life but also learn something new, or that the experiences I share in this blog are helpful to you in a similar situation in your own life. 

cat sleeping on desk in sunlit room, budgetarian blog on computer, live a luxurious life without spending a fortune

Wishing you a happy New Year! Thank you for joining me on this new journey.  I am very excited to see how we save money in the year ahead.
-Keavy

The Different Types of Tea, and which one saves you the most money:

My love for tea may borderline a bit too enthusiastic for some, but I find the history, different smells, unique tastes, and the many kinds of tea all fascinating. If you’ve noticed through my other posts you know how excited I get when I can save money and then share that process with you. This post will be no different: in it I’ll break down the average cost of each major type of tea and show which is the cheapest and most expensive, thus hopefully allowing you to make a more informed financial decision.

On average it costs me $0.10 to $0.67 per cup to make tea at home. The coffee and tea shop however, charges $3 to $5 for the same amount. Thus, by making tea at home you can save a lot of money. Which I’m all about! The prices mentioned in this post will be for teas you can buy and brew at home.

different types of tea in several tea pots on a table, each tea has different tastes and different costs

It is important to note that not all teas are processed the same. Within each tea category you will notice a price range for that tea’s cost per cup. It includes the lower priced tea which may not be the highest quality, and the higher cost average for higher quality tea. With that being said lets get started.

black tea in tea cup with saucer on white bed sheets

Black tea begins with the withering of fresh tea leaves, then they are heated at high temperatures allowing oxidation to occur, this allows water to evaporate from the leaf so it can absorb more oxygen. Black tea usually undergoes full oxidation, and as a result it gets its characteristic black leaf coloring. This gives a more robust and stronger flavor, and when brewed appropriately, a higher caffeine content compared to other teas. If you have a high quality pure black tea it can be re-steeped up to three times. The cost per cup for the higher quality tea is about $0.50, however the individually packaged single use black teas are $0.05 to $0.20 per cup. At $0.05 per cup this is the cheapest tea on the list!

oolong tea in tea cup on table with purple flower and tea spoon

Oolong tea undergoes partial oxidation somewhere between that of green tea and black tea. Similarly, the flavor of oolong tea is typically not as strong as black tea or as subtle as green tea, and it has its own extremely fragrant and alluring tones. Oolongs are often compared to the taste and aroma of fresh flowers or fruit, and can be re-steeped up to eight times. This balances out the initial cost when looking at the price tag for this type of tea, which will run you about $0.10 to $0.32 per cup, with each re-steeping becoming richer in flavor.

matcha green tea powder in tea cup on pink table

Green tea is made from the youngest, most tender leaves which provides the best quality. The leaves are allowed to wither slightly after being picked, then the oxidation process is stopped rapidly by heating. Green tea tends to produce a more sweet and bittersweet flavor with many undertones that emphasize the classic tea flavor enthusiasts love. Green tea prices can vary anywhere from $0.17 to $0.67 per cup. If you find a pure green tea, you can re-steep it up to three times, which helps drop the initial cost per cup to about $0.30.

white tea in tea cup with saucer on linen table cloth beside tulip on table

White tea is the most delicate. Appreciated for its subtle, pleasant mellow taste and natural sweetness, it is hand-picked with the bud and leaf together, then placed in direct sunlight to dry naturally. It is best when brewed at a low temperature, which produces low amounts of caffeine. Similarly to the green and black varieties, you should be able to get two to three re-steeps from this tea. The average cost per cup (single use will usually be cheaper than the pure loose leaf white tea), depending on quality, can be anywhere from $0.10 to $0.70.

yellow tea in tea cup with saucer on white table beside computer keyboard and plant

Yellow tea is difficult and time consuming to make, thus it is increasingly rare and expensive. It is in the same category as white tea because it is lightly oxidized. Yellow tea typically goes through a longer, slower drying period. Through its processing technique it does not have the grassy taste which is notable in green tea. It has more of a smooth, aromatic, and sweet floral taste. Yellow tea can be re-steeped two to three times, and will range from $0.50 to $1.14 per cup, making it the most expensive tea on the list.

Cheers to trying new types of tea and having fun brewing at home to save some hard earned cash 🙂
-Keavy