I’ve seen a number of people in a variety of forums recently mention “well I could buy a house, the mortgage payment would only be a few hundred dollars more than my current rent”. Unfortunately, what many people don’t realise is the associated costs of home ownership. Here are some of these costs which you should consider in your pre-purchase budget:

Before you move:

• Down Payment: While it is very possible to get a home loan without a down payment these days, having one brings a number of advantages: first of all, you’ll pay less. If you purchase a house at $250 000 with no down payment, you’ll be paying $1600 per month (at 6% interest). However, with a $25 000 down payment, you’ll only be paying $1439 per month, saving almost $200. This will save you an enormous amount of money. Also, the bank is more likely to give you a better rate if you have a large down payment, which can reduce your costs. Having a down payment is definitely a good idea. I would strongly recommend having at least $5000 to put down.
• PMI: However, if you don’t have a 20% down payment, you’ll likely have to pay PMI Insurance, which essentially insures the loan for the bank if you are unable to make the repayments. This will have to be factored in to your budgeting as well.
• Closing costs. These are generally 2-7% of the value of the home you’ve purchased, and have to be paid before you move into the home. This includes taxes, title insurance, financing costs and other settlement costs.

While you move:

• Furniture. If you’re going from a bachelor apartment to a 2-or-3 bedroom house, chances are you’re not going to have enough furniture to fill the place. You will most likely end up in IKEA, trying to find some stuff to fill up the space, and it will cost you money. If you do have the willpower to not purchase anything else, that’s excellent! You’re part of the minority and you can ignore this part.
• Moving costs: If you’re moving across the country this can get expensive, especially if you’re not the type to rent a budget truck and hire actual movers.

After you move:

• Property taxes: Many people completely forget that they have to pay taxes on their property. Furthermore, as your home’s value increases, so do your property taxes. While there may not be a huge risk of that if you’re in the USA, in certain parts of Canada you can be paying a significantly larger amount of money in the future for your property taxes.
• Maintenance costs: Things break down in houses. Unfortunately, now that you own yours, it’s not up to your landlord to pay those costs anymore. You’ll need to be able to spend a little bit of money when something inevitably goes wrong, and you need to budget for that scenario.
• Insurance: you need fire insurance, flood insurance, etc. These costs can add up, and they are required. Be sure to shop around and make sure you do some research before purchasing any sort of home insurance.

There are a number of costs involved in home ownership on top of the actual mortgage payment. You need to be sure that you had adequate savings to be able to afford a home and that you will be able to continue the repayments in the future. It’s entirely possible: millions of people have done it. You just need to step back, look at the big picture, and perhaps buy a townhouse instead of a house, or a smaller one which in ten years you can upgrade from. Just consider all of the costs, for your financial security’s sake.

Popularity: 9% [?]

While the most frugal won’t get cable, won’t get internet, won’t get home or cell phones, in reality most of you reading this have internet (unless you’re at a cafe), and most probably also have cable and a phone or two. Well, with a quick phone call you can easily get your rate reduced, often by a fair amount. I did this myself for my cell phone service a year ago. Here’s how:

1) Explore the competition.  By finding a better deal from your competition, you’ve got the edge in negotiation. One thing to look at is deals with other companies. If your cable is with Rogers and your internet and cell phone with Bell, you would save money by moving to Bell, even if the initial plan were the same price, as Bell offers a discount if you have a number of products with them.

Look for “new customer” offers as well. These are often great deals which you can use to your advantage. Always find concrete proof of these deals, and save them.

2) Call your current company, armed with your new offers. Immediately call the cancellation line rather than dealing with customer service, citing the competition’s offers as your reasons for leaving your current company. Their job is to do their absolute best to keep you. Even if you have absolutely no intention whatsoever of leaving your current company, making them think you will is without a doubt the most efficient way to get a better deal.

3) Be firm, but polite. One of the key things to remember is that the person on the other end of the line deals with disgruntled customers yelling at them all day. Call centers are known to be hell for a reason, and working the customer retention line is especially so. In order to entice them to give you the best offer they can, treat them as you would like to be treated if you were in their position. Remember to be firm, but do be polite.

4) Don’t back down, but do negotiate. The representative will tell you the other company is offering inferior service and try to sell you on theirs. Let them know that you are happy with the value they are offering, and you don’t feel the service is inferior. However, you do need to compromise at some point, or you will end up with nothing. If they offer you money off, it’s money off. You could go with the competition if you want to, or if you’re happy with your current service enjoy the discount!  When I did it I didn’t get quite as good a deal as the competition was offering, but I did save over 10% on my bill, with a phone call that took just over 10 minutes.

This is a great way to reduce monthly expenses on TV, internet and phone usage. Competition is stiff in these industries; take advantage of that!

Popularity: 12% [?]

Books can really be a student’s worst nightmare when it comes to expenses. I’ve known some science students who’ve paid upwards of $200 for a single book. In business, the average tends to be around $110 per book. Given as I took 5 classes this semester, this should have amounted to around $550. So, how did I manage to save $350?

Well, the first thing I did was the easiest: I traded. I got two books from classmates who had taken the class before. This is a pretty easy way to do things, and can save you a lot of cash!

Next, I decided which books I would really use. I knew I wouldn’t use my math textbook except to study for the final, which happens to be tomorrow morning. So, instead of buying it I just borrowed it from the library. I only used it for about 12 hours in total, which saved me $100.

Finally, the only two books that I bought at the bookstore I bought used. It wasn’t huge savings, but at $69 for one book and $109 for the other, I still saved much more money than I would have if I had bought all of my books new. Had I gone full-out, I’m sure I could have spent under $50… maybe next semester!

Popularity: 9% [?]

I’ve been an avid traveler for most of my life. I took my first plane trip when I was 6 months old, across the Atlantic to France, where my mom grew up and all of her family lives. Since then, I’ve been to most of Western Europe and Australia, and plan to eventually do a trip to Asia. Now, at 19 years old I’m planning on moving to Australia in May, and I thought that in the spirit of the trip I would reveal some of the frugal tips I learned in my years around the world:

1. Plan early. Plan very early! I am an impulse traveler. Last Sunday a friend of mine and I went to New York on literally one hour’s notice. However, when it comes to travel, planning early can save you a ton of cash. The discount airliners in Europe (such as RyanAir and EasyJet) will give you a bigger discount if you book early: in 2003, my parents booked a flight from Paris to Liverpool almost a year in advance, and it cost a mere 50 pence! Of course, we also had to pay 30 pounds in taxes, but it was still an extremely cheap flight. Book in advance and you’ll save some cash on flights.

2. Get your cash before you leave. Your local bank has much better exchange prices than mall kiosks and airports, no matter where you’re going. Order your cash at least two weeks before you leave, because even if you’re going to Mexico, there’s a good chance your bank won’t have Pesos on hand. They’ll have to be ordered and while they normally only take three or four business days to come in, it’s best to be on the safe side. At the bank I work at we don’t carry Euros on a regular basis and never have more than around 700 and the number of people who come in to try and buy some the day before their flight is absolutely phenomenal. Give yourself time and you’ll have a lower stress level as well.

3. When in Rome… We all complain about gas prices over here, but ours are nothing compared to the rest of the world. Renting a car is expensive, paying for gas is worse. Then you haven’t even factored in the fact that even taxi drivers in New York have absolutely nothing on European drivers. There’s a reason most Europeans take the subways and the train: they work. It’s relatively easy to find your way around all of the major city’s subway stations to find your end target. It will save you huge amounts of time and money, and there’s always that extra bonus of being able to tell your friends you experienced the “true” culture of London and Paris by traveling like the locals.

4. Bring your debit card. This isn’t so much a frugality tip as it is a safety one, but it’s important to mention. In 2003 my family was on a random island in Northern Norway when we ran out of cash. The ferry off the island only took cash, so when we spotted an ATM machine, my mom tried putting her Canadian debit card in and we were able to get cash. It’s important to keep your debit card on your for emergencies like that. Also, withdrawing directly from your chequings is a much better option than doing a cash advance.

5. Get local 800 numbers. When you’re outside of North America (or wherever you normally reside), 800 numbers don’t work. Make sure to get the local numbers for your credit card company, your health insurance provider and your bank. In case your cards are compromised while you’re overseas you’ll be able to contact them immediately and prevent losses. On the same note, call your credit card company and bank and make sure they know you’ll be overseas to avoid having your card frozen.

6. Make sure you have zipped (or buttonable) pockets.  As safe as you might feel walking through the cities in your own country, you need to remember that you’re not at home. Ladies, make sure your purse is zipped up with nothing exposed, and men be sure to carry your wallets and other important items in something closeable as well. Pickpockets are extremely common in most major cities in Europe, Asia and South America. Avoid this potential emergency by ensuring that everything you need is kept safe and on your person at all times. Being careless can cost you hundreds of dollars and a lot of stress!

7.  If you withdraw cash from an ATM, withdraw a lot. My card charges me $5 every time I withdraw money from an international ATM machine. This fee stays the same no matter how much I withdraw. As such, being as frugal as I am, I always withdraw as much as I possiby can in one shot. This can save you a significant amount of money if you use a lot of cash.

8. Get a money belt. Yes, they look lame. Yes, if you’re traveling with friends they will make fun of you. However, they will keep your cash, as well as any other items you carry with you, safe. When I went to Australia for the first time my mom bought me a money belt and as soon as I left her at the airport I took it off, never to wear it again. That was all good and fine until my passport fell out of my purse on the plane on the way back, and I found myself in Los Angeles airport, going through customs, without having a passport. A stewardess found it on the plane and brought it to me, but a money belt would have saved all sorts of problems.

9. If you go to an internet cafe, always change all of your passwords after. A HUGE number of internet cafes have keyloggers installed, and if you want your information to be safe, don’t log in at all, or change your passwords as soon as you can for everything you have accessed. Do not under any circumstances log in to online banking. This is why you have the phone numbers written down: so that you can call to find out this information. It’s much safer this way.

10. Quite frankly, there is no number 10, but it made the alliteration in the title work. I’ll finish off with some random tips: if you’re planning your trip last minute, find a good hotel deal with Wotif.com. Always be at the airport 3 hours before an international flight, especially if you’re flying Air Canada. Most importantly, planning ahead means you’ll have much more fun on your trip!!

Popularity: 24% [?]

Have you ever wondered whether or not you would be able to afford a mortgage payment, on top of other home owning expenses? Do you currently own a home and wonder whether or not you can afford to upgrade? There’s one way to find out: try it without consequence!

Regardless of whether or not you think you can afford a new home, an upgrade, etc, I would always recommend doing this for a few months before making a final decision. Choose a home, and using a mortgage calculator, determine what your monthly costs would be. Add a percentage point to the current rates just to be sure that in five years you will still be able to afford it.

Once you know your monthly mortgage payment, take that number and add 5-10% for maintenance, property taxes, etc. This is your total cost. Subtract your current rent (or mortgage payment) by this number to find the difference you’ll be paying each month.

As an example, say you’re paying $1200 per month in rent, and your dream home, costing you $250 000 at an interest rate of 8%, would cost $1908 monthly over 25 years. Adding 10% for home care and maintenance, your total costs for the new home is $2091 per month. As such, you’re going to be paying $891 more per month.

Now that you’ve got the numbers in order, it’s time to put this into practice: every month, stick $891 in a high-yield savings account. Not only will your savings increase (which you can add to the down payment for your home!) but you’re now living at the level which the house will cost you.

You need to live at this level for at least three months, but by all means keep doing so until you’ve accepted the idea that you will be able to continue living at a comfort level which is acceptable to you. If you find that you can take the change easily then you’re ready to make your purchase. If not, well while you have decisions to make, you at least didn’t make the purchase before discovering this.

Too many people don’t understand the lifestyle changes often associated with a higher mortgage rate. Finding out what it’s like beforehand is a great way to avoid making a major financial mistake.

Popularity: 19% [?]

Be it for an RRSP, a 401k, a Roth IRA or any other vehicle of retirement savings using the stock market, if you’re not going to be retiring for another 15 years or so, now is not the time to sell and try to re-invest later. In fact, it’s time to buy!

I’ve had a few people, both online and in real life, ask me whether or not they should sell the stock they own in their retirement savings and take the penalties to avoid the losses. What people don’t understand is that this money won’t be touched for at least 15 to 20 years (if you plan on retiring in the next five to ten years then this doesn’t necessarily apply to you and you may be better off investing in GICs for the remainder of your working life). The way to make money using the stock market is by buying low and selling high.

Right now, given the recession we’re in, people are selling low, when they should be buying low. In 15 years, the stock market will have recuperated and be higher than it is today, making selling stock now virtually useless and a great way to lose money. But by buying now, however, they’re buying low and increasing their chances of higher profits over the long term.

This is why you should be contributing as much as you’re able and allowed to into your retirement fund right now. This is the time when you’re going to be getting deals which will increase the worth of your fund over time. And by no means should you be selling anything right now if you intend to hold onto it for a long period of time. It’s Warren Buffet who says to buy when people get scared and sell when people get greedy. Well, people are scared and selling: this is when you should be buying.

Popularity: 19% [?]