People always tell us how lucky we are to own a house and not be paying rent. It’s an interesting comment. Yes, what we would be spending on rent is going towards something that will be ours. And yes, we can invest money into making the house look better without feeling like we’re making a donation to a landlord, but a house costs a lot more than a loan payment. For those thinking of buying a home, this is for you.
First, I should note that everyone’s costs are going to be different based on lifestyle, city, type of home and income. Second, the amount we use to budget from isn’t our entire salaries. We take about 20-25% for 401ks (pre-tax), IRA Roths and mutual fund investment. We also each get $300 of play money. I don’t want to have to tell Micah how much I spent on craft supplies and shoes, and I don’t need to know how many CDs or bike parts he’s purchased. That said, I want to make it clear that we don’t make a HUGE amount of money. We each hover around the average salary rate for Seattle. Micah works at one of the lowest paying private high schools in the city (private schools pay a lot less than public) and I work for a non-profit – enough said. :)
Now for the budget. If you followed me on Weddingbee (Mrs.Joey), you know I’m budget crazy. I’ve worked and re-worked this budget about 100 times since we even toyed with the idea of building a house. So here’s our latest budget.
|Line Item||Percent of Budget|
|Water, Sewage, Garbage||1.48|
|M’s Student Loan||4.96|
|Property Tax Contingency||1.97|
|Misc. House Needs||2.16|
I told you I was budget crazy. I should have been an accountant.
The Home Loan/Property Tax Contingency: OK, let’s talk about the mortgage. We live in a large, 3.5 storey house in Seattle. As you all know (since you’ve been reading along), we built our house from the ground up on a piece of land that was already in our possession. Basically this means that we took out less money than house and land are worth. We took out roughly about 300k give or take 10%. I’m not worried about sharing that because if you know us (and our entire mailing address), you’ll be able to find all the data on our home on Zillow in a month or two.
Having said all that, it’s clear this is our biggest expense. We actually pay about 15% more than we need to. We have the money and have no other debt besides Micah’s student loan. The home loan also includes the actual loan plus interest, home insurance and property taxes. Property taxes can fluctuate, so we also save a little on the side just incase. You don’t want to get to November and have to shell out an extra $1000 you didn’t plan on.
Utilities (Electric, Natural Gas, Water, Sewer, Garbage): We budgeted on the high side for utilities. In the winter, our highest electric bill was $110 and last month it was $30. Hopefully after a year of billing history, we can get the utility companies to put us on a budget plan but in the mean time I’d rather budget for more than less.
Cable/Internet: Our services are bundled and I think we’ll need to look at the cable package we’re getting as our costs are on the high side even though we don’t watch a ton of TV. Micah insists on getting Fox Sports NW which doesn’t come in basic cable plans. I’m OK with it because we’d end up watching Husky sports at bars and spending way more.
Sewage Use: This is interesting. So, in addition to paying to replace the sewer pipes (during construction) and paying sewage, we have to pay for the existence of the sewer pipe. Yes, seriously. It’s something like $4,500 total. You pay it once (or in monthly installments) and that’s it for as long as the house exists. This line item is nuts. It’s like the TV license you need in England. Yes, you need a license to own a TV in London. Ask me about it later.
Phone: We have iPhones – need I say more?
Izzy: Izzy is a new addition to the budget. She doesn’t eat a ton, so we’d never spend more than $25 on food a month. The other $25 goes towards shots, vet visits, etc. Anything we don’t spend on her now, we save towards her needs in the future.
Savings: Besides saving for retirement, we save towards a rainy day, future major purchases (new car) or unplanned unemployment. You can never be too safe, especially now.
Misc. House Needs: Sometimes you need curtains or dishwashing detergent or plants for the slope or amazing dishes from Italy. I feel a lot less guilty buying pretty dishes or fabric for pillows knowing we budgeted for pretty house things.
Dining Out: We need to get this under control but it’s hard. We used to budget less on it and would go over every month, so I adjusted it. What hits us hard is the occasional cup of coffee. It seems cheap at $6 a visit (for both of us), but then you do it 5 or 6 times a month and you’ve made a nice dent in the budget. It’s really bad in the winter.
Entertainment: We do Netflix and pay for it out of this line item. If we go hiking and had to pay for park fees, it would come out of this too. Movies, concert, plays – it all comes out of this line item. What we don’t spend this month, we save towards next month.
Health and Beauty: Shampoo, vitamins, razors, contact solution -- we pay for it out of this line item. We also pay for the fancy Crew hair stuff Micah uses and the Origin moisturizer I use out of this line item. We don’t buy them every month or even every other month, so we rarely go over budget.
Fuel: I take Lightrail (which is free for me) and Micah drives to a Park and Ride and carpools to school (which is far). Right now we don’t have a huge budget for gas because we don’t really need it but Micah’s South Seattle carpool is virtually gone, so unless it gets new members or he joins the North Seattle carpool, we have some adjusting to do here come fall. (POOP!)
Gifts: Mother’s day, Father’s Day, Birthdays and Christmas all add up. We put a little something away each month so it doesn’t hurt so much come Christmas. We don’t buy for each other out of this line item. :)
Travel Savings: We love to travel and have made it a priority. We either do 2 small trips a year or 1 really large one. We have an Alaska AIrlines card and it’s annual fee comes out of this fund. I love our Alaska Airlines card. If you need convincing, just ask me. :)
Budget Buffer: Sometimes you need a little more grass seed or you’re planning a dinner party and go over a little on the monthly food budget. We planned for this so we wouldn’t have to dip into the savings.
So that’s the budget and it’s REALLY changed since we moved from our apartment. We spent $1000 on rent (for a 3 bedroom) and about $100 on utilities. We only spent half what we do now on misc house needs because we didn’t have a yard to take care of.
In total, for less than half of our current mortgage, we paid for rent, utilities and misc house needs. It’s quite a change. We have people over more because it’s cheaper than going out. We’re more selective about little things like movies and we do a lot less impulse buying. But after everything is said and budgeted, neither of us would give up the house in favor of renting. We like having control over everything. But sometimes, I miss renting. I miss not having to cut the grass or pay the water, sewage or garbage bills.
Questions? Am I missing an expense?