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Posts Tagged Money

How To Get Started: A Practical Guide Part 3

So we have got you in the right state of mind, got you excited to build your house within minutes.  Yesterday we talked about what basic tools to get and how to learn to use them, it may take a few weeks to complete this step, but we are moving on.  Today we talk about getting your finances in order.

The sad truth is that it will be difficult to get a loan from the banks, your best bet for this is to have a good relationship with your banker/lender and get creative with how you approach it.  There are some easier ways to get loans for the purchase of land (depending on your state), but they often come with 8-9% interest and 20% down.  Of course there a loads of exceptions and variations depending on what bank and where you are.

For many of us we will have to rely on the money we have in hand to finance our construction.   Depending on your choice of house to build you will need as little as $3,000 up to $23,000 if you do the work yourself.  Now you can make your money go a lot further if you scavenge stuff off of craig’s list, ReStore, dump, etc.  When it comes to building your house remember that it is almost always going to be more expensive than you expected, so budget for it; I suggest 15% additional for things that come up.

The other key thing to do is make sure if you are going to start without all the money, think about key steps in the building process that you need to finish.  For example, some people lay their flooring down, then put up the framing, you would be wise to have enough cash on hand to finish sheeting the sides and the roof so that nice brand new floor doesn’t get rained on.

So when I speak of finances I go beyond just affording your house, I want to shift your entire financial life, why?  A few reasons: first to be fiscally sound will mean you can more easily get into your house, next it means that you will be able to overcome any financial hiccups during the process and finally, having all your affairs set means that when you start to live in your home you will also be happier because you no longer have debt, collectors calling you, you have a security blanket for rainy days and reduced stress.  With all of these reasons you will be much happier because there will be no more financial stress and you will enjoy your new house more.

When it comes to finances I subscribe to Dave Ramsey’s approach.  His process  First establish a $1000 emergency fund, start viciously paying down debt you have, establish 3 months living expenses in savings, then and only then, you become stable and able to take on a loan and/or start saving for your Tiny House.

When it comes to your house I can’t stress enough, you need to have your finances in order.  Part of this process is also educating yourself about needs and wants.  To do this we really need to understand how our society places pressure on us to consume things.  Consumption is obviously tied to money, because we need to purchase things in order to consume.  If we are able to reasonably take ourselves out of this culture (to a point), we can reduce our spending instantly.

More on consumer culture tomorrow!

Motivation

The Renter’s Manifesto

One of my favorite new websites is called Mint.com.  Basically it is a financial website that allows you to manage your money, but it also has this amazing blog.  I have now vowed to never rent if can avoid it.  I have been there, done that and found it that the outcome was less than desirable especially compared to that of living in a Tiny House.

The bloggers over at Mint have put out an interesting article about renting, they propose that they are in fact better off renting.  The big assertion they make is that if you are modest renter, who can manage your budget, that it is actually better at building equity.  By paying less than a mortgage, saving the difference and not assuming the risks, you can do better.

What do you all think?

Full Article

Cage Homes

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I found this story over at CNN, its about cage homes in Hong Kong.  If you haven’t heard about these, they are essentially bunkbeds that are sealed off with cage wire so that people can lock them when they aren’t there.  They are the size of a single bed and are about 4 feet tall for each “unit”.   You have to share a bathroom with everyone, but the kicker is this, guess how much it costs for one of these in Hong Kong?  $167 a month!

There has been recent outcry about the deplorable living conditions which a large number of people live in.  Above is a photo of one of these cage homes that was used in an art exhibit to raise awareness of the growing trend.  Among the cage homes, cubical farms have been cropping up where people pay to live in, about the same rate.  In a city where houses have sold as much as $9,200 per square foot, no wonder why people go to these extremes.  The questions is, what is the solution?  With such densely populated urban centers, space is getting less and less accessible.

Read more about it at Reuters

5 Reasons Why I Am Going Tiny

Freedom

Freedom from stuff, freedom from excess space, freedom of time, freedom from cleaning.  All of these things take time, energy, money, and resources, going smaller means these demands are reduced drastically.  You then have freedom to do what you want, what is important, what really matters in your life.  Tiny House image

Money

McMansions cost allot of money, I am sure you have noticed.  The average US house costs around $265,000.  But it doesn’t stop there!  In order for you to get into that big house, you have to get a mortgage, which by the time you pay for it; it will cost you two to three times that, so roughly $800,000.  Then add maintenance, insurance, furnishing such a large space, cleaning products, etc.

Then there is the risk that comes with a mortgage, even with buying a house that is conservative for your income, even if you save for 3-6 months of pay in case you get laid off (which 95% of Americans don’t budget for), you could still lose your home after paying it off for 28 out of the 30 years you have on it.  So factor the cost, plus risk, then consider the opportunity cost, you could be well in the hole close to 1.5 million dollars and then be left homeless.

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