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How to Afford Living as a Single Woman
Are you a person who is single and find it difficult to purchase larger items because you have one income? If so, then this post is for you.
This was a question that was asked from a member of my community, so I am answering it for you. Thank you for the great question by the way!
Now there are a few parts to my answer and it is probably going to surprise you.
You Need to Have Your Budget Dialed in Really Well
First things first, you need to have your finances organized really well.
Then you want to be managing your everyday finances, the cashflow coming in and the cashflow going out and make sure that you know everything that you are spending your money on how much in each category. Purchasing bigger ticket items with one income makes it difficult enough, so you really do have to have your finances dialed in, to help you as much as possible. Focus on the things that you can control and that is absolutely one that is well within your control.
Here is a checklist of mine you can grab, to help you with how you’re managing your everyday money!
What to Think About When Purchasing a Vehicle
When it comes to things like vehicles, consider purchasing vehicles where you don’t take so much of a hit from depreciation. When you buy a brand-new vehicle, as soon as you drive it off the lot, you lose about 30% right there. Economically speaking, the best deal on vehicles is when they are about 4 years old. Instead of thinking about buying brand new, consider purchasing vehicles used, so you don’t lose as much money. I know you might be telling yourself that it is a better idea to purchase new because then you won’t have to worry about repairs as much, but I can tell you that a four year old vehicle still has a lot of life in it. And paying that lower monthly vehicle payment that you pay for a much shorter period of time, even with some repairs here and there, you are still likely going to save a lot more than purchasing a vehicle brand new.
Find Out What Your Credit Score Is
The next thing to do, is to find out what your credit score is right now, so then you have an idea what it is and you can work on improving it. This way, when it comes time to purchase items on financing, you are paying less in interest.
Most people just thing, ya ya, interest isn’t really that big of a deal and I don’t really have control over it. This is not true. The difference of a person with an excellent credit score and someone with a low credit score, can be $100,000 difference in interest over a lifetime. Meaning that person with a low credit score, will be paying a lot more in interest. $100,0000 difference, that is HUGE. So find out your credit score and keep working on improving it, it could literally be the difference of an entire year’s worth of additional income plus some, over a lifetime.
Things to Think About When it Comes to Home Ownership as a Single Person
Now, when it comes to purchasing a home as a single person with one income, there are many factors to take into account.
First off, home prices aren’t what they were when our parents were younger. Inflation as you know, has significantly increased what home prices are. So, purchasing a home with one income, is quite difficult.
There are a few questions I want you to ask yourself and think about, when you are thinking about purchasing a home with one income.
- The job or career that you currently have, is it one that you see yourself working at for the next 10+ years?
- Is the city or town that you live in, a city or town that you want to live in for the long run? Or are you thinking about exploring other places or moving somewhere else?
The amount of times that most people change careers now a days, is very very often, compared to our parents who many of them worked at the same place for their entire career or they worked at a couple of places, but not changing careers or employers as much as we do, because we live in a different society.
If you are even remotely considering changing jobs, careers, moving to another city in a few years or even in ten years, it might actually work against you if you purchase a home.
Most people think that renting is throwing your money away (I know I used to have this same mindset when I was younger), but I want to explain why that’s not actually true and that purchasing a home is certainly not for everyone and that less people actually need to own homes now a days.
When you are renting, you pay your monthly rent. If something breaks down, your landlord is usually the one to fix it and to pay for it. Often they are the one who has to maintain it, saving you from having to purchase lawnmowers and everything else, which also saves you time. And time is money.
The True Costs of Home Ownership
When it comes to owning a home, a lot of people get so excited to become home owners, that they don’t actually take into account ALL of the expenses as a home owner. You have your monthly mortgage, but you also have yearly taxes and home owners insurance. Your insurance can often be $700-$2000+ for the year. Your home taxes can be $700-$5000+ a year depending on your home and your lot size. Any maintenance is done by you and paid for by you.
When you purchase your home, you need to come up with around 20% as a down payment, which on a $250,000 home is $50,000. Then you have closing costs such as lawyer fees, inspection fees, title transfer fees, survey fees, etc. which is typically about 3% of your home price, which can range greatly but typically from $2000-$10,000.
So, you’ve put a down payment of $50,000 + closing costs of around $7500, then you also have your home insurance which we will say roughly around $1500 and then home taxes we will estimate at $2200. So, right off the bat that’s around $57,500 in cash you’ve had to pay up front, plus $3700 in the first year for insurance and taxes and then on top of that, you have your monthly mortgage payments. Plus, you have any maintenance that comes up throughout that year and it doesn’t include any renos that you may have wanted to do.
When people think that you are throwing all of your money away in rent so owning is the only thing that makes sense, consider this.
All of the money that you pay in home taxes and home insurance, when you sell your house, you don’t get any of that back. And those are expenses that you don’t pay when you are renting.
You also are not guaranteed to make money on your home when you sell it. You are not even guaranteed to get back what you paid for it. Because that $250,000 home, you need to get more than that for it to break even. Because you are paying 3-4+% in interest on that home, you need to make $250,000 + all of the interest + the closing costs you paid when you purchased it and any renos you have done on it, to actually make any money. And you are still out what you paid in home taxes and insurance.
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Is Your Home Really Your Biggest Asset?
You may have heard people say that your home is your biggest asset. But how much of a benefit is it when you are spending your entire paycheck on owning a home just because everyone else told you to, and now you literally have no room to breathe and god forbid an emergency happens and then your thrown into more debt and more stress.
The true definition of an asset is that it is producing income for you. Is your house making you money on a monthly basis? No, it is costing you money. So it is actually by definition a liability. If you own a rental home on the other hand that is different, because someone else is paying your rent and you are able to have different deductions because it is a rental home bringing you in income.
I am sharing this because I want you to really think about what is best for you and your situation and not just do what others have told you in the past.
So, for some people, purchasing a home, isn’t really isn’t feasible.
How Much You Should Actually be Paying Monthly Towards Housing Costs
As a rule of thumb, how much you pay for housing per month, shouldn’t be more than 33% of your take-home pay, per month. Otherwise the higher it gets, the more you are going to struggle because your housing is taking up so much of your income and making other areas tighter.
It is better for you if your household costs are in the 20%-30% of your monthly take-home pay, because the lower, the more room you have financially to get ahead and have less stress.
When it comes to calculating that number, your household expenses aren’t just your monthly mortgage costs, it also includes:
- Your home owner’s insurance
- Yearly taxes
- Monthly utilities
- Yearly maintenance and repairs
- Homeowners association fees, condo fees, etc.
- Any renovations you want to do, build a fence, finish the basement, etc.
Click here to download my Realistic Budget template!
When it Might be Smarter to Rent than Buy
Another thing that I want you to consider is, if you only live in a home for a few years, that it would be cheaper to rent, because of the closing costs you are paying for when you purchase a home, will outweigh the costs of renting. Plus, when you go to sell your home, you aren’t guaranteed to sell it right away, and you aren’t guaranteed to make money on it or even get back what you paid for it. Which means you can take a huge loss on it, or have to stay in it for longer than you would like, which means you might not be able to take a different job offer or move, because you are stuck in your home. When it comes to making money on a home, people who have done that, were able to because they played the long game, most people had their home for 10-30+ years in order for that to happen. So, don’t think that buying a home is the best investment you will make financially, because depending on your circumstances and for many people nowadays, it is not.
If You Don’t Absolutely Love Your Job
If you aren’t absolutely in love with your job, if you aren’t planning on staying there for the long run, like 15+ years, if when you sit down and calculate your take-home pay and approximately what your monthly housing costs are (which includes everything I listed, not just your mortgage payment), then maybe owning a home, isn’t the smartest choice for you.
You Don’t Actually Have to Become a Home Owner
I also want you to know, that you don’t have to own a home, we were conditioned to think that, but times are very different now, many jobs you can work from locations that are not at an office or at a particular location, which means not every person has to live where they work, which offers a ton of flexibility.
I am not completely against home ownership, I own a home, I just want to give you as much information to make the smartest decision for your situation.
And if you are really dead set on purchasing a home, you can use the information I shared, to figure out what cost of a monthly mortgage with all of your other housing costs, is feasible for your income. Work out how much your monthly housing costs would approximately be, adding in everything else not just your monthly mortgage price and doing your best to make sure it is under 33% of your monthly take-home pay.
Consider All of the Facts Before Making a Big Financial Decision
I’m not saying not to buy a home, but I am saying to consider all of the facts and to really figure out what you value most. And then to sit down, and figure out what your take-home pay is, and do some calculations to see how much your housing costs would approximately be per month if you were to buy, and see what percentage of your income would that put your monthly housing costs at. The higher it is, the harder it is going to be to get ahead financially.
I hope you enjoyed the factors that I presented and just widened your perspective so you can make decisions that align with your finances and your goals and not just what society told us we were supposed to do in the past.
If you are at the point where you don’t want to struggle anymore and you want to reduce your overwhelm and anxiety around money, check out my Financial Services that I offer. I work one on one to help individuals and couples manage their specific financial situation and to improve their lives by walking them through HOW to change their financial situation, step by step.
Want to find out where you really stand financially? Click “Cash Flow Confidence” Program.
Frequently Asked Questions about Financial Coaching
Click here to download my Realistic Budget template!
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Do you have any questions or anything to add? Leave me a comment in the comments below and I will respond back to you!