The Finance Blogger


Can You Afford Your Home in Retirement

January 7th, 2015 ernie Posted in Down Sizing No Comments »

Can You Afford Your Home in RetirementYour home is paid off, your car is paid for, although it probably should be replaced in a few years since it is a few years old, but still in good condition. The house is older and will need routine maintenance, however there is nothing near term that is required at this time. Sounds pretty good doesn’t it. Retirement is just around the corner as well and you are wondering what your cash flow will be like and if you can do some of the things that you had planned on for many years with the money that you have saved and the income that will be generated from your pension?

Can You Afford Your Home in Retirement

You plan to retire and stay in your home. For most people this is probably the right long term strategy. Depending on your age and how close to your retirement there are a few things that you should plan and / or budget for. Items such as the roof replacement, furnace replacement, hot water tank and driveway are big ticket items. They need to be budgeted for so that you have the money to pay for these items when it comes time. Some consumers will also consider window replacements as well if the windows are older. There are more efficient models available and there are sometimes incentives.

Should you down size or stay where you are will depend on a number of things. There are the costs that we just mentioned and how prepared you are for these expenses. Some people will sell there homes instead of spending the money, although they will take a hit in the sale value of their home when they do. Then there is the day to day operation of their home.

Operating Costs

Regular operating costs such as heating and cooling, cleaning and maintenance are often much larger than they would be for a smaller home. A newer home with better insulation, efficient heating and cooling systems is attractive. In addition new lighting may appeal to someone who has an older bigger home.

Maintenance costs such as annual landscaping, painting, minor repairs is another area that is often troublesome for people.  If you let these things deteriorate, your home may not look as good when it comes time to sell. You will not get top dollar for your home. Never the less,  there is a cash flow to maintenance that cannot be ignored. It should be factored into your decision regarding to stay or to sell.

Can You Afford Your Home in Retirement – Cash Flow

Confirm your cash flow in retirement after taking into account all of the above. Don’t forget your income and plans to travel along with health related issues. Look at several scenarios and verify the changes in cash flow for each. Don’t forget to factor in the cost of moving, real estate fees and legal fees as part of your decision.

Once you have analyzed all of the possibilities, you can then decide can you afford your home in retirement. Or do you need to make further adjustments! There may be an emotional element to the decision as well that should only be considered after you have reviewed all of the financial impacts.

For more posts about down sizing, click here.

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All The To-Do About Moving

November 7th, 2012 ernie Posted in Down Sizing 1 Comment »

All The To-Do About MovingYou have just sold your home and you are about to move into the home you have just purchased. This last step of moving involves a lot of work , a lot of planning and oh yes help from all of your friends and family. Unless of course you are hiring packers and movers. There are many pre-move tips that will simplify your move and reduce the stress associated with your move. Planning and gathering information ahead of time will give you the time to make informed stress free decisions that not only will save you money, but also make the move much more enjoyable.

Your movers or renting a moving vehicle

  • Obtain estimates from several movers ahead of time and compare services and prices
  • Do you want them to pack or will you pack everything ahead of time
  • Do you need to have your expensive items appraised and insured before the move
  • Obtain estimates for renting a truck and consider asking friends and family to help with the move. Make sure you account for mileage charges, surcharges and of course the beer and pizza for your buddies.

Your Utilities If You Own Your Present Home

  • Arrange in advance to have your meters read on the day of the move
  • Have the bills forwarded to your new residence
  • Have your oil tank filled and provide the receipt to your lawyer so they can account of this cost in the adjustment associated with your sale of your home
  • Transfer all rentals such as water heaters to the new owner
  • Arrange for the telephone, cable TV or satellite service to be transferred
  • Arrange for other mail to be forwarded to your new home with the post office
  • Change your address on all banks, accounts etc to your new home

Your Agreements – If you Rent Your Present Home or Apartment

  • Provide the landlord with a written notice in advance
  • Arrange for any rental deposit returns
  • Arrange for the cable and telephone to be disconnected and / or transferred
  • Arrange for other mail to be forwarded to your new home with the post office
  • Change your address on all banks, accounts etc to your new home

 

Your Utilities at Your New Home

  • Arrange to have all of your utilities connected on the day that the sale closes
  • This includes gas, electricity, water, telephone, cable TV

General To-Do’s

  • Send out change of address cards well in advance of moving day
  • Arrange for the post office to forward your mail to your new home
  • Cancel all contracted services
  • Stop all pre-authorized checks
  • Arrange for service at your new home for telephone, cable gardening etc
  • Transfer bank accounts if needed
  • Transfer civic, social, athletic and religious memberships
  • Find new dentists, doctors, pharmacy and prescriptions.
  • Arrange to change the address on your driver’s license
  • Transfer address for health cards, credit cards etc
  • Collect any items from cleaning, repair or storage
  • Arrange to move perishables such as plants
  • Arrange for your pets to be moved
  • Dispose of all flammable liquids
  • Arrange to move lawn mowers, snow blowers etc since many movers will not handle these items

Every one will have different things on their list. The important thing is to sit down and plan your move so that there is not a mad dash on the day of the move and nothing is forgotten. Good luck with your move.

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Boomers Downsizing to a Bungalow

April 21st, 2012 ernie Posted in Down Sizing 1 Comment »

Boomers Downsizing to a BungalowAre boomers downsizing to a bungalow to save money or avoid stairs and can they save money when the make this transitions? Many baby boomers are retiring and thinking about whether they should stay in the home they have raised their children in or should they move to a small home with no stairs to climb, i.e. a bungalow! This is a huge step for many people with a lot of issues to be considered.

For most there is a huge emotional issue to consider. After all they have many fond memories of raising their families, great neighbors and comfortable surroundings. Some people must move for financial reasons or perhaps they do not have the positive memories that we mentioned earlier and cannot wait to move away. On the other hand many consumers cannot wait to move. They may not have had the positive experiences that we mentioned earlier and want to try another neighborhood.

Boomers Downsizing to a Bungalow

Stress Associated with Moving

It is a difficult and troubling time for those people that must move, especially if they would prefer to stay where they are. When boomers are downsizing to a bungalow, they are motivated by finances, or by health issues. Sometimes it is a change of scenery or just to be closer to the family. We have gone through the same analysis ourselves. Although we have been thinking about this issue for more than 5 years, we still have not made a decision. I guess we like our home and neighborhood too much and there is nothing urgent that would force us to make a decision.

The other big issue about downsizing to a bungalow is that you really do not save that much money. We have found that bungalows today are priced high because they are in high demand. Compare the cost per square foot for a bungalow against a normal two story house and you will probably find that the costs are much higher for the bungalow. We think that builders are trying to take advantage of the baby boomers who are trying to downsize and save a little money. The prices are high and you may not save that much money! Bungalows are also in demand since many people would prefer a bungalow and this drives the price up.

An Example of Some of the Issues

A friend of mind downsized to a bungalow and had to pay $1000 just for installation of his appliances by the builder. I asked him why he did not do it himself since he is quite capable of doing his own installation. The answer was that the builder would not honor the warranty if he were to do his own installation! So he was left with no choice but to pay the $1000. How many other things are like that, which add a lot of extra cost to the overall price of downsizing?

Many baby boomers are pretty handy when it comes to doing their own repairs. This includes the associated installation of new appliances as mentioned above. What happens though as we age and cannot perform some of these tasks any longer? Is it time to downsize to a bungalow or move into a condo, were everything is done for you? We think that it is cheaper or less expensive to stay right where we are. Even if we have to pay the extra costs to have someone do the work for us. The money we save from not having to pay legal fees, real estate fees and moving costs will pay for the services we need for many years.

Save Your Money

The money you would spend moving, paying for legal and real estate costs can all be invested into your current home. Avoid the hassle of having to move, of having to throw a lot of things out. No need spending money on a lot of new furniture. The old furniture will not fit the smaller space or will not complement the décor. For my money we are going to stay right where we are.

Another factor that comes to mind is that sometimes the kids come home after being away for many years. Downsizing might prevent that, but then keeping that large home means you can help them out as well.

Your comments on boomers downsizing to a bungalow would be appreciated. Are you planning to downsize? For more ideas about downsizing your home, click here.

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Things to think About When Downsizing to a Condo

April 7th, 2012 ernie Posted in Down Sizing 1 Comment »

Baby boomers all over the world are thinking about what they should do with regards to their current home and whether they should downsize or not. This post is going to Downsizing to a Condoaddress some of the issues associated with what you should think about when downsizing to a condo! There are many different issues and it really depends on your personal situation. Some of the items we will mention in this post will not really matter to you since you do not think they are important to you with your life style or situation in life. While others might make you step back a moment and really think about whether it is the right decision for you. Personally we want to downsize to a condo, but have not found the right condo that makes sense for us.

Downsizing to a Condo – Major Considerations

The major areas that we think you should consider as best we can determine are the following:

  • Life style
  • Expenses
  • Cost of Moving
  • Finances
  • Family
  • Health
  • Climate
  • Dreams

We will discuss each one in a little more detail to give you some insight regarding the the things to think about when downsizing to a condo.

Life style

For some people it is a pure lifestyle decision which is independent of many of the other thoughts we will discuss later. It is freedom to lock the door and take off, knowing that the grounds and the building will be maintained while you are away. It is not having to cut the grass or do home maintenance, at least outside. Some one else will do it for you, all be it at a cost! It is also location. Many condo’s are located in or near city center’s in close proximity shopping and restaurants. It might even be about being closer to neighbors who form a community which you can spend time with instead of having to leave the property. Many condo’s oriented to seniors are this way.

Expenses

Many people are worried about being able to deal with the expense of maintaining a home. They would rather pay a monthly condo fee which is fixed and will pay for all day to day expenses as well as some of the longer term significant issues such as windows, parking and the roof. While this is great in concept, many people get sticker shock when they hear what the actual condo fee’s are and how high they are.

Condo fees are high for a couple of reasons: first a study should have been completed which is designed to make sure that you have money in the condo accounts to pay for things as they mature; secondly, you are paying top $ for everything including those things that you would normally do yourself around the home and last, someone is making a profit, usually the condo management company you have hired to manage the affairs of the condo.

best approach is to create your own budget comparison to compare all of your day to day expenses as well as long term expenses to see which is the best approach for you.

Finances

The last statement is a great into  into our next topic. Many people are looking to reduce the monthly expenses they have for their current home and move to a condo. Unfortunately for many, this just does not work out this way. When you take into account the cost of moving, legal fee’s , redecoration fees etc, many homeowners decide to stay right were they are instead of moving. Create a budget that shows your current expenses and compare them to what it will be with your new home. This is the only way to tell if you will really save money or not. don’t forget to include heat, electricity and taxes in your expense comparison.

Cost of Moving

We mentioned the cost of moving above. These include real estate fees, legal fees, taxes if ay, actual moving costs, and redecoration costs in your new home. You may be surprised when you add all of this up!

Family

How much support will get you get from the family? Are they close by or will you move closer to them to hopefully gain the support you will need. It is a trade off between being close to family and being close to good close friends. Many people have to depend on professional support which can get very expensive. this is another item that you will want to factor into your decision.

Health

Can you continue to look after your own home and for how long? Can you climb the stairs or should you install a stair lift. Installing a stair lift is much preferable by many people compared to moving. Health can become a huge issue for many and it is tough to decide when the time is right.

Climate

Many baby boomers are trading cold climates for the warm south. This may be part of a life style decision as well. Some will maintain two homes, while others will just move to a new home, condo or otherwise for the warm weather.

Dreams

Fulfilling a dream can be another reason to think about moving to a condo. You just have to watch international house hunters to understand how many people will move to attain a dream they have always had about living in a different culture or climate. There is nothing wrong with attaining a dream, as long as you recognize that this is the real reason for downsizing to a condo in another city or climate or country! Most people do not follow their dreams.

Your thoughts on additional things to think about when downsizing to a condo are welcome. Our readers will enjoy hearing about more ideas of this sort.

For more thoughts and ideas about down sizing from your current home, click here.

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Should I Downsize to a Bungalow

January 7th, 2012 ernie Posted in Down Sizing 2 Comments »

Downsize to a BungalowDownsize to a Bungalow? Lot’s of baby boomers are thinking about whether they should stay where they are in their current homes or downsize to a bungalow.  There can be a number of legitimate reasons why you want to downsize, however saving money is probably not one of them. It just costs way too much to move and pay real estate fees etc unless you are downsizing to a much smaller home. Lot’s of people assess this situation every day and wonder what is the best position for their personal situation.

Downsize to a Bungalow – Issues

We will discuss this point in a moment, but first here is a list of reasons many people think about when they are thinking about downsizing and some actually do it.

  • A house without stairs
  • Less Yard work
  • Change neighborhoods
  • Life Style change
  • Avoid major maintenance issues
  • Health issues
  • Trying to reduce monthly costs
  • Just the urge to move to avoid memories

When you downsize to a bungalow you meet several of these objectives for moving.  No stairs, usually a smaller lot so less yard work, but not always and usually seniors like bungalows so there are like minded people around the area. Sometimes it is better to move than put a lot of money into an existing home. If you have serious health issues you may be forced to move out of your home also into a seniors home where there is more support available.

Downsize to a Bungalow – Economic

Moving for economic issues is a really tough one and unless you are downsizing to a much smaller home in another  neighborhood into a less desirable area, you may not save that much money.  Issues to consider in your assessment include:

  • Real Estate Fees – 5 to 6%
  • Legal fees
  • Moving fees
  • Taxes depending on your area
  • Property taxes
  • Heating and cooling costs
  • Landscaping if a new home
  • Updates to an older home, repairs and remodeling
  • Even with a new home, there are many upgrades to consider

All of these costs can really mount up so you need to be very careful in making your decision to downsize. Personally I would rather put all of this extra money into upgrades and improvements to my own home instead of paying all of these expenses to move to another home. Every situation is different, so you will need to develop costs associated with each and then make your decision based on the economics and emotional issues that you are dealing with.

Complete Your Own Calculations

Everyone must do their own math and take into account their financial circumstances. If , for example , you are paying 5% real estate fees on a $100,000 home that you are selling, that is $5000 along with legal fees to sell your current place and purchase another, say $1000 you now are spending $6000 in total.  Add to that the cost of moving, which might be as low as $100 to rent a truck for a day or much more if you hire someone to pack and move your things, adding several thousand dollars extra.

Then there is the redecoration, remodeling and landscaping. This could amount to nothing or be many thousands of dollars. Although it is usually not nothing, some people can get away with not spending too much money.  This is very personal to each couple, so make sure you discuss this with your spouse before you decide on how much to budget for this area.

If you love the area you live in,  then spend the money on your own home. If you have trouble with the stairs, install a stair lift. Everyone will be much more comfortable in their own home that they know and love. While some people prefer to move to another city that they have often thought about visiting. Then there are those that move to be with their kids or they move to be closer to family, especially if older members need support. Everyone makes their decision for a variety of reasons and they do what is right for them.

The intent of this blog is to encourage readers to also assess the real cost of downsizing to a bungalow or any other home. Good luck with your decisions! For more information about down sizing your home, click here.

 

 

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Should we Downsize?

December 7th, 2011 ernie Posted in Down Sizing 1 Comment »

Should we DownsizeWell this is a subject that many people who are about to retire or have just retired think a lot about. The kids are gone. You are tired of the big house, the cost of maintenance and upkeep, not to mention the cleaning.  The answer many people immediately think about is that they will down size to a smaller home. Their costs should be less, they will save money and life will be great. Should we downsize to save money or stay in our current home?

It turns out that this is not always the case and it really depends on where you live and what your real motivations are for down sizing. This is something we have been giving a lot of thought to recently and we have just about concluded that the smart thing is to stay right were we are complete with the big house, the pool and the big yard. Now before you say they are crazy, read the rest of this post and then tell me what is wrong with our logic. We are trying to avoid the emotional side of the decision, since once emotions get involved you never know were things will end up.

Should we Downsize – Our Situation re Downsizing

Anyway here is our situation. We would like to move to a nice condo were we really do not have to worry about anything, just pay the condo fee’s and pay for utilities and any decorating that we may have inside our unit. Well it turns out, at least in the area that we live in, the condo fees for a nice condo are really high, in access of $500 a month. Taxes are also the same as what we pay for our current home. So we are not going to save anything really from an operating cost perspective. This is really a critical point in the cash flow part of the analysis.

When it comes to price for something nice were we live, the price for a 2 bedroom apartment style condo is near what our home is worth. By the time you pay for legal fees, real estate fees and decorating, I will have to take out a mortgage on the new place and be further in debt. We have concluded for these reasons that it is cheaper to stay just were we are and pay for people to clean snow off the driveway and do other odd jobs that are needed from time to time.

Sure we have the responsibility of maintaining our home, but with the current economics in our area, it just does not make sense to move and downsize right now. Even bungalows are more expensive than our current home of 4 bedrooms. Now we have to mention that prices are certainly not the same in every area. They vary a great deal and the costs for condo fees also vary a great deal so your answer might be different than mine, which is ok. You need to do your own analysis and make your own decisions. All we are saying is that it makes no sense for us at the present time to downsize and move.

Should we Downsize – One last comment.

We also really like our home and do not want to or need to move or downsize. There is no pressure to move or change homes. This makes our decision even harder from an emotional perspective. We want to stay, but also want something with a lower cost. These decisions are not compatible with each other.

The upshot of all of this talk is that we plan to stay right were we are. For those of you considering the big decision to down size or not, you really should compare the following costs:

  • Cost of new place vs. what you can sell yours for
  • Moving costs including real estate and legal fee’s
  • Decoration costs of the new place
  • Taxes at the new place vs. your current home
  • Utility costs at the new place vs. your current home
  • Maintenance costs for your current home
  • Condo fees at your new home if moving into a condo
  • Maintenance fees for your new home
  • Upgrade costs such builder upgrade costs
  • Landscaping costs, fencing etc if applicable

By the time you compare all of these things, it is just cheaper to stay right were you are!

Comments and thoughts are welcome about things we did not think about or include. For more information about the question, should we downsize our home, click here.

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Downsize to a Condo

September 7th, 2011 ernie Posted in Down Sizing 1 Comment »

What will we do with all our stuff? Downsize to a Condo? We cannot possibly fit all of the things we have into a two bedroom condo! We hear that a lot from our friends as well as havingDownsize to a Condo wondered about this ourselves. The answer is that you cannot fit everything into a condo, unless it is really really big and then you are probably coming from a large home so it still will not work. This is probably one of the toughest emotional things to deal with when you are considering moving and down sizing to something smaller.

Friends of ours have done this. They had garage sales for weeks, they gave away all kinds of things and they just had to throw some things out that they might not have if they had stayed in their home. We have seen two couples do this and both are now happy with their decision, but it took them over two years to get rid of everything and even then it was a challenge. There is just so much emotional baggage attached to many things that we have. Everyone has to get over this part of the decision, however the more important aspect of the decision we think is all about the money and the life style change that you are making.

Downsize to a Condo – some Issues

Life Style Change

You may be moving from a single detached home with space between you and your neighbors to a condo with 4 walls and neighbors who might be noisy above or beside you. There may be one parking spot and in a lot of cases no place to store anything.  You are also cooped up inside unless you have a balcony. Even then it is only so large. This is a big change and one that should not be taken lightly. Think about it for awhile, even spend some time living in a vacation condo to see what it is really like to live in one. Take the time to imagine living this way for the rest of your life.

Financial Issues

This is really the point of this post and this blog. We want to review the issues around moving from your home to a condo from a financial perspective. In most cases utilities are going to cost less since you have a smaller space and you have people living on one or both sides of you.

Taxes can be even more expensive depending on the relative value of the condo vs. your home and the way your city or state evaluates tax rates. The big expense is going to be condo fee’s. This comes as a shock to many people. We have seen condo fees approaching $1000 per month for a 2 bedroom condo in our city for a unit that costs in the neighborhood of $500,000! Many residents are older, do not do anything for themselves and want everything absolutely perfect and they are willing to pay for it.

Low Condo Fees

Beware of moving into a new condo with low fees. They are set that way by the builder to entice buyers. Once the board is elected they must complete a financial study which they are required to do by law. Suddenly they need to raise the condo fees by a large amount to cover anticipated expenses in the future. This can really hurt some people if they are only just making it in terms of meeting the monthly bills.

Many communities charge a land transfer tax that can be quite substantial. This may cause a lot of people some consternation when they realize just how much it is. Before you make a decision to downsize make sure you have included and understood all of the fees associated with selling and buying a home.

For the record we looked at this solution to downsize. We have not been able to find anything that we like with reasonable numbers. We are planning to stay right were we are. Our family will pay the fees we need to maintain our own home!

If you have looked at this scenario for downsizing and concluded that it is something you want to do, we would like to get your comments. What we have discussed is not an issue of whether you can afford it or not. It is more of an issue of whether it makes sense from a lifestyle and financial perspective or not.

Many Baby boomers are going through this exact decision process and it is difficult.

 

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Downsize to a Bungalow?

August 21st, 2011 ernie Posted in Down Sizing 1 Comment »

Downsizing to a bungalow is not for everyone. We just finished a post on downsizing to a smaller home and whether it would be a good idea for us or not. One of the options that we considered was downsizing to a bungalow to achieve a number of objectives that we will discuss in a few minutes.Downsize to a Bungalow Friends of ours just moved into a new bungalow and based on their experience we will not be following their path to downsizing. If you downsize to a bungalow, there is all of the landscaping that must be done, new window coverings and other expenses. If you downsize to a bungalow that is older, there is usually lots or renovation work that needs to be completed.

Criteria and Objectives

Everyone has their own criteria and objectives for moving and it is important to set your own based on your life style , age and needs. Our list includes the following:

  • Cost of a bungalow should be less than what our current home is worth
  • We want to make money on the deal or at least break even
  • We want all rooms on one level so no stairs
  • Same neighborhood
  • Nice area and neighborhood
  • Decent sized lot so that we can enjoy the backyard
  • Parking for two cars
  • A relatively uncrowded street

This is our criteria and readers may have others that they may want to add to the list. Comments are welcome.

For us, bungalows in our city fail for a couple of reasons. The cost of a new home with upgrades will cost almost as much as what we can sell our 4 bedroom home for on a much smaller postage sized lot. When you add in the cost of real estate, legal fees and moving, not to mention decorating and new furniture, this ends up costing us much more money. This was the first big failure in terms of our criteria.

Downsize to a Bungalow – Size of Lot and Parking

We cannot find anything in our area with a decent sized lot and the streets are narrow compared to what we are used to with lots of cars parked in driveways and on the streets. Everyone seems to have at least two cars and they end up being parked everywhere. This gives that really busy cluttered look compared to what we have. This is the second reason why we do not what to proceed with a bungalow choice.

The big concern we have is the stairs as we get older. Well that is easy to solve and we can stay in our current home.  There are all kinds of companies that offer elevators that fit into or onto the stairs and lift you up to the second floor.  So this problem is solved in terms of us staying in the current home we are in. We also have ample parking and a quiet street with most people parking in their garage or on their driveway.

Staying Where We Are

So I guess the answer for us is that we will not downsize. We will stay right were we are and the money we save can be spent on maintaining the house and making it more comfortable for us to live in as we get older. I am find that the more people we talk to the more we are convinced that this is the right approach.

One couple who are good friends of ours downsized from a 4 bedroom home to a two bedroom bungalow. They finished off the basement, upgraded the floors, counter tops and many more items. By the time they were done they were well over budget. They had spent more than they had received for the home they sold. They have a really nice home too. We still wonder why they sold. Now they have bad neighbors with big dogs that crap over everything. Their street is really busy and they have no were really to park other than their driveway. The street is always full.

They also had the hassle of dealing with a builder that did not do a good job on many things. Even after a year the builder is still fixing things for them.

So that is my take on downsizing. If you are happy with your current home, stay there. Don’t waste the money moving to another home and risk disappointment. As you get older consumers have less patience to deal with all of these types of issues.

Comments on your experience down sizing or thoughts about what we have said in this post are welcome. Looking for more details about downsize to a bungalow and options, click here.

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