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What's wrong with owning a 400-sq ft home if that's all you can afford?
"Out of the ordinary" expenses, which in my mind are usually high-dollar issues - say the engine blew in the car and cost $3,000 - should be handled by the emergency fund, that's why it's there.
I guess what I'm saying is - in a good financial plan, the structure should protect against pretty much anything causing your monthly cash flow to be so impacted.
I'm also not clear on the mortgage payment - is it a monthly expense that you pay yourself even through the tenant is also, or do you just pay the $1600 in anticipation of the tenant's rent? I hope you've got about 6 months of that mortgage in the emergency fund, otherwise that's a BIG black cloud if your tenant turns into a deadbeat.
It can easily take 6 months from a first missed payment, to recognizing a big problem, to force an eviction, to rent a property again.
@ chicago - Buying new tires isn't a big deal to me at all, nor is it an annoyance. My car needs tires, like I need shoes. It's a simple necessity that affects my finances like everything a consumer must buy.
@ savvy - I think my past experience has prepared me to live on so little. Now I've become accustomed to it. As long as my needs are met, I consider the rest as "extra." Being debt free makes it easier too.
re: mortgage question, I have an emergency fund that will cover 9-12 months of basic necessities and I also keep a separate reserve if my tenants don't pay. I'm well prepared for a "worst case" scenario.
"So if something out of the ordinary happens, such this month when I need new tires, I find myself strapped for cash—or dare I say BROKE—before the month is over."
You said broke... now you say it won't break the bank. Based on the info given, I can only comment on what I read. I consider BROKE as breaking the bank, maybe it's just semantics.
ANY non-recurring expense you don't pay every month is a pretty inclusive statement, and certainly not one I imagine could be covered on a consistent basis by simply "cutting back on non-necessities." It means you are either going to have to dip into your emergency fund more often, or constantly be juggling.
*I* would not be very comfortable in my financial plan if putting tires on my car meant I couldn't get a haircut that week, or grab a sandwich for lunch. That was the old me, I remember him well, and I don't ever want to be him again. I like knowing the money is ready when I need tires, and that I don't have to rearrange all of my other spending just to cover. It keeps things running smooth, and it doesn't trigger emotions that cause poor decisions.
Personal Finance is just that - personal. If your plan is (truly) working for you, then that's what you need to be doing. My plan works for me.
You mentioned that a 'big chunk' goes to employer benefits - could you be a little more specific?
@ Brian - Yes, I think it's a matter of semantics. Based on the amount of discretionary $$ I'm used to having, when it's significantly reduced, I consider myself "broke" but I certainly don't mean it literally. And I agree, personal finance is personal. As long as my financial goals are being met and my necessities are covered, everything else is gravy. If I have to do without something that I "want" because something more important came up, I don't mind.
@ Card Master - Why are my exact contributions to employer benefits important in the context of this post? I don't know the amount right off hand, but if there is some value to knowing that information, I may consider looking it up for you. Perhaps, there's something specific you're trying to figure out. If so, just ask.
I liked your post... forcing yourself to live on less now so that you have more later is inspirational
To each their own when it comes to budgeting, I say.
I also understand "feeling broke." I had to spend $1K unexpectedly on my car recently, (go in for an oil and filter change, come out with new brakes and tires). Was the money there? Yes? Did I feel broke? Yes...because I am used to a certain level of savings. Therefore, I have enforced some personal "economies" until my account is back to where I want it to be.
This is reassurance that I"m not the only one who wants to feel as though they are living paycheck to paycheck (well, without the stress of actually doing it!(
It depends a LOT on your state laws and the speed of your court system. Where I live, an eviction can usually be completed in about a month from the time of a missed payment.
On the 5th day past due, you can serve (I think) a 7-day Notice to Quit, then you can file for eviction and get a trial date scheduled in 2-3 weeks. If the tenant loses in court, he has 24 hours to vacate or have his possessions moved out to the curb.
Because screening, credit, and background checks are widespread today, formal eviction (which shows up in record checks) is something people try to avoid.
I attended a morning of eviction trials for a property management course, and of a few dozen scheduled trials, half were settled ahead of time and most of the others were settled informally pre-trial the same morning. Only two or three actually went to (a very brief) trial.
I tried to post that in Firefox as MW and instead of posting, I got redirected to Google. (WTF?)
So I thought maybe MW was being filtered out (why else would it redirect?), and I tried again in IE using a different handle.
Yes, you don't see 400-sq ft houses, probably because of zoning regs. I'd like to see 400-sf houses on 2,000-sf lots, but zoning regs usually require 10,000-sf minimum lot sizes.
I live in a 400-sf house but it's like a guest house behind a "normal" house, and the lot cannot be split, so I can't buy just this house by itself.
I've tried other methods but treating savings like any other bill is the only one that's really worked for me.
Happy weekend :)
just kidding. Fabulous Post, Single Ma. Living paycheck to paycheck can be good when you have all of your priorities in order
Then I live off the remainder while still saving some money at the end of every 2 weeks to leave in my chequing account for a weekend getaway, shopping expedition, or a non-recurring expense.
For example, my property taxes are due in a couple of months and I'm trying to cut back on my non-necessities in order to pay them, rather than dipping into my home fund.
I don't mind missing a lunch or dinner out, or going to a cheaper salon occasionally. It's a strategy that works for me as a type of forced savings. Sometimes my friends bug me when I say "I'm broke" - of course I'm not - I just try to make more careful choices about how to spend the money I take home.