Tools That Every Household Should Own

by couchpotatowhome, posted in Featured, Housing & Real Estate

A couple of weeks ago I was at a friends place for a party. While we were at the party, the faucet in his kitchen started leaking and there was puddle of water below the sink. They had a pull out kitchen faucet where the tubing had come lose from the spout due to regular use and started leaking. All we needed to do was to use a wrench to tighten the tube that connects to the spout to stop the faucet from leaking.

To my surprise they did not own a basic wrench. Lucky for them, I always carry a toolkit in my car for emergencies which has a wrench and we were able to fix the problem immediately. They have lived in this house for almost three years now and the only tool they own is a basic run off the mill screw driver set with four different bits. I was amazed to know that a homeowner would not have certain basic tools that a household should carry for emergencies to be able to fix basic stuff at home.

In this blog I am going to provide a list of some basic tools that I believe every household should minimally carry.

1. Basic Tool Set

Every household should carry a basic tool set which minimally contains a hammer, a tape measure, a pair of pliers, basic ratcheting wrench set, screw driver with a few hex, Philips and torx bits and basic hex key wrench set. The picture shows the one I own. This is a basic set that I bought for $40 from Walmart almost 10 years ago. It’s a great set and contains every tool that a household would need for any basic household repairs.

Here are some basic tool sets that I would recommend for any household.

You don’t need to splurge on a tool set. You should be able to get a tool set with all the tools you need for basic home repairs for $50 – $70.

2. Utility Knife

A utility knife is another important tool that every household should own. A utility knife is a very versatile tool and can be used for opening a box, scoring and cutting a paper board or a dry wall or even using it to tighten or loosen a flat head screw in case of emergencies.

3. Stud Detector

A stud detector is a tool used to detect studs behind the drywall. A stud detector is a very important tool if you need to hang something on your walls that is heavy and you need to put the screws in the stud to be able to bare the weight. You need this tool if you need to do basic household chores such as hanging a photo frame or wall mounting a TV. You should be able to get a basic one for around $20.

4. Tongue and Groove Pliers

This is a tool that you will need for all your basic plumbing needs. This is an adjustable tool which fits most popular plumbing nuts. You can use this tool to tighten a nut in a leaky faucet, install a new kitchen or toilet faucet, install a new trash compactor etc.

For a regular household a 6 in. tongue and groove plier should suffice. This should be able to cover most of the simple household plumbing needs.

5. Power Drill

A power drill is a very useful tool if you need to drill holes in your drywall for screws to mount a television or to put up photo frames. You can even connect your screw driver bits to the power tool and use it as a power screw driver to assemble things such as a furniture. If you are a fan of Ikea fan you should be aware of the time it takes to assemble their furniture. It only takes half the time using a power tool to assemble an Ikea furniture.

For your basic household needs you need at least an 18 V power tool. Anything less than 18 V is not powerful enough and anything more than that is simple too powerful for basic household needs.

Here are a list of some reasonable priced power drills that you can consider buying.

6. Drill Bit Set

What’s the point of owning a power drill if you don’t have a drill bit set. If you decide to buy power drill, you should consider buying a drill bit set to go with it. A basic 21-piece drill bit set such as the one shown here should suffice for most of the household needs.

7. Flashlight

A flashlight is a must have for every household. I would actually recommend that you have one flashlight in the house and one in you car for emergencies. I would recommend buying at least a 500 lumens LED flashlight. You can find recommendations of good flashlights here.

8. Safety Glasses and Work Gloves

Safety is paramount when you are trying to do any household repairs. Always wear safety goggles when doing any repairs. You can buy a good safety glass for as low as $5 – $10.

Always wear a work glove when doing any repairs. Things such as utility knives, drill bits are prone to breaking. Wearing a glove will protect you from any accidents. You should be able to find a good work glove in any hardware store.

I believe everyone who owns a house should at least own all the tools listed above. These tools should be sufficient for basic household repairs. You don’t have to break the bank in buying high end tools. Basic run of the mill tools should be more than enough for basic household repairs since these tools do not get used frequently.

You should be able to buy all these tools for less than $250. You can find all these tools in your neighborhood hardware store such as Lowes, Menards, Home Depot or Ace Hardware.

Please share your thoughts on other tools that you have found to be useful for a household to own in the comments section below.

Kid’s Toys – Tricks To Save Money

by couchpotatowhome, posted in Featured, Life Hacks

I have a 14 month old toddler at home. He is the best thing that could have happened to us. At this age, the kid’s minds are like a sponge, soaking up huge amounts of information from their environment. They are absorbing everything around them, effortlessly, and indiscriminately. At this age the kids need a lot of mental stimulation. Toys are one of the best ways to provide mental stimulation for kids.

I don’t know about others but I have noticed that my son gets easily bored with toys. He needs new toys every few days to keep his ever curious mind busy. However, toys can be expensive and I have seen people spend hundreds of dollars in buying toys. Their living rooms are cluttered with toys. But, it does not have to be that way.

Here are some idea I have used to buy toys inexpensively and also minimize clutter.

Buy Used Toys

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We’ve spent at least a few hundred dollars on toys until now. We used to buy new toys always until one day my wife found some great used toys while browsing on Facebook Market place. The first used toy we bought was a Vtech walker. This walker would typically cost you about $40.00 if you bought it new. We were able to get a hardly used one in great condition for $8.00. Like many others we wanted to provide the best toys for our kid and were initially skeptical about buying a used toy. Once we got past the stigma of buying a used toy and bought our first toy through Facebook Market place, we now only buy used toys. By buying used toys, not only are you able to save a lot of money, but you are able to provide more options for your kids by giving them more toys. In some instances we have been able to sell the toys back through Facebook marketplace for a few dollars more than what we had initially bought for.

There are several other online marketplaces such as Offer Up and Craigslist where you can buy used toys as well.

When you buy a used toy, just make sure you thoroughly clean it and disinfect it with an alcohol wipe prior to letting your kid play with it.

Exchange Toys

Several of our friends have kids who are around the same age as our son.We swap toys with those friends every few weeks. This way you minimize clutter at home since you don’t have to buy all the toys, but you also keep it interesting for your kids since they get to play with new toys every few weeks.

Kids have a short attention spans. So, even if you are swapping back the same toy a few weeks later, it looks new to them and they are more interested in playing with those new toys rather than playing with the toys they see everyday. This keeps it interesting for the kids. Personally, my kid is very excited to play with his new toys every time we do a toy swap. We typically do a toy swap once a month with our friends. This concept is similar to the one provided by services such as ToyBoxMonthly with the exception of the subscription fees. You can do the same with other kids stuff such as kids books, movies etc.

Reach Out to Family, Friends and Colleagues

I was talking to one of my colleagues and we were discussing kids and toys. During my conversation I had mentioned to him about how my son gets easily bored with toys and how he quickly outgrows them and that I needed to buy new toys to keep him entertained. When he heard that, he remembered that he had some toys in the basement that he needed to get rid of and offered to give them to me if I needed it. That is when I realized that there are several people who you might know who have kids whose toys might be sitting in their basement collecting dust and cluttering it up. You can reach out to them to see if they have toys that they are trying to get rid of. This would be a great way to save some money on toys while providing more option for your kids.

Using the above techniques not only will you be able to save a lot of money on toys but you will also be able to provide more toys to your kids to stimulate their ever curious minds. You can also minimize the clutter in your home by selling toys you no longer use on online marketplaces such as Facebook marketplace and OfferUp and use that money in order to buy other toys. This way you are just putting the money you got from selling your old toys in buying new toys instead of putting additional money in buying toys.

I hope you found this article helpful. These are simple changes you can make in your life to save a few extra bucks.

Feel free to share other ideas you might have used in saving money on kid’s stuff (toys, clothes, books etc.) in the comments section below.

New Year Resolutions To Improve Your Finances

by couchpotatowhome, posted in Featured, Personal Finance

January is the time of the year to take a step back and assess how you did last year and what you can differently to improve your financial situation this year. Here are some ideas on what to consider when you are deciding on resolutions for this year to improve your financial situation and how to go about successfully implementing them.

1. Track Your Expenses

The first and foremost step towards improving your financial situation is to understand your finances. The biggest element of understanding your finances is tracking your expenses. A good resolution to consider for this year would be to consistently track your expenses each month. You can do this by using a simple tool such as an excel sheet or google docs. Alternatively you can consider one of these popular apps to track your expenses.

I have personally been tracking my expense consistently every months since 2010. It was initially tough, however it has become a habit now. Tracking your expenses helps you identify areas where you tend to spend more. You can then try to focus efforts on reducing expenses in those areas where you tend to spend more.

2. Eliminate and/or Consolidate Your Credit Card Debt

The average credit card debt per American household currently stands at $5,700 and 41.2% of all households carry some sort of credit card debt according to a report by ValuePenguin. Credit card debt is by far one of the most expensive debts to carry. The average APR across all credit cards is about 17.47 %.

The ideal situation would be for you to take a resolution to pay off all your credit card debt this year if you can afford to. This would be a huge load off your shoulders. But, I do acknowledge the fact that it’s easier said than done considering other financial obligations you may have. If you cannot pay off all your credit card debt, at least try consolidating your credit card debt using these cheaper alternatives.

Low-interest balance transfers – You could apply for a new credit card which offer low interest introductory balance transfer. There are also several cards that would provide 0% APR on balance transfers up to 1 year. You will then have up to 1 year to pay off all your debt interest free.

Home equity line of credit – If you have enough equity built into your house, you could consider getting a home equity line of credit to pay off all your credit card debts. The average rate for home equity line of credit as of December, 2018 was about 4.82% which is significantly lower than the rate for credit card debt.

Personal loans –You could apply for a low interest personal loan to consolidate your credit card debt. Peer-to-Peer lending services such as Prosper, Upstart, Lending Club and Peerform provide personal loans at very competitive rates. You can apply for a personal loans in one of these platforms in under thirty minutes.

3. Save For Retirement

If you are employed and your company offers a 401(k) plan, consider contributing to it this year if you aren’t already doing so. Typically there is a minimum amount that you need to contribute to your 401(k) to get the full company match. Consider at least contributing the minimum amount to get the full company match. The company match in your 401(k) is essentially FREE money and it’s a sacrilege to not contributing the minimum required amount to ensure you get the fully company match.

This is the time of the year when everyone gets a performance appraisal. One way you could start contributing to you retirement account is by transferring the entire amount that you get as performance appraisal into your retirement account. This should not impact your finances because you will only be transferring you incremental salary increase into your retirement account and this should not impact your take home pay.

If you already contribute to a retirement account, consider increasing your contribution by a couple of percent this year. This will not only take you one step closer to your retirement goal but will also help reduce your taxable income.

4. Create A Budget

I personally do not have a budget. But, this is something I plan on taking as a resolution this year. Based on my research everyone should have a budget to understand your income, your expenses and your savings. This will help inform how well you are doing with respect to achieving your financial goals. Creating a budget is relatively easy. There are several online tools these days to create a budget. One in particular I seemed to like is the budget calculator by bankrate.com.

A budget is a great planning/modeling tool which tells you how much you should make or how much you should spend in order be able to save a certain amount of money. In order to start your budget you need to first start tracking your finances. Without tracking your finances you wont be able to create an accurate budget. It’s not just sufficient to create a budget. The most important part of creating a budget is periodically checking in to see how you are doing against you budget and making changes as needed to ensure you don’t overshoot your budget.

5. Minimize Expenses

This is one of the most common and easiest resolutions to carry. However, it’s the most difficult to implement.

There are so many little things you can do to minimize spending such as bringing your lunch to work a few days a week. not spending any money couple of days a week etc. See this blog post for more tricks on how to minimize expenses . I believe spending money unnecessarily on things that are not really needed is a bad habit and should be broken.

Just make sure you don’t make yourself miserable trying to cut down on your expenses. Start small and work your way up. Minimizing expense is not a sprint, it’s more like a marathon. It takes time and effort. The trick is to set small achievable goals to minimize expenses and being consistent with it.

6. Invest Your Money

The only investment for most of the people I know is an employee sponsored retirement account. A retirement account alone is not sufficient. You need to diversify your investments.

This new year consider opening a brokerage account (fidelity, etrade, robinhood, webull) and invest money in stocks. If you are not comfortable buying individual stocks, invest in mutual funds or even a CD.

For people who are not comfortable investing on their own there are several online investment service such as betterment and wealthfront who will invest your money for a menial fees of 0.25%. All you need to do is answer a few questions in order for them to assess you risk level and they would decide on where to invest your money based on your risk level.

Money sitting idly (above your emergency funds) in your bank account is essentially losing value when accounted for inflation. So, consider putting your money to work by investing in any of the tools mentioned above that you feel the most comfortable with.

7. Create/Update Your Will

A will is an important tool that will protect your final wishes. The new year is a great opportunity to sit down and plan out exactly how you want your assets allocated or to assign a guardian if you have a minor child.

You need a will even if you don’t have a lot of assets. A will doesn’t have to be complicated or terribly expensive, and the peace of mind it provides for you and your loved ones is invaluable.”

If you’re unsure of where to start, read my blog on everything you need to know about a will.

Succeeding In Your Resolutions

Most of the new year resolutions fail within a month. The trick to ensuring you succeed in your new year resolutions is to set small attainable goals rather than setting lofty goals.

We are social beings and we need reassurance that we are succeeding in our endeavors. If not, we tend to get demotivated and give up on our resolutions. By setting up small goals and achieving them, you are subconsciously assuring yourself that you are capable of doing great things and this feeling of achievement eventually becomes addictive and you would want to achieve more.

I hope you found this post both helpful and inspiring. I have a feeling this is gonna be a great year for me especially since I have already lost five pounds since the beginning of the year and I hope this turns out to be a great year for you as well.

Share any of your financial New Year’s Resolutions that you are considering in the comments below.

5 Things To Watch For When You Check Out A House

by couchpotatowhome, posted in Featured, Housing & Real Estate

Everyone wonders what they should be looking for when they go see a house prior to putting an offer. When we first started looking for a house we just looked at the floor plan to ensure it met our needs and that we liked it. We also looked at the house cosmetically to ensure the house looks clean, is painted well and looks upgraded. We did not know better on what else we should be looking for. But, as the saying goes don’t judge a book by its cover. There is more to watch for when you look at a house.  I’ve have listed a few things you should consider when you go look at a house. When you order an inspection the inspector would be checking all the items listed below, but it’s good for you to watch for it as well prior to putting an offer so you can make an informed decision prior to putting the offer

1. Appliances

Pay attention to all the appliances: stove, microwave, refrigerator, dishwasher, washer and dryer to determine if they are relatively new. If they are very old they might be at the end of their usable life and you might have to replace them once you move into the house. Replacing all the appliances might run into thousands of dollars. So, if the appliances are old you should take that into account when you decide the offer price for the property. In some instances people might consider requesting a homeowner’s warranty which covers all the appliances for a year.

2. Furnace, Air conditioner and water heater

Find out the age of the furnace, air conditioner and the water heater. These are typically the most expensive equipment in a house. The typical use life of furnace and air conditioners is about 15- 20 years and the use life of water heaters is about 8 – 12 years. You can find the age of the furnace from the mfg. dates on the labels place on these equipment. If you cannot find the stickers you can always ask the relator to find out the age of this equipment from the homeowner. This is one of the key things you should consider while deciding your offer price. The cost of replacing this equipment can run into several thousand dollars.

3. Windows & Patio Doors

Look at the windows and patio doors. Make sure you don’t notice any condensation between the glass panes of the windows or patio doors. If you notice any condensation that could mean that the windows are pretty old and the seals are broken. If the seals are broken that means the window is no longer doing a good job of insulating the house from the outside temperature.

4. Sidings & roof 

Look at the sidings to see if there is any weather damage. See if the sidings look uneven and looks bulged in places. This could mean that the siding might need a replacement.  Typically it’s hard to look at the roof, but if it’s a multi-story home and if you might be typically be able to see parts of the roof from the higher floors depending on the layout of the house.  Peeled, curled or broken shingles could mean that the roof it at its end of life and might need to be replaced. The typical use life of a roof is about 15-20 years. Replacing both the sidings and roof is very expensive and needs to be considered before you put an offer. Roof and sidings are more of a concern if you are buying an independent home versus a townhome or a condo. With an independent home you are responsible for replacing the roof and the sidings and will have to shell out money from your pocket. If you are buying a condo or a townhome its less of a concern, but you would still need to pay attention to them because you might be charged special assessments if the association has to replace the roofs and the sidings and does not have sufficient reserves to do so.

5. Surroundings

Always pay attention to the surroundings. See what the house backs into. It might be loud if the house backs into a busy road or a freeway. It typically is harder to sell a house if it backs into a freeway or a busy road because of the noise factor. Also, just drive around the neighborhood to see what’s around the house. This is your home where you will be living with your family, so you got to be sure that the neighborhood is right for you. When you buy a house it’s not just the house that needs to be right for you, it’s also the surroundings and the neighborhood that’s got to be the right fit for you.

Once you put an offer into a house, everything listed above except for the surroundings will be checked during the home inspection. But, it’s a good practice to keep these items in mind when you go check out a house because if more than one thing listed above is not favorable to you, you might want to consider staying away from the house or at least factoring this into your offer price. It costs money and time for a home inspection. So, it’s better to look at these items earlier and weed the house out instead of going through the process of putting an offer and spending money on home inspection just to find out that several things are wrong with the house and that it could cost a lot of money to fix them.

Every Adult Should Have a Will

by couchpotatowhome, posted in Featured, Personal Finance

My wife and I had a baby last year. Since we are first generation immigrants, both our parents live back home and we do not have any immediate family in the states either. Once we had the baby we started getting worried about who would get the guardianship of the baby if something were to happen to both of us. The last thing we would want is for our precious baby to be taken away by child care services and put into foster homes. So, I started doing a lot of research on how we can ensure that our baby gets assigned to the guardian of our choice and that all our assets get transferred over to the baby. Through my research I found out that a will would be the appropriate legal vehicle to appoint a legal guardian for our baby and to ensure that all our assets get transferred to him.

What’s a Will

A will is a legal document that lets you outline how you wish your assets to be distributed upon your death. It also allows you to appoint a guardian if you have minor children. After your death, the probate court will use the will as a guideline to settle your assets.

If you die without a will, you would have died “intestate” and the so called intestacy laws would kick in. The intestacy laws vary significantly from state to state and depending on the state you live in, the probate court would decide how to distribute your assets after your death without regard for your dying wishes or the needs or your heirs.

Here are some common legal issues when you die without a will.

Inheritance

It’s a typical misconception that all your assets pass over to your spouse after your death. But, you will be surprised to know that, it’s not always the case. Only a few states have intestacy laws that allow your spouse to inherit all your assets if you have no kids outside your marriage with this spouse. In most of the states a third to a half of your assets may go to your spouse and the rest is divided among your kids. In the case of life insurance policies and accounts such as 401(k) and IRA where you have named a beneficiary the proceeds will directly go to the beneficiary, or in the case of joint accounts the proceeds will directly go to the surviving owner. So, if you don’t have a will yet, at least make sure that you have elected appropriate beneficiaries for all your retirement accounts and life insurance.

Alternatively, you can also disinherit someone through a will. You can disinherit a child or a spouse if you wish. However, if you would like to disinherit a spouse, you will need to be aware of the laws governing your state, whether it be a common law state, community property state or an equitable distribution state. A person can only disinherit a spouse in a community property state.

Guardianship Of Minor Children

Anyone with minor kids should absolutely have a will. Through a will you will be able to appoint a guardian for your kid in case anything happens to both the parents. If a guardian is not appointed at the time of death, your surviving family will have to seek help in a probate court to have a guardian appointed for your children.  The person appointed by the court may not be whom you would have wanted to be entrusted with your kids. if you have several family members you can list the order in which you would like the guardianship of your kid to be assigned. So, in case the family member who is your first choice is not able to take guardianship of the kid due to some reason, the court knows who the next in line is to assign the guardianship of the kid. In my case, I do not have immediate family members in the country. So, I have decided to assign one of my friends as a guardian and he would in turn be able to then ensure my kid is transferred over to my parents who live back home.

Financial Inheritance By Minor Children

Without a will your assets might immediately be awarded to your minor children. Can you imagine a five year old having hundreds of thousands of dollars. Though a will you can state when you would like you assets distributed to your kid. You can set it up so that your spouse manages the assets until the kid is of legal age and the kid gets the assets when he/she is of legal age.

How Do You Draft A Will?

Duh….why would anyone ask such a dumb question. A will is a legal document, so one would think that you need a lawyer to draft a will. This is a common misconception.You can obviously go to a lawyer who would help you draft a will. A standard will drafted by a lawyer could cost you anywhere from $300 – $500. However, since wills are such common documents there a several other inexpensive ways to draft a will.

  • You can download a standard template from the internet to fill out a will. You can use the standard template in this link based on your state of residence and get a will drafted in less than an hour for free.
  • You can use a software such as Quicken Will Maker or an online service such as Legal Zoom. This will cost you about $50 – $100.

What Makes a Will Legal?

In order for a will to be considered legal the following requirements must be fulfilled.

  • The Will must be signed by at least two witnesses. Witnesses typically must be people who won’t inherit anything under the will.
  • The will must be signed and dated by the grantor

A will does not have to be notarized. However, if you and your witnesses sign a self-proving affidavit before a notary public, you can help simplify the court procedures required to prove the validity of the will after you die.
This affidavit provides an extra layer of security, after your death in case the will is questioned by a family member or a third party.

A will does not have to be recorded or filed with any government agency. Just keep the will in a safe, accessible place and be sure the person in charge of winding up your affairs (your executor) knows where it is. It would also be good to distribute a copy of your will to your attorney.

Steps To Take To Execute The Will

After a persons death in order to execute a will, the executor must typically file the will with a probate court. If everything is in order, the court issues a grant of probate. This document allows financial institutions and other organizations such as the Land Title Office to rely on the will as being the last will made by the will-maker.

Conclusion

A will is an effective in estate transfer, appointing a legal guardian for minor children and other legal proceedings after death, but it comes with it own drawbacks. For instance, your estate will become part of public record, and anything left by a will must go through probate court. Also, probate attorneys can be expensive and cannot be avoided. In some instances you could loose up to 2% – 4% of your assets due to attorney fees and court cost. A Living Trust is another common method used by people who have several assets and would like to avoid the expensive and time consuming probate process. I will provide more details of a trust in a separate article.

Even with the drawbacks listed above a will is still an effective method in estate planning and every adult should minimally have a will. Creating a basic will takes about an hour and it’s a time well spent if you really care about your loved ones.

Skyrocket Your Returns By Putting Your Money in High Yield Accounts

by couchpotatowhome, posted in Featured, Personal Finance

It’s a sacrilege to have your hard earned money just sitting around in a regular checking or savings account that hardly yields any returns. If you have your money in one of the big banks such as Bank of America, Chase or Citibank, you are probably only earning about 0.01% APY on your money. The national average for a typical checking account is only about 0.17% which is significantly less than the current inflation rate which is estimated to be about 1.9%. If you have your money in one of these low yielding accounts you are actually losing money considering inflation. What it essentially means is that if you have $100 in your account today, it’s only worth $98.10 the next year adjusted for inflation.

It does not have to be that way. You can put your money in other high yield accounts to get better returns. The first things that comes to mind when people talk about high yield accounts is CD’s. But, CD’s have a minimum lock in period and there is a penalty to take the money out before the lock in period ends. It’s a common misconception that CD’s are the only safe way to earn high returns if you do not want to invest in stocks or bonds.

There are several banks which offer high yield savings accounts and rewards checking accounts which yield high returns and have the benefit of not being locked into a contract unlike the CD’s. This gives you the freedom of being able to withdraw your money any time your feel like while yielding high returns.

I have a premium rewards checking account with a Credit Union and I earned $450 on my savings of $15,000 in 2018 which amounts to a 3% APY well above inflation. You can also earn such high yields by opening high yield accounts.

Below is a list of some high yield savings and checking accounts that I have come across based on  my research.

High Yield Savings Accounts

High-Yield Rewards Checking Accounts

Typically with rewards checking account there are certain requirements to quality for the higher APY. Typical requirements are to have a direct deposit setup in the account and to have a minimum number of transactions every month to quality for the high APY. Through personal experience I have noticed that most of the times I don’t meet the requirement for the minimum number of transactions. So, in order to ensure I meet the requirement for minimum number of transactions, I review my account around the last week of every month to see if I have enough transactions to meet the threshold to qualify for the high yield APY. This will give you an idea of how many transaction you need to do to meet the threshold. One trick that has worked for me to achieve the required minimum transaction threshold is to split your purchases in a store into multiple transactions. Although not ideal, this would help you meet your transaction threshold easily.

Conclusion

Don’t let your hard earned money sit idly in a low yield account. Take charge and open one of the high yield accounts listed above and put your money to work. These small but consistent changes are what will help you achieve your goal towards financial freedom.

How Much House Can You Really Afford?

by couchpotatowhome, posted in Featured, Housing & Real Estate

Your budget is the first thing you need to figure out when you decide to buy a house. Almost everyone makes the mistake of not figuring out how much they can afford prior to looking for a house. The first instinct for a lot of people is to ask the realtor on how they could go about figuring out what their budget should be and almost always the realtor would recommend that you go to a bank and get a pre-approval to find how much they would pre-approve you for. The bank typically goes with something called the debt to income ratio. They would typically pre-approve you for approximately 43% debt to income ratio. Also, keep in mind that when they provide pre-approval the banks only consider the principal and interest payments towards the debt to equity ratio. Your monthly payments are more than just the EMI. You will have to factor in taxes, property insurance and HOA if any to calculate you total monthly payments towards your house. People assume that if you are pre-approved, you will surely be able to secure a loan for that amount. I hope it was that simple. Figuring out how much house you can afford is much more complicated than that. You would need to consider several factors prior to deciding you budget for buying a house.

The first thing we did was track our monthly expenses. We kept an excel sheet on our computer where we wrote down all our expenses every day. At the end of every day we wrote down every penny that we spent the entire day. We did this for two months. This helped us give an idea of how much we spend on an average every month. This also helped us decide what spending we needed to cut down on if we needed to in case you need to increase the budget for buying a house. This exercise would give you an idea of how much money you would minimally need to maintain your current lifestyle and how much money you would have left for putting into buying a home.

The next thing we did was identify all the fixed expenses we had every month. What I mean by that is list down all the other loans that we had such as car payments, student loans, credit card payments etc. You might also want to list other fixed expenses, such as college 529 payments that you might be making if you have kids.

Figure out how much money you want to save at the end of each month after all you expenses. It’s always a good practice to keep some money as emergency fund. We have heard experts say that you should typically have anywhere from 6 months to a year worth of liquidity cash as your emergency fund. Another reason to save money is to handle any unexpected expenses such as the furnace and A/c going bad that might come up when you buy a home.

Now you would want to figure out your monthly family income post taxes and all your pre-paids such as medical, 401(k) etc. Now that you have all the elements needed for the calculation, you can figure out how much monthly payments you can afford. In order to calculate the monthly payments you can afford subtract all the expenses listed above from your family income and that should give you the monthly payment you can afford. Keep in mind that this monthly payment that you have calculated includes the EMI, property taxes, insurance and HOA if any.

I know this is a lot of information and to a lot of people this might seems complicated. My friends have used this and it has worked really well for them. This is something that people do not want to spend their time on. But, keep in mind that buying a house is one of the most important decision that you would make as an adult. So, it would be good for you to take the time to figure out what you can afford before jumping into buying a home. I would strongly recommend doing this before you go talk to a bank or a realtor. The reason I say this is because the realtors and bankers always want you to buy an expensive house because the more expensive the house you buy the more money they make. But, at the end of the day you are the one who has to live with your decisions. Also, it’s so much easier to get carried away with buying a house. Almost everyone I know of ended up going over their initial budget. So, it’s highly recommended that you plan appropriately prior to buying the house.

At the end of the day how much you want to spend on the house depends on you. Plan appropriately prior to jumping into buying a house. Nothing beats planning. It’s better to be safe than sorry. House is meant to be a place you create memories to be cherished for a lifetime. You do not want to be enslaved to your house or want it to be a burden.

This is an excel worksheet that I’ve created that would help you calculate the budget for your house.

Please comment with other approaches that have worked for you while deciding the budget for buying a house.

CAUTION – Steps To Take to Protect Your Data And Prevent Identify Theft When Disposing Off Your Computer

by couchpotatowhome, posted in Featured, Personal Finance

I have a couple of old laptops lying around in my closet taking up unwanted space. So, I decided to take them to Best Buy today for recycling. While I was dropping off my laptops there was another person dropping off his computer for recycling as well. While he was dropping off his laptop for recycling, I asked the person if he had removed his hard disk from the computer and he mentioned that he had not removed the hard disk from his computer or erase all the data from his hard disk.

This was very disconcerting to me since all your personal information is typically on your computer and anyone can recover all the data from your computer. This data can be used to steel your identity and open bank accounts/ credit cards under you name which could significantly impact your credit history and tarnish your reputation.  I was surprised to see that anyone in the internet age where identity theft is exponentially increasing would be unaware of the steps to take to protect your data prior to disposing off your computer. So, I thought that I’d write this blog to inform people on what steps you need to take prior to disposing off your computer.

A place like best buy or other local computer stores would typically take your computer for free and recycle them. However, before you dispose off your computer you need to ensure that no one can recover any of your data from your hard disk. 

You can use one of the two ways listed below to ensure that the data from your hard disk is non-recoverable prior to disposing off your computer.

Physically Destroy The Hard Drive

Physically destroying a hard drive is the easiest way to absolutely ensure that the data on it is non-recoverable. All you will have to do is remove the hard disk from the computer and physically destroy it. You can either go to Google or Youtube to find resources to locate and remove the hard disk from your computer.

Once the hard disk has been located and removed you can destroy a hard drive yourself by nailing or drilling through it several times. Alternatively, you could just smash it with a hammer and a railroad spike. Once physically destroyed, the data from the hard disk will no longer be recoverable and you can safely dispose off the hard disk and recycle your computer.

Caution: Wear safety glasses and take great caution ​when physically destroying a hard drive yourself.

Erase The Data So It’s Non-Recoverable

Erasing the data from your hard disk permanently so the data on it is non-recoverable is another way of ensuring no one can access your personal information from your hard disk.

People think that you can do this by simply using the format function on your computer. However, formatting your hard disk does not actually erase the data from your hard drive. Formatting only erases the location information for the data, making it invisible to the operating system. Since the operating system can’t see the data, the drive looks empty when you look at its contents. However, all the data is still there and can be recovered using an appropriate software or hardware.

So, if you would like to permanently erase the data on your hard disk so it’s non-recoverable use on the methods listed in this blog.

I personally prefer physically destroying the hard disk and disposing it off separately prior to taking my computer for recycling. This is the easiest and absolute way of ensuring that the data is non-recoverable.

The next time you are think disposing of your computer ensure that you either remove the hard disk and destroy it or completely erase it so the data is non-recoverable. This is the most responsible think to do to protect your data and to prevent you from falling prey to identity theft, the repercussions of which maybe significant.

Buy Vs. Rent

by couchpotatowhome, posted in Featured, Housing & Real Estate

Is it the time of the year when you have to renew your rental lease. Are you confused if you should rent or buy?

This is not a very easy decision to make. This is one of the complicated decisions you will have to make as an adult. I wish there was a clear way to make a decision on buying vs. renting.  There are several factors that need to be considered when you decide to buy as opposed to renting. Some of the key things to consider when you decide to buy are:

  • Do you have enough money saved up to make a down payment?
  • How much monthly payment can you afford to make on a house?
  • How long do you plan on living in the house?
  • Do you want to buy an independent house or a condo or a townhouse?

The decision on buying vs. renting for us was relatively easier. We had been renting a one bedroom apartment for over 6 years. We like having guest over at our house, but it gets difficult to accommodate guests when you just have a one bedroom apartment. So, we were thinking of scaling up from a 1 bedroom apartment to a 3 bedroom apartment. The rent for which was almost going to be twice of what we were currently paying. This was around 2013. This was when there were a lot of advertisements on the television stating that the interest rates were at an all-time low and the property prices had become pretty cheap and that it was the right time to buy a house before the property prices started going up again. So, we just went into websites like Zillow, trulia, redfin etc. and started looking at home prices with 3 bedrooms and realized that if we bought a 3 bedroom townhouse with a reasonable down payment we would end up paying less monthly payment including principal, interest, property taxes and HOA. This is what helped us make the decision from renting to buying.

We understand that this might not always be the case in all markets. In some markets where the property prices are significantly higher you might not be able to do a direct comparison between renting and buying because renting might mostly turn out to be cheaper than buying. But, in instances like that you would have to consider other factors. You need to understand that when you rent a property you are giving away money to someone else and helping them build equity on their house. Whereas if you bought a house and made monthly payments you are building equity in your own  house. So, when you go to sell the property you get the money back that you put into the house. Below is an illustration to help understand this concept.

Let’s say you are renting a 2 bedroom condo for $1500 a month for 5 years. At the end of 5 years assuming the rent has stayed the same, which is rarely the case, you would have ended up paying $60,000 towards rent. This is the money you have basically given away to someone else to build equity and you cannot even claim a tax exemption on this money. Whereas, for the same $1500 each month you could have bought a house worth $250,000 with as low as 3% down, 4% interest rate and a 30 year loan with a property tax of around $4,000 (You can use a simple mortgage calculator available on the internet to be able to calculate these figures).  In the same 5 years you would have built a total equity in the house of approximately $23,000 that is not accounting for the $7,500 in equity that you would have already built through your down payment. So even if we assume that the property does not appreciate in the 5 years you had owned the property, you will still be able make money when you sell the property as opposed to having lost all the money you paid in rent. In addition, you also get tax benefits for owning a house. You will be able to claim tax deduction for the interest you have paid towards your mortgage and the property taxes that you have paid. Whereas when you rent you can’t claim any tax deductions on the rent you pay. The amount of equity you build exponentially goes up as you go down on the years of mortgage. But, of course your monthly payment will also go up. So, you will have to weigh all of this to figure out what is the right option for you.

As mentioned earlier buying vs. renting decision is not an easy one to make. It differs based on everyone’s unique situation. With the ideas provided in this blog you will be able to make an informed decision on buying vs. renting based on your situation instead of being in the rut and just renewing your lease without thinking.

Add other considerations you had to make based on your situation when you were faced with this decision in the comments section below.

Tricks To Minimize Expenses

by couchpotatowhome, posted in Featured, Personal Finance

If you have gotten to reading this post, I am assuming that you have already read the previous post and you have started tracking your financial metrics to understand where you stand with respect to your finances.

This post is meant to provide simple tricks on how to minimize non-essential expenses. Below is a list of some typical non-essential expenses based on my experience and tricks on how to reduce them.

Eating Outside

Based on my experience eating outside by far seems to account for the highest monthly expense. Everyone is constantly looking for ideas to minimize expenses on eating outside. Eating outside at work seems to be one of the most common reasons for increased expenses associated with eating outside. In order to reduce eating outside you can simply start by bringing lunch from home just a few days a week. You can bring a simple lunch such as a salad, a cold sandwich or ready to eat meals from the grocery store that can be heated up at work. This has a two fold advantage, not only does it help save money but it also makes you healthy.

Other ways to minimize expenses on eating outside is by limiting the number of times you go out to eat as a family to once per week or going out to eat only during special occasions.

Online Shopping

The other major source of unnecessary expense is online shopping. Online binge shopping has become a favorite hobby for a lot of people. People tend to buy unnecessary things online due to the great return policy with the hopes that they would return it later if they did not need that item. But, guess what, very few  people ever get to returning those unwanted items adding to unnecessary clutter and wasted money.

One way you can minimize your online spending is by curbing your urge for impulse purchases. There are several ways to minimize impulse purchases

  • When you like something, don’t immediately buy it. Instead add it to your cart or click on watch/save for later. Come back a day or two later and if you still think that it is something you really need then go ahead and buy it.
  • Don’t buy multiple items with the hope of keeping one and returning the others. That seldom works. Just buy one item at a time and make it a habit to not buy the next item until you have returned the first item.
  • People tend to buy gift cards and add money to their online accounts so it’s easy for them to purchase items.  Always pay with your credit card or bank account each time you make a purchase. This gives you an opportunity to re-think the purchase and decide if this is a purchase you really want to make.

Cable & Internet

Cable and internet bill seems to account for another major chunk of monthly expense. Internet speeds seem to be constantly increasing and people tend to always want the highest speed internet. You obviously have to pay a premium if you want a ultra high internet speed. However, if you are a typical household and all you use your internet is for streaming videos, music and surfing the internet, an internet speed of 40 – 50 Mbps is more than sufficient. By reducing your internet speed you should be able to reduce your monthly internet bill.

Another major expense is your cable bill. People rarely watch cable these days. However people tend to pay for cable because it tends to come bundled with your internet. If you are one of those people who barely watches cable consider cutting your cable and switching to a internet only plan. This should significantly bring your monthly bill down. Instead, switch to online stream services such as Netflix, Hulu, Amazon prime etc. if you like to watch local channels, you can always buy an HD antenna and you will be able to get all your local channel and news for free.

By applying the simple tricks provided above one should be able to reduce their unnecessary monthly expense.

This is by no means an all inclusive list. Please add any tricks that have worked for you in order to reduce unnecessary expenses in the comments.