My commitment to money grubbing is boiled down to a very simple concept – I don’t like being told what to do.
You probably can’t tell from my writings, but when provoked, I sometimes lose my temper.
Fortunately, I’ve never popped a neck vein after a heated discussion with a supervisor. However, there were times I’ve come terrifyingly close to putting my foot up somebody’s rump. Of course, that’s no way for a professional to behave. So, I abstain from violence.
But the thought of being self reliant won’t leave me.
Ya never know when you’ll be all alone with no one to fend for you but yourself.
One of the biggest risks to personal freedom is debt. It ties up our future earnings. It convinces us we should stay in jobs we hate, in relationships with people we hate. It makes us kiss butts we should kick.
I’m telling you. Debt stinks.
Since becoming debt free in late 2008, I feel so, you know, FREE. I don’t wanna borrow money – for any reason.*
When it comes to housing, you can rent it, buy it, bop it, or twist it. As long as there’s a way to obtain shelter that protects your face from ice cold rain drops, it doesn’t matter. Currently, I’ve chosen to rent.
As indicated by the title, I’ve been kicking around the idea of, eventually, buying a home with my own money.
That’s kuh-razy. I know.
Many believe saving up a 100% down payment is impossible.
Well, I’ve got a 4-step plan for buying a house with cash. Although I must warn you, it’s not for the meek.
Make a lot of money
You thought I’d unveil a strategy that allows you to pay cash for a house making $20,000 a year. Grasshopper, you want too much. I’m not a magician.
In 2010, the median household income in the United States was $49,455. Now, I don’t have exact figures, but those of us on the 100% down plan need to be somewhere, roughly, uh, let’s say, far north of that.
A lot of people are reluctant to relocate, but you could work in an an area where wages are higher than average and live cheaply.
Spend as little as possible
Although there are countless ways to save money, I’ll limit this discussion to two biggies.
Live with roommates. I did it for two years when I moved to the DC area: one year just for hoohahs and another year to get out of debt.
If you’re currently living with parents, unless they’re driving you nuts, consider staying put until you save up enough money to pay cash for a house.
Avoid lifestyle inflation. When your income increases, taxes are the only expenses that should go up. Every other expense stays the same.
For a clear view of how cutting certain costs will save you money, check out Bill.com’s My Savings Machine.
This isn’t one of those wussy plans where you borrow a $500 down payment and have the government subsidize your mortgage interest for the next 100 years.
Let’s get one thing straight. I do NOT advocate you skip retirement investing while saving up to pay cash for a house.
Patience is key. If you’re diverting 15% of your income to retirement accounts, you’ll likely be at this for years. Embrace it.
Lower your standards when it comes to both size and location.
If you have 5 kids under the age of 12 and are currently expecting twins, unless you’re really crushing it on step 1, this might be tough. Don’t blame me; I ain’t tell you to have so many babies.
I’d love to live in a gorgeous, 3-story, row house in Logan Circle. But buying in an expensive area like that is quite difficult for a first-time home buyer. According to Realtor.org, Washington, D.C.’s median single family home price is about $341K. Homes in Logan Circle are easily twice that much. Whereas, the median price of a single family home in Orlando, FL is only $128K.
Keep in mind that median is the middle. Half the homes cost more. Half cost less.
You could go even further by purchasing a home that’s 75% of the median home price in Orlando, FL. That’s only about $96K.
Don’t forget. Because you’re paying cash, you won’t pay loan origination fees, points, and all that other foolishness borrowers owe at closing. AND you have a much better chance of stealing a house from a
desperate motivated seller when you’re a cash buyer.
The following scenario assumes annual savings and home prices will increase 1% and 3%, respectively. Retirement savings are based on 15% of your after tax income.
*Okay, I do use credit cards for convenience, security, and discounts. It doesn’t count when you pay your balances off in full every month.
Photo by Alison and Orlando Masis
Have you ever considered paying cash for a house? How would you save up enough money?