Too many Clothes, No Down Payment: Crazy fashion trends do more than strain closet space. They can sometimes send the message that trendiness is more important than building wealth. Here’s to save the money you spend on new clothes for something more rewarding – a down payment on your own home.
Reduce your wardrobe. Consign, donate or give away clothes you haven’t worn in a year or two. Keep anything that goes with at least three other items, like a jacket that works with a dress, skirt and blouse, or jeans.
Take better care. Fast fashion doesn’t last, so when you wash clothes, turn pants, skirts and blouses inside out first. Don’t use wire hangers. Fold knits instead of hanging them. Your clothes will look better and last longer.
Buy less. If you buy something for $100, look at how long the season is to wear it (four months) and how many times you’ll actually wear it (17). Take the cost ($100) and divide by the number of wearings. That’s a tax of $5.88 every time you wear it.
Bank the money. If you spend $200 a month on clothes, try a year without buying anything new and let that $200 multiply in a savings account, 401K, or CD. That’s $2,400 that could grow with compound interest and investment growth. In three years, you could have over $10,000 or more and that’s a good start toward owning a home.
Home Insurance and Replacement Costs: How do you know if you have your home insured for the right amount? Your lender may require insurance to cover the loan amount, but what you owe and actual replacement costs can be vastly different.
According to the National Association of Insurance Commissioners (NAIC), replacement costs are the amount it would take to replace or rebuild your home or repair damages with similar materials and quality, without deducting for depreciation. Actual cash value is the amount it would take to repair or replace damage to your home after depreciation. Standard plans require policy limits of at least 80% of replacement cost.
Replacement costs should include loss of your possessions. Create a room-by-room inventory of your possessions, including photographs and/or video, cost of goods, and how long you’ve had them. Give documentation to your insurer and keep copies in a safe place or on the cloud.
The NAIC advises that you compare cost-to-repair and cost-to-replace prices for your area with your insurer. There are different packages of home insurance that protect against specified damage-causing events, such as fire, windstorm, and theft. They also contain coverage for property damage, living expenses during repairs, personal liability and medical payments.
Review your policy annually. If you’ve made improvements to the home, or purchased more goods, you should inform the insurer. You may also get a premium discount for long-time loyalty, combining car and home insurance, raising your deductible, and other initiatives.
Are You Really Ready to Sell? If you find yourself saying any of the following to your Berkshire Hathaway HomeServices network professional, you may be hurting your chances of selling your home quickly and for the most money possible.
“I’m not making any repairs.” According to the 2018 Home Buyer and Seller Generational Trends Report from the National Association of REALTORS®, 47 percent of buyers under the age of 37 purchased new homes to avoid renovations and problems. If many buyers don’t have the will, skill or time to make repairs, you’re eliminating a number of buyers who would otherwise love your home.
“My home has to be worth more than that.” You may believe your home should be worth more than you paid for it and provide you with enough equity to move. Your listing agent will supply you with tools to understand current market value. The comparable market analysis shows what homes have recently sold for and what other sellers are asking for similar homes as yours, as well as price and sales trends.
“Let’s price it higher and see what happens.” Pricing above comparable homes is a real risk. You’ll outprice buyers who would want your home. Buyers who can afford your home will quickly find that your home doesn’t compare to others.
In any of these cases, you’ll be looking at a price adjustment, and have lost valuable marketing time. Realistically, your home is only worth what the most qualified buyer is willing to pay for your home.