Onto today's final installment of the ongoing series (10 weeks) presented by one of my most recommended sites: DailyFinance.com and written by Brian O'Connor.
The $1,000 Challenge, Part 10: When the Refi Fails, Rethink Repair Costs
So far in The $1,000 Challenge, I've shown you how I cut more than $800 a month from my family's budget in nine spending categories.(To catch up, check out the previous articles in the series here.) The last step in reaching my goal of cutting our spending by a full $1,000 a month was to trim $168 out of what we spent on housing.
Refinancing my 5.5 percent mortgage to 4.875 percent -- and rolling in the balance of a small variable rate home equity line -- would cut $113 out of my monthly housing budget. The rules for smart refinancing are simple: It should not lengthen the term of the loan; it should pay for itself in 24 months or less; and, other than loans fees, it should not raise the your balance. And it won't happen in a hurry.
- I gathered recommendations for established local mortgage brokers and found one who didn't charge an application fee until after an appraisal had been conducted. That way, I wouldn't waste $400 or $500 in nonrefundable loan fees on top of a $300 appraisal bill if my home didn't qualify for a new loan.
- I got my broker to tell her manager to tell the independent third-party appraisal management firm to tell the independent real estate appraiser that I needed the appraisal in time to wrap up my cost-cutting project. So, of course, the appraisal was set for two weeks after my deadline.
But if I couldn't save on the house, I could at least save on the housekeeping. Cutting the maid service (my own mother calls me "domestically challenged") from twice a month to once saved $60. If I train the dust bunnies to march in formation, maybe we can start charging admission.
The next-biggest spending category was the Funny Money family fleet, which consists of a 30-year-old deck boat and its slightly older twin. That original vessel died a year before and, on the advice of our mechanic, Big Tom, we kept it for parts.
That meant paying to store it -- which had to go. The storage is paid until spring, but after that, I'd pull off the parts we want, scrap the rest and sell the trailer.
Instead of coming up with money when the boat breaks down, it would work better to budget for repairs and annual fees, then set that money aside each month in a separate savings account.
With a boat built in 1979, unused repair money won't go unused for long. Any excess can build up to provide a cash cushion when several fixes are needed. That way we can keep the aging S.S. MoneyPit on the water without floating a credit card charge or sinking the family budget.
That brought my last week's savings to $169.38 -- and push my total to a whopping $1.39 over my $1,000 goal. While tinkering with the maintenance budgets won't reduce my overall spending, it still lowers my monthly spending by evening out what comes out of our take-home pay. Instead of having to skip another bill or pile more debt onto a credit card, I'll be able to pay repair bills with cash from the reserve account and keep all our other financial goals on track.
- Week 1 - Miscellaneous Spending: $132.89
- Week 2 - Utilities and Phones: $139.39
- Week 3 - Transportation Costs: $41.61
- Week 4 - Kid Costs: $114.50
- Week 5 - Work Costs: $90
- Week 6 - Personal Spending: $104
- Week 7 - Entertainment: $108
- Week 8 - Insurance: $64.40
- Week 9 - Groceries: $37.23
- Week 10 savings: ... $169.38
- Total Monthly Savings: $1,001.39
Read Brian's columns in The Detroit News.
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