I have heard that “renting is like throwing away your money.”
I have heard it a lot.
In fact, I even used to say it! Until 2008, when house prices fell for the first time in my lifetime.
The truth is, that line is more marketing ploy than truth when you actually crunch the numbers.
We are closing the books on our twelfth month in our new-to-us home, and trust me: There is plenty of money we have thrown away.
Don’t get me wrong: We are even more in love with our house now than we were when we moved in. (Remember that leak we discovered on closing day? No bueno.)
I kept track of just about every penny that we spent on the house this past year. That doesn’t include money we would have spent regardless of our housing situation. So, home supplies like paper towels don’t count. Mouse traps and air conditioners, however, definitely count. Those are two items we didn’t have to buy in our last rental.
How much money did we “throw away” each year while renting?
We paid $1825 a month in rent and $110 a year for renter’s insurance — for a total of $22,010 a year to live maintenance-free and property tax-free.
How much money do we throw away each year while owning?
- $8100 a year in property taxes
- $960 a year in homeowner’s insurance
- $2846 a year in PMI (this is something you don’t have to pay if you have a 20% down payment)
- about $20,578 a year in interest (this amount goes down as the loan ages).
In our first year of ownership, we “threw away” $32,484 — $10,000 more than when we rented.
If you’re thinking, “But you built up some equity in your home,” then you’re right. After $32,484 of “thrown away” money, we paid — and therefore “gained” — $9,114 in equity. With our $590,000 house, our measly equity isn’t even enough to pay the realtor’s commission if we sell the place.
On top of the minimum amount of money thrown away each year on taxes, insurance and interest, there are the maintenance and repairs; the home improvement projects; the appliance and tool purchases; and the all-too-tempting home decor purchases. Here is our breakdown . . .
Necessary Repairs and Improvements:
- $139.26 for random stuff at Lowe’s, including a hose and the 3 dozen tiny connectors and tape I needed to attach it to the sump pump; a mailbox and post, and another gas can.
- $338.31 on our first home repair: Replacing the motherboard on our fridge, which was slowly getting warmer.
- $419 for an air conditioner for the first floor
- $147.69 for an air conditioner in Little Stapler’s room
- $50 to remove wasp nests. We thought they were bees and Mr. Stapler is allergic. For $50, we got an education in bees versus wasps and located the source of their intrusion. But I still wish we had DIY-ed that one.
- $24.43 for my favorite purchase of all: Mr. Stapler bought a fan belt for our dryer and figured out how to fix it on his own! Well, Little Stapler and YouTube helped. I’m so proud!
Medium-sized Improvement Projects:
- $5,525 for lead abatement (encapsulating the windowsills)
- $5,300 to replace our water boiler (we received a $3,500 rebate to replace it in the summer)
Lawn Care and Snow Removal:
- $25 for a leaf blower and string trimmer at a yard sale
- $49.97 for poison ivy killer, mouse traps, gas can, and two-stroke oil
- $49.97 for an electric leaf blower and string trimmer, which Mr. Stapler bought after not being able to start either gas-powered lawn
toyimplement that I had purchased
- $237 for a manual mower (Mr. Stapler still wasn’t digging the gas-powered devices and prefered muscle-powered devices)
- Free gas-powered string trimmer we received as a house warming gift (Mr. Stapler had realized the limitations of the electric-powered string trimmer, and by August he wanted a more powerful tool)
- $1,150 for a two-stage gas snowblower. (I think it’s safe to say that Mr. Stapler is OK with gas-powered tools now).
I learned that Mr. Stapler does not like my yard sale finds.
Practical Home Decor:
- $1.46 for picture hangers (after using a $20 off coupon from our local hardware store’s “welcome to the neighborhood” letter)
- $316.61 for a rug for Little Stapler’s room
- $130.04 for an indoor/outdoor rug in our dining room
- $757.20 for six shades in our bedroom windows
- $3 for lamps for Baby Stapler’s room, at a yard sale (they happen to be pink, but I found a solution for that … stay tuned)
- $1,144 for a beautiful living room rug (this was my first bonus money purchase)
- $45.47 for a lamp in Little Stapler’s room
Except for the last two home decor purchases, the rest of them were made during the first month at the house. The indoor/outdoor rug in our dining room was a genius idea from the Making Lemonade blog, where she recommends a rug that can be easily cleaned when you have little kids learning how to eat!
Impulse Home Decor:
- $3 for decorative shelves (yard sale!)
- $26.55 for a cool chalkboard / mail sorter / key hook / bulletin board combo next to the front door
- $34.52 that I labeled in Mint.com “organizing stuff,” but I don’t remember what it was!
- $43.07 for “Target furnishings.” Oy! Again, I don’t remember what this was!
- $22.29 — unlabeled
- $10.41 — also unlabeld.
You know that it’s an impulse buy when you can’t remember what you bought! Was it worth it? Probably not.
All of this spending added up to a total of $15,922.
How did we pay for it? Most of it was absorbed within our regular expenses. We took out a $5,300 loan at 0% interest to fund the boiler replacement, and $1,200 was from The Bonus.
My big take-away from the past year is that an Emergency Fund, although sometimes necessary, is not always required for home owners. We were able to navigate our repairs without needing cold, hard, cash at hand.
I also learned that I spend more wisely with a spending plan. There are some purchases that just seem extravagant to me now. I wish we had been more conservative with our spending on Little Stapler’s rug, for example. It’s too small and we could have gotten something just as nice, but the right size, for less.
In fact, I haven’t spent a dime on home decor for six months! I was waiting for The Bonus to arrive. I kept telling myself that I couldn’t spend without a plan, and we couldn’t plan without knowing exactly how much we would have.
I’m thinking of implementing a semi-annual home “spending” event. This will help to keep my impulse buying in check and ensure that we’re only spending our money on items that we still want after four months.
Over the next year, we plan to spend some of The Bonus on two or three more unexciting home improvement projects — tree removal, bathroom fan install, grading the lawn around our foundation. You know, really thrilling things. Mostly, they serve to mitigate a potential problem. I hope we will be able to plow through some of these not-so-exciting improvements in time to install a nice gas fireplace in 2017. That is a home improvement we would all really enjoy!
But for now, it’s lawn equipment, air conditioners, sump pumps, and fridge repairs.
In the end, we traded $22,010 in housing costs as renters for $48,406 in housing costs as owners; plus, made a $9,114 equity investment.
Please don’t misinterpret: Although depositing that money into our retirement accounts or using it to pay down our student loans would have doubled our net worth, we believe it’s money well spent. If not for the awesome school district alone, we love living on land that we own, in a house that we own. There is a satisfying, primal, feeling to home ownership that feels like we could do whatever we want on our land (we can’t) or rip out a wall if we needed to (we don’t). We could chop down our next Christmas tree from our own back yard, or stomp down the stairs without bugging the neighbors.
After decades of renting, it’s so wonderful to be home.
(image by duron123, via freedigitalphotos.net)