It's been just over a year since we bought our house and, as part of my celebration, I thought now would be a good time to dig into the numbers in more depth. How did our financial projections hold up to reality?
The Monthly Budget: Then and Now
The first data I'd like to share is a list of monthly expenses from when we were renting versus what we experience now that we are homeowners. It's important to remember when making these comparisons that they are not apples-to-apples. We moved from a two-bedroom, 1000-square-foot condo into a three-bedroom, 1650-square-foot-freestanding house with a pool. So, obviously, we went into this knowing that our new home would be more expensive.
Here is a chart of our basic monthly expenses:
|Expense||Condo (Rental)||House (Ownership)|
|Rent/Mortgage||$1,000||$1,500 (includes PITI/PMI)*|
|Electric||Ranged from $100-$275||Ranged from $110-$325**|
A few notes about our expenses:
*First, our actual mortgage payment/PITI/PMI is $1,400, but we are overpaying in a way that averages out to an extra payment a year.
**Second, we are hoping that our electric bill decreases this year as a result of installing our new HVAC unit.
***Third, our landscaping is mostly gravel, though there are six palm trees that require annual trimming — and that costs about $350. (They are 20- to 30-foot palms, so we have to hire professionals to do this with cranes.) We do have some grass that requires irrigation during the summer months; so between that and the pool, our water costs are a bit high.
Homeownership: Repairs and Upgrades
Aside from the increased monthly expenses, homeownership also entails responsibility for paying for repairs when things break as well as making upgrades to the property. This is one of the reasons that renting can be a better deal than buying — if, of course, you have responsible landlords who actually do these things. When we were renting, our landlords were terrible about making necessary repairs! That was extremely frustrating (and a couple of times, even dangerous). And as a result, we were excited about taking on this responsibility ourselves.
Here's a list of major repairs and upgrades we made during our first year of homeownership:
Re-sodding grass/sprinkler repairs
Prior to move-in. This was for grass that comes back every year. (We don't plant winter rye and so don't need to water year-round.)
Our A/C quit on a 108-degree day last August.
New pool filter
Old one died.
New ice maker (fridge)
Our freezer is on the bottom and, as a result of the broken ice maker, water was pooling in the bottom of the unit.
New garage door motor
Old one died.
Cost includes install.
New HVAC and thermostat
We didn't want to get stuck with another $1,000 repair bill. Our new unit has a 10-year parts-and-service warranty.
We had six motion-sensor floodlights installed on the sides/front/rear of the house as well as in-ground lighting in the front and backyards. This price includes install.
Our existing shed is metal and is corroded and dangerous. The amount listed here is just the cost of the new shed, though we will be hiring a handyman to tear down/dispose of the old shed and build the new one.
Supplies, etc., for small projects (re-keying the house, a new hall light fixture, broken towel racks, a busted gate latch, that sort of thing).
Even though our house is well-built and was move-in ready, we definitely spent more than I anticipated in our first year. On the plus side, since we decided against solar panels, once the new shed is assembled, the only other major project/priority we have on the horizon is having the back deck resurfaced. We'll probably have that done this winter. If we can bank the amount above instead of spending it on house projects going forward, we will be well on our way to refinancing so we can get rid of PMI.
An Updated Reckoning After One Year
Given these expenses, you are probably wondering the status of our income and bank accounts. On the income side, Jake's base salary is $130K. His firm does do bonuses, though they are not very big. His firm tends to give bonuses in non-monetary form, such as, free dinners at expensive restaurants or a clothing allowance. (He didn't get to pick the clothes. It was hi-larious.)
On my side, after seven years stuck at $42K, I am now making $55K at my new day job. Between that and my side gig, my average monthly take-home pay has gone from about $2,000 to about $4,000.
In addition to contributing toward the repairs and upgrades listed above, I have been paying $1,000 per month toward my student loans. As a result, I am on track to achieve my goal of a student loan balance under $80K by year's end.
Here's a more detailed look at where things stand:
% Change, YTD
Student loan debt (Honey)
Student loan debt (Jake)
As you can see, all the numbers are trending in the right direction. Looking at the net worth number, I actually think that it is probably possible for us to reach a zero net worth by the end of the year. If that happens, then we can start the wealth-building process in 2016. Obviously, however, that's just paper wealth, since the VAST majority of our assets will either be tied up in our house or in our retirement accounts rather than in any liquid form. We do have quite a bit of cash on hand in online savings accounts currently; but as I said, I think the next big goal for us will be to refinance our mortgage, so I don't expect our reserves to stay that big forever.
And that's our status after one year of homeownership! Homeowners out there, what has your experience been?
Author: Honey Smith
Honey Smith has been reading GRS since at least 2008, right when she got her first â€œrealâ€ job and started getting serious about finances. She and her husband Jake are in their mid-30s and recently bought a home together. Currently, she manages graduate programs at a large state institution, and he is an attorney at a mid-sized firm.
Between them, they have paid off approximately $30,000 in consumer debt since she started writing for GRS in 2012. However, they still have nearly $200,000 of student loan debt, so she will continue to chronicle their debt-paydown journey. In addition to personal finance, Honey is interested in vegetarianism and cooking, gardening (despite living in the desert and having a black thumb), issues in higher education (including the student loan bubble and the slow death of tenure), and animal rights; however, her heart lies with fantasy novels, trashy TV and Skyrim.