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Renting a Room: Things to Keep in Mind

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Here are some considerations to take in account before allowing a stranger, friend, or family member to rent a room in your house.

Many cash strapped homeowners earn extra money by renting a room in their homes in order to help cover the bills. In theory, and on paper, this idea sounds awesome. You get an extra $400 – $500 or more injected into your budget every month, for each empty room. But in practice, the process of renting a room to a complete stranger, or even to a friend or family member, can turn out to be more than you bargained for. Be aware of potential issues in advance so that you can be prepared and implement simple solutions.

Overnight House Guests

Flickr; PseudoDude
Flickr; PseudoDude

One problem that many homeowners who take in roomers have is overnight guests, such as girlfriends and boyfriends. Most landlords who are renting out a room in their house will even make it clear in a lease that no one except the roomer i

s allowed to stay overnight in the house. This is because overnight guests create an additional strain on the resources of the house. That includes additional hot water being used for showers and cooking gas or electricity being used if the guest decides to wake up and go make a meal in the middle of the night.

Chances are, you made a flat rate monthly deal with your roomer that included water, gas, electric, cable, phone, Internet, and other utilities, but that flat rate did not include paying for an additional overnight guest’s use of those amenities. So make your terms about guests clear in your rent agreement to avoid confusion.

You’ll Feel Like You’re Scolding a Child

Are you a parent turned empty-nester? If so, you probably remember how hard it was to get your kids to do something you asked, such as take out their garbage, turn down their music, or stop leaving their dirty plates on the counter — the eye rolls, the sighs, the slamming doors…

When you take in a roomer they will likely be sharing your living space, and that includes the kitchen and bathroom. It’s important to establish clear “house rules” for everyone in the home to follow and post them conspicuously in common areas.

When They Stop Paying Their Rent On Time… or At All

Without a doubt, the worst case scenario of renting a room in your house is when the roomer stops paying you rent. It’s a very difficult bind to find yourself in because not only do you have to continually contact the roomer about paying his rent, you are also obligated by law to give him written notice and allow him to stay for at least 15-30 more days (even if the roomer has not paid you rent for the month) before you can initiate an eviction (varies by state). After that 15 or 30 days is up, your roomer could decide that he or she still isn’t budging — it can get complicated. The eviction process could take a month or two to complete.

So if you are thinking about renting a room in your home to someone, remember these guidelines:

1) Include every rule you can think of in the lease, and make sure you go over it with the roomer before he or she moves in (no verbal leases).

2) Get a large initial deposit, preferably for two or three months of rent.

3) Do a credit check to find out if they already have past evictions or payment problems related to an apartment.

4) Talk to the prospective roomer’s previous landlord if possible.

5) Be firm, respectful business-like with the roomer at all times to ensure that the relationship remains professional.

Tips for Reeling in Out-of-Control Spending Habits

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We live in a society that has become accustomed to buying lots of unnecessary material things. That includes expensive cellphones, clothes, televisions and other non-essentials. The exact reasons behind this buying behavior vary from shopping addictions to the desire to “keep up with the Joneses.” But there comes a time when you must take a hard look at your spending habits and how they may be affecting your financial future.

Time is money
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Record Your Purchases

Carry a little journal with you when you go out of the house for anything. If you stop and make a purchase, write down each item that you bought and its cost. At the end of the month review the list of items to get a snapshot of exactly where your money is going. Add everything up in Microsoft Excel to get a grand total of the non-essential items. Think about the fact that the money you spent on all of that stuff could have gone into a savings fund or invested in a business idea. You may be a little surprised and upset at what you bought and how much it cost you. That is a good thing—that list should motivate you to make a change.

Write a List of Needs vs. Wants

Sit down and write two lists. One list is of your needs, like food and gas money. Then start writing down your wants, like brand new clothes, trips to the nail salon and outings to movie theaters. Chances are your list of wants will be much longer than your needs. Once you have these lists, buy everything that you need first and then if you have the extra funds available, you can pick one to three items from the “want list” each month.

Cash and Carry

Start carrying around cash and leave your credit or debit card at home. Using a card for purchases makes it too easy to overspend. Budget a reasonable amount that you need each month to cover your everyday expenses, such as food and toiletries. Withdraw that amount from your bank account and put it in a safe place. Each time you leave the house, withdraw just enough cash from your stash to get what you need during that outing. If you run out of cash, then your day of shopping is over—time to go home. Even if there is still something out there that you really wanted, going home will give you time to really think about whether or not you really need the item at all. This is how you prevent impulse purchases.

In order to change your out-of-control spending habits, you must change your learned behaviors and your mindset about what is a need and what is a want. Write lists, limit your shopping trips, avoid browsing around in stores without a specific goal and carry cash to get what you need instead of using cards.

4 Simple Tips to Save Money on a Tight Budget

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Many Americans today live above and beyond their means. Learning how to save money is a can be a challenging lesson to learn. You have to ask yourself why you need the latest tech gadget, biggest sports utility vehicle (SUV) and the latest high-end fashion accessories – especially when it puts you in debt. Instead, investigate ways to save money on a tight budget!

Maintain the Vehicle You Have

Front of Car
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This is the usual course of action for the average American consumer: pay monthly for an auto loan for five to seven years only to then purchase another automobile, pay for another five to seven years and basically continue a never ending cycle of payments. If you’re paying for a $15,000 car with an average car loan length of 60 months (five years) with about 7 percent interest, you’re giving up about $18,000 during that period of time, which includes interest. Instead of committing to plunking down another $18,000, maintain the vehicle you’ve already paid for instead.

Ask yourself three questions to decide if you need a new vehicle:

1)      Is the current vehicle safe and reliable?

2)      Is the current vehicle good on gas?

3)      Were you happy and excited when you initially purchased you vehicle?

If you answered yes to all three questions, re-evaluate the desire for a new vehicle. Maybe it’s not necessary. Maybe you can invest just $2,000 or $3,000 in your car during that next five years to keep it in tip-top shape and looking like it’s brand new.

Make Your Home a Constant Vacation Spot

The average American expects to spend an average of $1,200 per person while on vacation, according to a 2012 American Express survey. Does spending that amount make sense when you already spend hundreds or thousands per month on your home? Why not make your home your vacation paradise since that is where you invest a large portion of your salary every month?

For the cost of a week-long vacation for the family, you can purchase an indoor pool for your yard to enjoy for years to come. Besides the enjoyment, it may also enhance your property value—that means that your luxurious vacation pool could be making you money while providing you with a getaway. You could also have a deck or a screened-in porch, Jacuzzi or game room built in your home for your continual pleasure that may cost less than a vacation for a family of four. Once again, these improvements might add to the value of your property.

Get Your Cable and Entertainment Costs Under Control

According to a study by the NPD Group, the average monthly cable television bill was around $86 as of 2012, and could rise to as much as $200 per month. This is a compelling argument for subscribing to a less expensive option such as Netflix, Hulu or Amazon Instant Video starting today. Netflix, Hulu and Amazon Instant Video cost significantly less (around $8 to $10 per month as of 2014) and provide just as must entertainment value as cable. Even if you were to opt for all three services it would cost under $25 per month, which is a savings of over $60 per month.

Make Your Own Detergent

It may seem like a small issue at first, but if you look at the cost of the leading brands of laundry detergent, it is clear that an alternative could save you a lot of money each year. There have even been stories of people stealing laundry detergent and trying to resell it due to its high value. Luckily, you can make your own laundry detergent to save yourself some money.


According to the EPA, the average American family washes about 400 loads of laundry per year, which works out to about 7.5 loads per week. An average 50 ounce, $15 bottle of leading brand detergent covers about 30 loads.

If instead you make your own detergent you can yield enough laundry detergent to take care of as much as three years of laundry for around $10 by buying Borax Natural Laundry Booster, Arm & Hammer Baking Soda, a bar of Ivory Soap and combining it with three gallons of water. Experiment with a bit of each to find the right mixture for your clothes.

The idea of making even small changes to your daily routine can be difficult to grasp at first, but once you see the amount of weekly, monthly and yearly dollars you can keep in your pocket on average by making minor changes to your household habits, you will probably want to learn about even more ways to save.

 

Sources:

money.cnn.com/2012/05/10/pf/expert/vacation-spending.moneymag/

epa.gov/greenhomes/Basement.htm

huffingtonpost.com/2012/04/11/cable-bill-200-dollars-2020-study_n_1418779.html

How to Reduce Your Debt By 60% or More

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When overwhelmed with debt it is sometimes helpful to set a specific debt reduction percentage goal. If you have a specific figure in mind it makes your goal seem more realistic and achievable.  If you really want to make significant progress, set a goal to reduce your debt by as much as 60 percent in a set period of time.

Time to Pay Off Your Debt
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1. Call your creditor to attempt to negotiate the balance first. It’s rare, but creditors will sometimes agree to decrease the balance in order to make it more affordable for paying off. This is a measure most common for consumers who can prove financial hardship.

2. Sign up for a debt management plan with a reputable credit counseling service to cut down the balance. Debt management program providers can sometimes convince creditors to lower the balance owed. Then they sign you up for a payoff program with one payment per month. If you have multiple debt accounts, your creditors may refer you to a non-profit credit counseling service to discuss this option instead of a direct negotiation. Contact the National Foundation for Credit Counseling to more information.

3. Pay off some or all of your debt with your current savings, if you have any. In many cases, the interest cost on debt far exceeds the interest yield on a savings account. For instance, if you’re paying 12 percent per year on a debt account and earning 2 percent per year on a savings account, both with the same balance you’re essentially losing 10 percent per year. So if you have debt of $5,000 dollars and wish to shave off 60 percent, withdraw $3,000 dollars from your savings and apply it toward paying down the principal. Build up your savings again slowly but surely over the coming months with the money you save in debt interest payments.

4. Use an online amortization or debt payoff calculator to estimate the monthly payment required to shave off 60 percent of your debt in a set number of months. Put that extra amount toward additional principal on your account each month until you reach your goal. You may have to play with the figures when performing the online calculation to find a monthly payment amount you can manage.

Tips:

Some debt agreements may have a prepayment penalty, which means that you will have to pay an additional fee if you pay the balance off sooner than planned. Check with your lender in advance.

 

 

Is Living a Debt-Free Cash-Only Lifestyle Possible?

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Before the economic crisis of 2008, credit was doled out so freely that getting into debt was an accepted way of life. It was almost considered normal for a family to carry multiple credit cards with balances reaching into the thousands or to withdraw all of the equity from a home in exchange for regular interest-heavy payments.

Fifties
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But since credit became more difficult to secure an increasing number of consumers have had to learn how to live a cash-only lifestyle.

What does that mean? Simply put it means that if you can’t afford to pay cash for what you want to buy you cannot have it.

So if you don’t have $2,000 for a brand new 42-inch flat screen television you must enjoy it in the store and then go home to your trusty 27-inch. If you don’t have $15,000 sitting in a savings account to pay for the brand new car you want, you buy the beater for $800 that reliably transports you from point A to point B.

It means no loans. No credit cards. No “buy now pay later” deals. Cash-only is a serious lifestyle adjustment, but it is possible to live a fruitful life without relying on credit to get by?

Make Cuts

The first step to living a debt-free cash-only lifestyle is to revamp your budget. Your budget should allow you to pay your required bills and also have enough discretionary cash leftover to take care of your basic needs—that way you do not have to look to a loan or credit line to get by from week to week or month to month. If you take a close look at your budget, chances are that you’ll identify one or more places where you can make some cuts.

Use Envelopes

Once you have your budget in place you need a way to manage the cash that you’ll be spending throughout the week or month. The envelope system is a reliable method. Withdraw the cash you need for your other living expenses from your account (avoid using debit cards because it is too easy to overspend) and divide it up into individually labeled envelopes. For instance, use one envelope for groceries, one for entertainment and another for car expenses.

Saving Cash

If you do have a large purchase in mind, such as a car or television, you have to save cash for it. That is the name of the game when you live a cash-only lifestyle. You cannot always receive what you want immediately — you may have to wait and save.

Remember the good old days when you had to save up your allowance to buy that bike you wanted? Well you have to go back to that way of thinking. Credit was designed to give you immediate satisfaction but it also gives you long-term pain. When you save money toward your goal you may have to wait a while for the pleasure, but you get the long-term satisfaction of knowing that you bought it cash and no one can come after you for interest.

Cut Up Those Credit Offers

As you continue your cash-only lifestyle you may find that over time credit card companies will come calling with offers. That’s because they desperately want a piece of your income, which you’ve finally learned how to manage responsibly. Cut up those offers immediately and contact all three major credit bureaus to request to have your name removed from all of their marketing lists.

When you live a debt-free cash-only lifestyle you put yourself in a position of power. You are not a slave to interest and collections on the items you’ve purchased in order to live a normal lifestyle. You (and you alone) are in full control of your financial future.