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Is COVID-19 Costing You Cash at Home? 7 Hidden Expenses of Self-Isolating During the Pandemic

April 24, 2020

Coronavirus Is Costing You Cash at Home: 7 Hidden Expenses of Self-Isolating

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Those who are fortunate enough to still be collecting a paycheck while quarantined or sheltering in place might expect to build up some serious savings. While you work from home, you’re avoiding your usual commuting expenses, and you’re probably saving money by not going to bars, restaurants, and movies, or skipping that vacation to Fiji.

But as spending decreases in some areas during self-isolation, it can creep up in others. To brace yourself and your budget, keep an eye on these expenses while you’re self-isolating at home.

1. Utilities

If you’ve gone from office life to Zoom life, you’re spending more time at home than usual, which could ramp up your household expenses.

“Your utility spending might be considerably higher if you’re spending more time at home cooking, charging devices, using lights and appliances,” says Ted Rossman, industry analyst at

To keep your utility bills down, turn off lights when you leave the room, open windows during the day to let in cool air, unplug devices that you’re not using, and consider turning down your water heater by a few degrees.

2. Groceries

Grocery delivery

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Even if you’re not hoarding (and you shouldn’t be), you might find yourself spending more on groceries while you shelter in place.

For some people, an uptick in grocery spending will be offset by the money saved from not dining at restaurants. But if your local store is picked over—or if you pay fees for grocery delivery—you could spend more on groceries than usual.

“I’ve been to a local grocery store, and the only thing that was available was organic, so I couldn’t buy the generic. I actually had to spend more money,” says Steve Repak, author of the “6 Week Money Challenge for Your Personal Finances.”

If your grocery spending feels out of hand, be flexible and creative with your menu. Cook the food you already have at home before you head back to the store. Sites such as Eater have compiled resources for home cooks, including Pantry Cooking 101 and How to Stock a Pantry.

If you’re using a delivery service, place infrequent, larger orders instead of several small orders. Or consider curbside service; many stores are allowing free pickups where they bring your groceries right to your car, so you can save on delivery fees and tips.

3. Meal delivery and takeout

You may not be able to enjoy a nice meal at a restaurant, but you can order takeout and delivery—and those indulgences can add up quickly. After all, it’s not just the meal you’re paying for.

“There’s probably still a service fee, and on top of that you have to leave a gratuity,” Repak says. (It’s also a good idea to generously tip the workers who are delivering your food in these times.)

If you’re on a budget, reserve takeout and delivery for special occasions or those days when you just can’t muster the motivation to cook.

4. Alcohol and other sources of comfort

Curl up with a good bottle…

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If you find yourself decompressing with a glass or two (or three) of wine every night, your drinking habit could do a number on your budget. And you wouldn’t be alone—alcohol consumption has shot up nationwide, and in states where recreational marijuana is legal, dispensaries are reporting booming business.

“Social isolation is really strongly linked to physical and mental health problems, and the way we cope with a lot of them is by drinking more,” Repak says. “People are going to smoke more and drink more … and we need to find other healthier coping mechanisms to offset that additional spending.”

You may not want to totally forfeit your evening glass of pinot, but you can make your supply last longer by sipping a mug of (far more affordable) chamomile tea on occasion, or opting for a calming yoga video or breathing exercise.

5. Subscriptions

You’ve rewatched all your favorite shows on Netflix and Hulu—so, now’s the time to add a Disney+ subscription, right?

Not so fast, Repak says.

“Save a little bit of money by just picking one of the streaming services,” he suggests, or at least don’t pile on new subscriptions to the ones you already have.

To free up your budget, take inventory of your other monthly subscriptions, services, and other recurring expenses, and see if there’s anything that can be eliminated.

“Ten dollars a month may not sound like a lot, but if you have five of those, that’s $600 annually,” Rossman adds.

6. Online shopping

Online shopping knows no quarantine

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If you turn to retail therapy to soothe your soul, your budget could take a hit. True, many retailers are offering deep discounts in order to move merchandise, but even discount purchases add up.

“Impulse buying is a potential trap,” Rossman says. “Some people fall victim to it more than others.”

Instead of clicking “add to cart” as a coping mechanism, Repak suggests cleaning out your closet instead.

“This is a great time that we can offset our budget by decluttering our house or apartment,” he says.

Use sites like Poshmark to sell your clothes, or Mercari for your household items. Many donation centers such as Goodwill are still accepting donations, too—just call ahead to make sure your local store or donation drop-off location will take your items.

7. New hobbies you’re trying in quarantine

Our spending habits are highly personal, and you might find yourself throwing money at a new habit or hobby to fight cabin fever.

“It’s a worthwhile exercise to track your spending, especially now that so much is different,” Rossman says. “Look through your credit card and bank statements from the past month. Do you see anything surprising? Are there areas where you spent extra but didn’t feel it was worth it? These could be good ways to cut back.”

And remember: Even if quarantine has eliminated some of your old day-to-day expenses, it’s easy to overestimate how much you’re saving.

“Most people don’t have a great handle on their budget and spending habits anyway, and so much has changed of late,” Rossman says. “It’s easy to overlook things.”

The post Is COVID-19 Costing You Cash at Home? 7 Hidden Expenses of Self-Isolating During the Pandemic appeared first on Real Estate News & Insights |®.

Real Estate Reality: How to Get Ready for a Recession—Just in Case

March 12, 2020

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What a difference a few weeks can make! We started 2020 on a hopeful note, expecting a solid—if moderate—continuation of the longest U.S. expansion on record. The only major obstacles in the housing market, it seemed, would be affordability and availability.

Then came the global expansion of the coronavirus epidemic, and in response, the social and economic landscape has shifted. On March 3, the U.S. Federal Reserve announced a surprise cut of 50 basis points in its short-term interest rate, the largest reduction in borrowing costs since the 2008 Great Recession. But despite this action, a slowdown in economic activity seems inevitable as consumers and companies cut back on travel, conferences, dining, lodging, and other spending, and talk of a recession is increasing.

Traditionally, a recession is marked as a period of two consecutive quarters of decline in the gross domestic product, although other factors also come into consideration. And while historically no two recessions have been alike, they tend to share some key features: rising unemployment, slow or no wage growth, declining prices, and shrinking credit availability.

The last recession, in 2008-09, is considered the second-worst economic contraction in U.S. history, and its effects still linger in our collective memory.

With this in mind, we thought it might be helpful to share our perspective on how a recession may affect the housing market, and how you can prepare for it.

Make your recession plan now

As the popular saying goes, “failure to plan is planning to fail.” But while a plan does not have to be overly complex, it should take into account your circumstances, life stage, goals, and resources.

Start by assessing your financial situation—are you early in your career or nearing retirement? Do you have family and people who depend on you from a financial perspective? Jot down how much you earn and how much money you bring home after taxes. Then compare that figure with how much money you spend on housing, utilities, food, transportation, travel, entertainment, gifts, charitable donations, and other items. Determine which are fixed expenses and where you can make cuts, if necessary. How large is the difference between money coming in and money flowing out?

Loss of a job is a major threat during a downturn, so an essential part of your plan should be saving. Traditionally, financial planners recommended putting aside enough cash to cover three to six months of expenses. However, during the 2008-09 recession many people found themselves unemployed for one year or longer.

Tips for homeowners

Sixty percent of homeowners have mortgage debt, which comes into focus at a time of economic uncertainty. For most Americans, a home is their largest asset and will factor prominently into their financial plan. As a homeowner, you should consider the following:

  • Establish an emergency fund: A good rule of thumb is to have at least six months’ worth of living expenses saved in the event you lose your job. If you’re a homeowner, planning to have enough cash to cover your mortgage and unexpected home repairs for six to 12 months is prudent. This may not be feasible, but it is a goal worth aiming for.
  • Look for ways to reduce your expenses: Mortgage rates have fallen to historic lows, so there may be an opportunity to lower monthly payments by refinancing, or to make them more predictable by switching from a variable to a fixed-rate mortgage. Often there are fees associated with refinancing, so you will want to compare those with what you’ll be saving over time and how long you think you’ll live in the home. If it costs you $2,000 to save $200 a month, then after you’ve lived in the home for just less than a year, you’ve saved enough to offset the fees, which probably means the refinance makes sense. If you’re not sure that you’ll be in the home long-term or if it will take you a longer time to recoup the fees with your monthly savings, then refinance may not be the best option for you. Also, it’s important to shop around for mortgage loans and make sure you are comparing apples to apples on the interest rate as well as any associated costs. Check rates or use a calculator to see if refinancing makes sense.
  • Consider your home an asset: Understand how much equity you have in your home, and research what rates look like for home equity loans. In the event of a job loss, it could make sense to tap into the equity in your home. Check with a financial adviser to see if this might be a good option for you. Tools like MyHome, which gives a view into your property value and equity, can be a good place to start.
  • Consider an early payoff: If you’re a longtime homeowner, there may be an opportunity to pay off your mortgage or switch to a shorter-term loan. Those in a 30-year might be able to switch to a 10- or 15-year mortgage at a lower rate. This can help reduce monthly payments or eliminate your mortgage debt, placing your financial situation on a stronger foundation.

Tips for house hunters heading into the spring buying season

Although most people think of recessions with dread, it is worth keeping in mind that they can also be periods of opportunity, especially if you are prepared. As the last recession demonstrated, while asset markets declined, many prepared buyers found treasures, often in low-priced homes. If you’re thinking about buying a home, here are some things to keep in mind:

  • Do your financial homework. It’s important to understand your monthly expenses and how much you can comfortably afford. If you’re not feeling confident or comfortable that your income is stable, it might be best to pause your home search.
  • Know what you’re looking for. Have a short list of your preferred neighborhoods, home size, features, and commute time to help narrow your search. Understanding the market will help you identify a great buy or hidden gem, as many prepared buyers did during the last downturn.
  • Be ready to move quickly. Be prepared with loan pre-approval (which is more solid than pre-qualification) in case your perfect home comes on the market and you need to move quickly to beat out other offers.
  • Be patient. Housing inventory has been declining at double-digit rates for the past seven months. This has resulted in a noticeable shortage of homes for sale at all price points, but especially in the affordable range. A quarter of first-time buyers have had to spend over a year on their home search. In these market conditions, it’s important to be prepared, but also patient.

Whether you own a home or are looking to invest for the first time, the important thing to remember is that you can plan for a recession, and it’s never too early to do so.

The post Real Estate Reality: How to Get Ready for a Recession—Just in Case appeared first on Real Estate News & Insights |®.

The No. 1 Thing People With Fat Savings Accounts Scrimp on That You Likely Don’t

February 4, 2020

Man counting money


Housing may be the key to bigger savings.

Earlier this week, a Reddit post — from a 48-year-old woman claiming to be a millionaire despite having only low-paying jobs until about age 30 — went viral, and in it she details some extreme frugality. She says she saves tea bags so she can make multiple cups from one bag, only eats out a couple of times a year, dilutes her dish soap with half water so it lasts longer and almost exclusively wears dark clothes as light colors stain too easily.

But she says there are two things on her long list of frugal habits that research shows really are the key to getting rich: Buying a very affordable home (hers, she says, was just $135,000 and in an excellent neighborhood) and driving an old car (hers is a 12-year-old Subaru, she says).

Indeed, research from TD Ameritrade — which looks at people who save 20% or more of their incomes, called “super savers” — shows that the single biggest difference between what super savers spent less on, as compared with the rest of us, was housing. Super savers spent just 14% of their incomes on housing, while regular folks dropped 23%.

What’s more, research released Monday by The Principal found that more than four in 10 people who fully funded or were very close to fully funding their 401(k) accounts said that one of the sacrifices they made to save so much was that they lived in a modest home. This — along with owning older cars — was one of the two top answers.

One reason super savers may scrimp on housing? “They may see expensive mortgage payments as a liability. Our data shows that they value freedom to do what they want as well as financial security and peace of mind,” explains Dara Luber, senior manager of retirement at TD Ameritrade.

In some ways, it may be easier to cut housing or automotive costs than make smaller conscious choices all day to cut out the things you love, like those lattes. After all, you move once and buy a car infrequently, and your monthly mortgage, rent or auto payments are slashed every month following.

Meanwhile, making choices frequently can lead to something called decision fatigue, which research shows can impact our ability to make the “right” choices as the day goes on.

And because housing is the biggest part of most Americans’ budgets, it’s extra important to save on it. Indeed, the average American household spends a total of roughly $60,000 a year; nearly $20,000 of that spending is on housing, government data show.

Of course, it’s often easier said than done. Households often pay more for housing so they also get into a good school district or because an area is safer. And, it’s also possible that many of the savers interviewed in the TD Ameritrade study had lower housing costs because they put more down on their home when they bought.

Still, it’s important to note that there’s plenty of room to downsize: New homes built in America today on average have 1,000 more square feet than they did in the 1970s, and living space per person has doubled.

The post The No. 1 Thing People With Fat Savings Accounts Scrimp on That You Likely Don’t appeared first on Real Estate News & Insights |®.

I’m 27 and Put 17% of My Income Into My 401(k), but That’s Keeping Me From Buying a Home

December 27, 2019


Hello Catey,

I am a single, 27-year-old male. I am beginning to save for a down payment on a home. I currently contribute about 17% to my 401(k). While that is great, it doesn’t leave me very much room to save for a new home. I am looking for perspective about lowering my 401(k) contributions to help save up for a down payment on a home, versus maintaining 401(k) and lengthening my home-buying timeline.


Dear Zack,

First of all, congrats on contributing so much to your 401(k) – you’re in an elite minority. A survey from personal finance site GoBankingRates found that about one in three Americans have nothing saved for retirement, with millennials being the most likely group to have a $0 retirement balance.

And even those who do contribute aren’t typically contributing like you do: The average person in their 20s with a 401(k) plan is putting in an average of 7% of their income with their employer matching an average of 4%, Fidelity data shows.

So you’re far ahead of the pack on saving for retirement — and that’s great. Even so, before you touch those retirement contribution amounts, consider other options: “This individual is taking a binary approach to his financial situation, assuming that the 401(k) is the only place to look for cash flow to purchase a home,” says Rich Ramassini, the director of strategy and sales performance for PNC Investments. He notes that you should look at your annual cash flow (income – expenses) and look for other opportunities to save — if you haven’t already.

If you’ve done that, some experts MarketWatch consulted with said that it’s OK for you to lower your 401(k) contributions — to a point, and for a short time — if you want to buy a home. (That advice assumes you don’t have any other high-interest debt and you have an emergency fund socked away -— things you might want to deal with before buying a home, as MarketWatch wrote in this article).

“I generally recommend that employees set aside at least 10% to 15% of their income in order to fund the retirement that they want,” says certified financial planner Amy Ouellette, the director of retirement services at Betterment for Business. “However, your contribution rate doesn’t need to be set in stone, and it’s okay to consider lowering it a bit when saving up for other big milestones. While saving for retirement is incredibly important, so is having the financial freedom to make other worthwhile investments like home ownership.”

So how low can you lower your 401(k) contributions while trying to save for a home? “If buying a home is a few years out, I’d consider reducing your 401(k) savings rate to 8% to 10% of your income, while building up the down payment fund; this way you continue to build for your retirement while meeting a shorter term goal,” says Ouellette.

Certified financial planner Bobbi Rebell cautions that if you decide to lower your contributions to save for a home, you should still make sure you contribute at least enough to get the company match: “That is free money and often a return of 100% depending on the specifics of the plan,” Rebell, who is also the host of the Financial Grownup and co-host of the Money with Friends podcasts, adds. And Ouellette adds that you may want to talk to a financial advisor to calculate exactly how much to decrease contributions by and how much that will leave you for a down payment.

Another possible option: A 401(k) loan, though that also comes with risks. “The best option available, if you plan to stay at your job for a while, is to take a loan from your 401(k) to help cover you for the down payment on the home. Doing this will allow you to continue funding your 401(k) on a pre-tax basis (at the same rate as before), locking in that federal tax deduction up front, while getting you the funds needed to buy the home,” says Dave Cherill, a member of the American Institute of CPAs’ Personal Financial Planning Executive Committee — who adds that you must “keep in mind, if you leave your job with the loan outstanding, you will either need to pay it back, or include it in income that tax year and pay a 10% penalty on top (if under the age of 59-1/2).”

And of course, it’s important that you’re selective about the house you buy, ensuring that you can truly afford the home, that you’re getting a good mortgage rate if you do take out a loan, among other factors. And you should be aware of the fact that investing more in stocks may have upsides over real estate, as MarketWatch explored here.

“Owning a home is a huge financial investment but it is also a lifestyle choice. It provides stability, and a sense of ownership. It is often a commitment to a community,” Rebell points out. “Ownership has many non-financial benefits so it’s not [just] about comparing which will give you the better ‘return.’”

The post I’m 27 and Put 17% of My Income Into My 401(k), but That’s Keeping Me From Buying a Home appeared first on Real Estate News & Insights |®.