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Raising A Millionaire: Quote of the Week

"Those who face that which is actually before them, unburdened by the past, undistracted by the future, these are they who live, who make the best use of their lives; these are those who have found the secret of contentment."

  -Alban Goodier

Raising A Millionaire: Article of the Week
The True Cost of Owning a Home
If you're entertaining thoughts of buying your first home now that the housing market is cooling off and prices are coming down, take note: The cost of home ownership might be a lot more than you think.

I'm not talking about the down payment or monthly mortgage payments. Although buying a home is a big investment, owning one comes with a new set of expenses you may not have had while renting or living with Mom and Dad. These extras can put a strain on your daily finances if you aren't prepared.

I know the temptation to buy a house can be strong, especially if you've been renting for a while, have gotten married or are ready to start a family

Where the money goes
Insurance. Before you can get a mortgage, most lenders will require you to show proof of homeowners insurance. The average premium was $729 in 2004 -- the latest figure available from the Insurance Information Institute. Insurance premiums vary greatly depending on where you live and the size, type and age of your house. For example, older, historic homes often cost more to insure because the cost of repairing damage to them can be greater than for newer homes that have standardized features. And if you live along the coasts, you'll have to pay a high price for being in a hurricane-prone area. You also will have to pay extra for flood coverage if you live in a flood plain.

Property taxes. This is another expense you can't escape. Property taxes are based on the value of your home. So the more expensive your house, the more you'll have to pay in taxes. You'll have to pay state property taxes and usually county or city property taxes, too.

Utilites. You're probably used to budgeting for utilities if you are renting. But the cost of heating a one-bedroom apartment can pale in comparison with the bills for an entire house.

Appliances. When you buy a house, most major appliances will come with it, except perhaps the washer and dryer.

Furniture. If you move from a one-bedroom apartment to, say, a three-bedroom house, you probably won't have the furniture to fill it.

House repair and maintenance. If you've been renting, your landlord probably has picked up the tab for repairs and general maintenance of your abode. Once you have your own house, you'll be footing the bill. And if you're not handy, it can get expensive if you have to call in a pro to paint the interior or exterior of your house, clean or repair gutters, or fix plumbing or wiring, for example.

Yard care. If you are used to living in an apartment with no yard, this can be the biggest home-owning expense shocker. At the least, you'll have to buy a mower to keep the grass trimmed. But you probably will have to invest in many more lawn and garden tools.

Pest control. This is one expense hopefully you won't have to deal with, but you never know. Before you buy a house, be sure to get a termite inspection. Unfortunately, even if there is no infestation at the time of the inspection, that's no guarantee these creepy crawlies won't show up and do a lot of damage if you don't wipe them out quickly.

Remodeling. The home remodeling shows make it look so easy (and often fail to mention the cost) that some of us buy homes with fixes we'd like to make -- an upgraded kitchen, perhaps -- without being honest with ourselves how much it's going to cost.

Once you buy, a good way to make sure you have the money when you need it is to set aside a fixed amount of money in your monthly budget for home expenses. Park the money in a high-yield online savings account specifically for that purpose. That way, you won't have to lean on your credit cards or raid your long-term savings when your home needs a repair or something else arises.

Raising A Millionaire: Other Articles

Why Real Estate? - There are so many reasons to own real estate. Here's help to get you going on the road to financial well-being.

Stacking the Odds for Real Estate Success - Why not take advantage of all that real estate has to offer you? Learn how to "stack" the odds of real estate success in your favor.

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