Part 14 (2/2)

- If you're in school, Student Universe () often has the best deals on airfare. (These offers apply to college students and faculty.) The site also helps you research hotels, rental cars, and more. EF College Break () is another great resource for students, providing affordable tours of other countries.

- If you want to take a cruise, VacationsToGo.com is a must-visit site. When the cruise lines can't fill their s.h.i.+ps, they discount the unsold cabins and sell them through this website. You'll find the best bargains during a cruise's slow season-and usually in the last 90 days before departure. You may also want to take a look at CruiseCompete.com, which lets travel agencies blindly bid for your business.

- Tired of getting stuck in the worst seat on the plane? SeatGuru.com contains a library of layouts for over 700 different planes, as well as info on where to find power outlets, overhead TVs, and bathrooms. SeatGuru won't save you money, but it can certainly make your trips more comfortable.

- Yapta.com (short for Your Amazing Personal Travel a.s.sistant) can help you find flights, track fares, and get alerts when a fare drops into your price range. Yapta also acts as a sort of PriceProtectr.com (The Tyranny of Stuff) for travel: Enter your flight confirmation number, and Yapta tracks ticket prices. If the price drops below what you paid for it, Yapta sends you an alert so you can take advantage of the better price.

Savvy travelers suggest using these web-based tools to find the flights and hotels you want-but then purchasing tickets or accommodations directly from the source. The tools will help you find the best deal, but you'll usually save even more by booking directly with the hotel or airline.

Hometown Vacations When was the last time you vacationed in your city? I've lived in and around Portland, Oregon all my life, but never really viewed it through the eyes of a tourist. A couple of years ago, I spent a day doing touristy stuff with a friend from L.A. I had a great time, and learned more about my city in those few hours than ever before.

A hometown vacation-a staycation-can be both frugal and fun. As the site Finance for a Freelance Life notes in the article at tinyurl.com/MM-staycations, there are lots of advantages to hometown tourism: You save big on accommodations, since you don't pay for any. You also save on gas and travel expenses, and by packing meals from home. Perhaps best of all, vacationing in your hometown lets you stay in your comfort zone; you can use your knowledge of the area to pick cheap attractions.

But you don't have to pinch pennies during a staycation. You'll still save money even if you stay in a nice hotel, dine in fancy restaurants, see a show, and take a couple of tours. Because you don't pay any travel costs and you're familiar with the area, your vacation dollars go much further in your own city.

Regardless of how much you choose to spend, here are some tips for enjoying a vacation close to home: - Set a budget. Whether you opt to take the frugal approach or splurge, create a spending plan and stick to it, just like you would on a regular vacation.

- Grab a guidebook. Tourist guides contain great info about cheap eats, cool spots, and local history. You can find guidebooks at local bookstores or better yet, borrow one from your public library. If you're a member of AAA, pick one up for free at the local office.

- Book a tour. Tours can be a fun way to get to know a city's history and trivia-even if you've lived there all your life. For example, Portland offers walking tours of local microbreweries. What's your city known for?

- Be adventurous. Be bold and try new things. If you live near a river, go kayaking. If you live near the mountains, go hiking or skiing.

- Chat it up. Talk with the actual tourists. Ask them what they like about the city. Get recommendations for cheap or fun spots to visit. Answer their questions. Talking with tourists is an excellent way to see your surroundings with new eyes.

- Be unreachable. Pretend you're vacationing out of town, even if you're still at home: Ignore the phone and don't check email. After all, a vacation is a time to relax and forget the cares of the workaday world-whether you're on a Caribbean cruise or simply walking down Main Street.

- Swap houses. Have some like-minded friends? Swap houses for a week (or a weekend). This cheap change of scenery can make you feel like you're in a completely different city. It may also give you insight into neighborhoods you haven't explored.

- Mix things up. When you've lived in the same city for 5, 10, or 40 years, you tend to have favorite routes, places, and things to do. A staycation is a chance to explore. While preparing for your vacation, keep a list of things you'd like to see and do. Ask your friends where they take out-of-town visitors. Use the events guide in your local paper to research activities.

TipIn their book America's Cheapest Family, Steve and Annette Economides suggest using a staycation for a mix of work and play. They write that, in addition to saving money, there's another benefit to taking a hometown vacation: ”Completing a home improvement project during a week of vacation may sound illogical, but it can really be a stress reliever.”

You can probably have a better time in your own city than you would somewhere hundreds of miles away-and for much, much less.

Cash Is King Did you notice something about the recommendations in this chapter? In each case, the best way to save money on big things is to save money for them. When you use cash instead of credit to pay for a car or vacation, you can save hundreds (or even thousands) of dollars. All the money you would have otherwise paid in interest goes directly to boosting your cash flow, making it easier to save for retirement-and to pay cash again in the future. So planning ahead and saving for expenses isn't just a great way to get organized-it actually saves money.

In the next chapter, you'll learn ways to save on the biggest expense of all: housing.

Chapter10.House and Home.

”A house is made of brick and mortar, but home is made by the people who live there.”-M.K. Soni Housing is by far the largest expense in most people's budgets. According to the U.S. government's 2008 Consumer Expenditure Survey, the average American family spends $1,747.83 on housing and related expenses every month. That's more than they spend on food, clothing, healthcare, and entertainment put together. So if you want a quick way to improve your financial health, housing is the place to look.

So far, you've read about a lot of different ways to save money: You know how to spend less on groceries, trim your transportation budget, and use credit wisely. Everyday thrift can boost your cash flow, helping you to get out of debt and save money. But even all those changes combined don't have the power to affect your budget like what you spend on housing.

This chapter will give you the facts you need to make smart housing decisions.

The Eternal Question: Rent or Buy?

Deciding whether to rent or buy is a complicated financial and emotional decision. Real-estate agents like to say, ”Renting is like throwing your money away.” On its surface, this advice seems to make sense, so it gets repeated a lot in popular culture. But in a 2008 issue of Newsweek (tinyurl.com/nw-rentok), Robert s.h.i.+ller, a professor of economics at Yale University, wrote, ”The popular argument that renting is equivalent to throwing money down the drain is really fallacious.”

In some cases, it does make financial sense to buy a home. But in other situations, renting is the better choice. And often, there's not a lot of difference between the two, especially if you're smart and keep costs low. The decision usually comes down to personal preference. Let's take a brief look at the pros and cons of each.

Here are the advantages of owning your home: - Stability. When you take out a mortgage, you know what your payments will be for years to come. There's no landlord to change the rules, and you don't need to worry about being kicked out at a moment's notice.

- Equity. As you make your mortgage payments, and as the property's value increases, you build equity, which is the difference between what you owe on your house and what you could sell it for. In other words, it's how much value you have stored in your home. For example, if your house is worth $225,000 and you owe $175,000, you've got $50,000 in equity.

- Freedom. You can do what you want with your home and yard, like plant a garden, paint the ceiling purple, or install a wet bar in the bas.e.m.e.nt.

On the other hand, the advantages of renting include: - Flexibility. With a rental, you don't have a long-term commitment. You can move on short notice, whether to get away from bad neighbors or to take advantage of lower rents elsewhere. There's also a wider range of rental options than homes for sale. It's difficult to buy a tiny house, for example, but you can easily find one- or two-room rentals.

- Lower costs. In the June 2007 issue of Kiplinger's Personal Finance Kiplinger's Personal Finance ( (tinyurl.com/kip0607), editor Knight Kiplinger wrote, ”It often costs less to rent. The annual cost of owning a property, be it a house or a condo, is usually greater than the cost of renting, after taxes.” True, you don't build equity when you rent, but you're not burdened with taxes, insurance, and maintenance costs either. You can use the money you save to travel or buy stocks.

- Lack of responsibility. When you rent, somebody else does the yard work and repairs the leaky showerhead. (Of course, this can be a disadvantage if your landlord is slow to respond to problems.) All you do is stick to the terms of your lease or rental agreement and someone else takes care of the rest.

Both sides of the rent vs. buy argument can trot out numbers and statistics to prove why they're right and the other side is wrong. The bottom line is that the decision isn't just a financial one, so it's hard to generalize. Yes, renting can save you money and it comes with far fewer ha.s.sles than owning. But owning your home can give you non-financial benefits.

The best way to decide is to think about your goals and figure out what makes sense for you. Ask yourself these questions: - How long will you stay in one place? The longer you plan to stay put, the more sense it makes to buy a home. Buying lets you recover your costs and build equity.

- How do costs compare? Find a good rent-vs.-buy calculator and crunch the numbers. The New York Times has a nifty web-based calculator (tinyurl.com/NYT-rbcalc) that can help you compare costs for renting vs. owning. The site lets you plug in numbers for your situation, and then shows you how long it would take to break even with buying.

- How would you spend the savings? When renting is cheaper, you can use the money you save to pursue other goals. Sure, you could spend the cash on purses and videogames, but you'll be better off in the long run if you use it to fund your retirement (see Chapter13 Chapter13), budget for a new car-or even save for a down payment on a house.

- How do you feel about homeowners.h.i.+p? For some, owning a home is a piece of the American Dream. For others, the ch.o.r.es and maintenance are a nightmare. Your feelings about homeowners.h.i.+p are just as important as the financial stuff.

NoteHere's an excellent article from the New York Times (tinyurl.com/NYT-buying) that explains why the author-a long-time renter-decided to buy a home. It does a good job of laying out the pros and cons of each choice.

If you decide to buy, do it for the right reasons: because it fits your goals and will make you happy. Don't do it because you think it's a good investment. A mortgage is not a retirement plan-it won't make you rich. Instead, think of it as an investment in a certain lifestyle. If homeowners.h.i.+p is a lifestyle you want and can afford, then buy; if not, rent.

Tips for Renters One advantage to renting over buying is you have a lot more options, so make the most of it. Be choosy; don't settle for the first thing you see.

Pick a neighborhood close to work or school, and one with stores and entertainment options. If exercise is important to you, find a spot that gives you access to s.p.a.ces for biking or running. By finding a rental in a walkable neighborhood, or next to a bus or train line, you can save tons by not owning a car (see Car-Free Living Car-Free Living).

TipTo find out how walkable an address is, check out WalkScore.com, which calculates how close it is to things like restaurants, libraries, and grocery stores.

Don't rent a place if it's going to cost so much you can't afford to have a social life or meet your financial goals. A good rule of thumb is to limit your monthly rent to no more that 25% of your pre-tax pay. You can use the Rentometer () to find affordable rentals in your area.

TipIf you have the time and inclination, you can save money by taking a gig as an apartment manager. Yes, you'll have to deal with locked-out tenants and leaky faucets, but you'll get free (or at least reduced) rent. The box on Renting out a spare room Renting out a spare room has an example of someone who does this. has an example of someone who does this.

Before you sign a lease or rental agreement, tour the unit you'll live in. This may seem like common sense, but you'd be surprised at how many people rent places sight unseen. If you can, visit the unit at various times of the day, and maybe once over the weekend. A neighborhood that's quiet on a weekday morning may be party central on Friday nights.

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