If you’ve recently lost your job (like the other 8.5 million people in the last 2 years), I know you’re in a state of semi-shock. All sorts of questions are running through your head and you’re probably wondering about a lot more than your budget. You’re wondering about how you’ll live day to day until you find employment elsewhere. But making adjustments to your spending habits is an important part of the process of finding your next job whether you budget with YNAB or just a pencil and paper. How?

If you’re relatively confident in your ability to weather this storm financially, you won’t seem desperate in your interviews. You’ll sleep better, and your relationships will be better because you’ll know your limitations and your budget prognosis for the future. You’ll be better able to respond to interview questions with ease and confidence because fear won’t be hanging over your head.

Budgeting steps after losing your job

• Understand what income you still have
• Assess your assets
• Know your fixed expenses
• Evaluate your variable expenses
• Accept that desperate times call for desperate measures
• File for unemployment
• Negotiate everything
• Initiate calls to your creditors

What income is still coming in?

Before you make any budget, jobless or not, you need a clear understanding of what money is coming in from ANY source (spousal income, unemployment compensation, interest, dividends, side jobs, etc)/

What other assets are available?

How much do you have in liquid assets and available savings. Do you have a whole life insurance policy with cash value? What about your emergency fund? If you’re reading this and actually still have a job, get a big, fat, healthy emergency fund in place now (check out 17 Sneaky Savings Strategies). You’ll never regret having cash in your bank account.

Know your fixed expenses

Fixed expenses are items where the payment doesn’t change that much – things like your mortgage or rent, food (not dining out), medicines, your student loans, minimum payments on credit cards, car payments, required insurance, communication bills (cell phone), utilities, or child support payments. You need to have these written down.

Evaluate your variable expenses

These are items where your spending can change month to month. They include clothing, dining out, entertainment, vacations, gifts for friends or relatives, and those impulsive trips to the mall or to Target.

Desperate times call for desperate measures

If your income and available assets cannot cover your fixed and variable expenses, it’s time to do some cutting. First cut your variable expenses, then begin evaluating your fixed expenses, trying to find ways to reduce them. You may have to pull the kids out of private school. You may need to eliminate your land line and only use your cell phone. You may have to forego that morning coffee stop. Cable TV may be a thing of the past. You may have to bump up your air conditioner to 78 degrees and turn on the fan or bump down your heater to 68 and don a sweater. You may have to jettison that second car, or the camper you haven’t used in 4 years (or was it 5?). You may have to have a yard sale and get rid of the clutter in your garage or attic. You may have to become a coupon clipping maniac.

The bottom line is you have to stretch every single dollar as far as possible.

File for unemployment

It’s disgusting, I know. I had to do it once and I was so embarrassed I left the office without filling out the paperwork and found a job within an hour – digging ditches … literally. But since you’ve paid into the system, it makes perfect sense to get back what you deposited over the years.

Negotiate everything

Your creditors may be willing to negotiate your interest rates, but you have to know what to say to get your credit card interest rate lowered. Whatever you do, never let on that you’ve lost your job in these negotiations – that comes later.

Initiate calls to your creditors

Don’t make them have to come looking for you. Initiate the call yourself, explaining your situation and the fact that you’re desperately looking for employment and you plan to pay minimum payments, even while unemployed. Your creditors may even have programs to temporarily suspend your payments, but you’ll never know unless you inform them of your situation. Make certain you answer their calls and perform exactly as you promise.

Making a budget is about setting priorities

Your creditors know this – they just want to be a higher priority than anything else. But remember, you’re the one in control. You decide who gets paid and how much. Don’t let a pushy debt collector take your food money or your mortgage money or your child’s medicine money. Explain where they are on your prioritized list and tell them when and how much you’ll send them. Then follow through.

“When worms are scarce, chickens keep scratching.” ~Bill Lee

Be prepared to scale back – big time. That part is inevitable, but also know that this too shall pass. Get off the couch and get started interviewing. You’re lifestyle may take a hit, but if you don’t give up and keep on scratching, you’ll make it.

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Car insurance companies calculate your premiums based on several risk factors. The biggest factor is the likelihood you’ll file a claim. Some examples of other risk factors with auto insurance include the mileage on the car, how often you use the car, your driving record, previous accidents, your zip code, whether your car is highly desired by thieves, and  the car model’s history of accidents (Corvettes cost more than Chevettes). There are a few ways to reduce your risk factor and, in turn, the amount of your car insurance premium, saving your bank account from a state of shock!

1. Shop around!

Take a few moments and shop with online sites like NetQuote or Insureme. These two sites do the shopping for you, taking your information and getting online insurance quotes from multiple, highly reputable companies. The savings can be substantial and it pays to shop your car insurance every 12 – 24 months. Insurers can be guilty of “premium creep” – where they inch up your premiums every few months or so, citing nothing more than the increased cost of providing the service as their reason.

Another aspect of shopping around is to ask for discounts. Sometimes simply asking can score you some big-time savings! Ask about discounts for :

• Your occupation
• Multiple vehicles insured with the same company
• Multiple insurance lines with the same company
• New vehicle safety features
• Senior citizens
• New parents
• Those who have been accident free for multiple years
• Alternative fuel vehicles
• Anti-theft devices installed on the vehicle (including On-Star)
• Taking defensive driving courses
• Low annual mileage driven
• Not driving after midnight
• Having no traffic citations
• Good students
• Driver training courses

2. Choose a policy with a high deductible ($1,500 and up).

I’ve seen a statistic that the average car accident is minor and costs less than $1,200. Insurers are willing to charge a much smaller premium to avoid the hassle of a $1,000 fender-bender. If you’ve built your emergency fund properly, a $1,500 deductible won’t ruin your bank account!

3. Maintain a clean driving record.

Lay off the lead foot! Use your cruise control when on the highway (set for the speed limit) and pay attention to traffic signs and signals. I tell my 16 year old — “Do what you know is right” and you won’t have to worry with getting pulled over.

4. Lower your coverage on older cars.

Drop collision and/or comprehensive coverage on older cars that are worth less than ten times the premium –  these cars aren’t worth the cost of that type of coverage.

5. Keep your mileage low by using public transportation when you can.

Make sure your insurer knows that you use public transportation on a regular basis. More miles on your vehicle means a great possibility of an accident.

6. Take a defensive driver education course.

Even if it isn’t to relieve your record of a ticket, a defensive driving course can reduce your car insurance premium, drastically if you have drivers on your policy that are under the age of 26.

7. Buy a used vehicle with safety features, such as airbags and anti-lock brakes.

Remember that not only is your likelihood of filing a claim an important consideration, but also how large your claim might be. Buying a car with safety features no only protects you and your loved ones in case of an accident, but also protects the insurance company from higher claims.

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Under-confidence appears to result in more careful budgeting and more accurate estimation of expenses. Personally, I believe the You Need A Budget (YNAB) process trumps all other budgeting processes available because it’s designed to help you stop living paycheck to paycheck, assigns a task to every dollar, helps you beef up your savings account, and has built in flexibility. YNAB compensates for your under-confidence!

Photo by Jeff Keen

A 2008 study in the Journal of Consumer Research discovered that people were more accurate when calculating their budget on an annual basis that when figuring it monthly – even when they were logging their expenses weekly. Researchers Ülküman, Thomas, and Morwitz also found that an individual’s perception of their budget making ability affected the accuracy of their budgets.

During the study, researchers asked participants of various income levels to estimate their budgets for the next year and the next month. They also asked them how difficult budgeting was and told them a variety of stories about the challenges of budget preparation.

The researchers believe the annual budgets were more accurate because they were actually more difficult to construct, whereas people tended to be over-confident when preparing monthly budgets. The accuracy of the annual budgets improved when people were told the difficulty they experienced would result in more accurate budgets.

Why more accuracy? Confidence – or the lack of it

The authors concluded that our “default tendency” is to underestimate our expenditures, regardless of the time frame. But our lack of confidence in projecting our expenses and income for 12 months causes us to take special care and pay much more attention to the task at hand, so we adjust our expenses upward, presumably as a cushion.

So perhaps the best way to prepare your budget is to calculate it on an annual basis then divide by 12. And don’t worry about being “under-confident.” It may actually be a virtue when making your budget!

We can’t “assess” the future, nor can we “predict” it. These are euphemisms. We can only guess. An informed guess is still a guess. – Michael Crichton

Still, try YNAB to help your guess become as informed and accurate as possible!

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Buying a home isn’t as complicated as some people make it out to be, but there are quite a few potential pitfalls. Buying a home isn’t like buying a lawnmower or even a car – not only is the price significantly higher, but the laws and regulations associated with purchasing real estate differ greatly from those for consumable goods. So whether you’re ready to take the plunge into home ownership for the first time or the tenth, there are several steps you must take to know if you’ve found the right home for you.

1. Determine how homeownership fits into your budget.

The general recommendation is no more than 28 percent of your gross income should be spent on housing costs and if you exceed 33 percent, you risk becoming “house poor.” House poor means you have a huge, beautiful home but cannot afford much else. Once you determine how much to budget for housing costs, you can move on to the next step.

2. Use a mortgage calculator to decide the price range you can afford.

Try using the Mortgage Max Calculator on Dinkytown to determine how much mortgage you can take on. Remember, this calculator gives you the MAX mortgage you should have, so plan on looking at homes priced considerably less so you don’t become house poor.

3. Check prices on comparable homes in your preferred area.

“Comps” are what they’re called in the industry. They’re just basically price checks on other similar homes. If you do your own comps, make sure you compare very similar homes. Make sure they match up on:

• Square footage
• Number of bedrooms
• Number of bathrooms
• Total number of rooms
• Lot size
• Amenities (garage, basement, family room, fireplaces, etc.)
• School system

The general theory is that similar homes will sell for similar prices.

4. Calculate your monthly housing costs.

Those costs will go far, FAR beyond just the principle and interest on your mortgage loan. Count on real estate taxes, homeowners insurance, homeowners association fees, condo association fees, mortgage insurance costs, landscaping costs, maintenance costs, and repair costs. When your stove, refrigerator, heater or air conditioner dies, it comes out of your checking account (or your emergency fund).

5. Estimate your closing costs.

Buying a home has up-front costs as well as ongoing costs. Those up-front costs could be origination fees charged by your lender, title fees, settlement fees, fees for the real estate lawyer, taxes, and other prepaid items such as homeowners insurance or homeowner’s association fees. You should figure at least 5 percent of the total price as a pretty good estimate of your closing costs.

6. Go ahead and talk with a real estate agent.

Chances are pretty good that you know one or know someone who does. Just ask some simple opinion questions like: “How’s the market these days?” or “What areas are growing? or “What’s the mood amongst mortgage lenders?” Just asking a few questions doesn’t commit you but you can glean some good information by striking up a friendly conversation.

7. Look at the big picture.

Buying a home can be a great way to increase your personal wealth, but it can also be a drain on your monthly finances through maintenance and repairs. Examine why you want to own your home and be honest with yourself (there’s no reason not to). The irony of your life’s biggest purchase is that it is usually made for emotional reasons, but that’s okay. Personal finance IS personal!

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A “deal” is usually defined as an arrangement for mutual advantage but most “deals” aren’t. When a deal seems too good to be true, it almost always is, and it’s usually slanted in someone else’s favor.

Marketer’s have a huge playbook of techniques to make you think you’re getting the best of them, but consumer’s have to be  careful to not get ripped off and bust the budget. Here are 6 to look out for:

While supplies last …

The fear of scarcity can drive you and me to make a decision without thinking. We’re naturally afraid of limiting our choices and we worry about regretting it. Salespeople know it, play on those fears, and convince us to get out the checkbook.

10 for $10

What this usually results in is 9 too many. This type of pricing structure is most often used on items you wouldn’t buy 10 of anyway. Most of the time, you can purchase just one for a dollar. That means there never was a discount.

Buy one get one free – just pay shipping

Those “as seen on TV” items are major culprits of this tactic. “It’s only $19.95, but WAIT – order now and we’ll double the offer!” That item (according to Consumer Reports), costs approximately $5. By the time you pay postage of $8 on each item, so you end up paying $35.95 for two … and the TV sales guy makes a fortune.

Medium, large, extra large

People tend to favor a middle choice and by renaming “small” as “medium” retailers play on that tendency. They tend to leave off the fact that the small size is the one they make the most profit on.

Serve yourself – only $3.99/lb

Ever see that sign at a salad bar? Hey, how much could some lettuce weigh? A lot more than you think. Sure lettuce doesn’t weigh much, but bacon, cheese, salad dressing, boiled eggs, kalamata olives, and red pepper humus does. By the time you put your salad on the scales, you’ve spent $10.

Only 99 cents

I’ll bet you didn’t know that the net profit margin of 99 cent stores (7 percent) is double that of Wal-Mart (3.5 percent). Since people perceive prices that end in 9 as more appealing than those ending in whole numbers, those 99 cent stores are raking it in.

Though these marketing playbook tactics can seem sleazy at times, personal finance IS personal. That 10 for $10 deal may actually be something you need, so please don’t think you shouldn’t take advantage of purchasing opportunities that make sense for your situation. Just make sure you are doing what’s best regardless of the “deal” presented to you.

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This is a guest post by Vicki Thompson. If you would like to guest post here at The Wisdom Journal, please use my guest post submission form.

You can save on moving costs even when you hire the services of a moving company to assist you.

Initially, when you plan to move, make sure to weigh two possible options. You can either move on your own or you can hire a moving company instead. Acquiring the services of a mover may sound expensive but it doesn’t always break the budget. It may still come out less expensive if you are moving across the country. Whether you rent a moving truck or hire an agency, be sure to do what makes sense for your wallet. Here are some tips:

1. Lighten your cargo

Reduce your load to save money. The lighter the weight of your stuff, the less money is involved. Sort your things and sell or give away what you no longer need. You can have a garage sale to get rid of unimportant items. Books can be donated to charity centers.

2. Move during non-peak season

If you want to save money, schedule your move for a date that isn’t in the peak season. You can ask your moving company to provide you with information about their peak and off peak seasons. A mover will charge higher rates during their peak period.

3. Ask for a discount

When asking for a quote, ask if about discounts. Most companies offer discounts to stay competitive in the moving industry. Get at least three quotes so you can make comparisons and have full control over your choice. The majority of moving companies, such as the Sacramento moving company, will offer free estimates. Search the net to find a huge list of moving companies willing to provide price quotations without charging you a fee.

4. Adapt to the company’s schedule

If you agree to coordinate your time with the company’s moving schedule, then ask if they will consider granting you a pricing discount.

5. Beware of the hidden costs for various services

Ask about the fees that could be charged for various services such as:

• Accessorial charge – packing, unpacking, and additional charges for longer hauls.
• Expedited service charge – a fee applied to the transfer of your possessions at your designated time.
• Flight charge – fee for transporting your things by going up and down the stairs whether at the point of origin or at your new home. Availability of elevators for carrying your things would not imply additional costs.
• Line-haul charge – this is a fee for long distance trips obtained during a move.
• Long carry – another fee charged when you go beyond the distance limit, which is a specified gap from the back of the truck to your dwelling. Any more than that, an extra cost will be added on the moving rate.
• Shuttle service charge – is applied to the use of smaller vehicles transporting things to areas that are not accessible by large trailers.

Plan ahead for possible services you will need during your move to prevent any unexpected fees and charges.

6. Get your new home is ready

Make sure that your new home is ready for you to move into. Otherwise, you will incur an additional charge called storage in transit fee. This fee is charged for the temporary storage of your goods waiting to be unloaded.

7. Consider moving specialty items and bigger things yourself

Specialty stuff and bigger belongings would entail extra costs to move. If you plan to drive to your destination, rent a trailer and move these things by yourself.

8. Investigate specialty movers

Another option of moving specialty items is to hire a specialty mover. It may cost you less than paying additional fees for the added staff from your moving company.

9. Ask about appliances that need special packaging

Appliances and other valuable items may require some special form of packaging. Inquire from moving companies for the possible extra rates on the moving cost. Should they charge, you might as well as get help from relatives, friends or neighbors to help you out in packing.

10. Pack everything ahead of time

Be sure to pack your things before the moving truck arrives. Help from the mover’s staff for last minute packing involves additional costs.

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It is possible to get out of a car lease. Possible, but not always easy. Possible, but not always without damage to your credit score. Possible, but not always cheap.

If you have the cash flow in your budget, I believe keeping your word and paying for the lease until it ends is the honorable thing to do. But … what if there’s no way you can continue your lease? What if you lost your job? What if the lease is breaking you financially and you need to abandon it because other items (such as housing and food) are being neglected because of that crazy car lease? Read on.

Getting out of a car lease

Your first step is to go talk to your car dealer.Your dealer may be able to help you strike a deal to:

• Lower your payments
• Preserve your credit
• Get you out of the car completely

Obviously if the deal will cost you more than the balance on the lease, you don’t want to go this route, but if your dealer is willing to work with you, there may be a way out. But beware: is WILL cost you something. The car dealer isn’t in the business for charity work.

If your dealer cannot work with you to get you out of your lease, consider a “lease swap.” Companies such as SwapALease.com or LeaseTrader.com will connect you to a buyer who, for an incentive, will take over your car lease, allowing you to walk away with no liability and no penalties or obligations. Before you list your car with a lease swap company, it is vitally important to check with your leasing company to see if they will allow this type of transfer.

What is the “incentive?” That would be a steep discount. How steep will depend on:

1. Your car
2. How much is remaining on your lease
3. How many miles you have on it
4. The interest rate of your lease

So the answer is: it depends.

But if your budget can’t take it anymore, using Lease Trader might be a viable option. It will cost $75 to $100 to list your car, and then there will be a contract transfer fee that could be as much as $200 – possibly higher. Listing your lease doesn’t mean getting out of your lease is a slam dunk though. If you’re running close to your allotted mileage, you may find it difficult to to find a taker.

When you check out LeaseTrader.com, be sure and click on “How IT Works” in the upper right hand of the home page. They can show you step by step what to do to get out of an existing car lease.

The last option is the least pretty. You can get out of your car lease by possibly surrendering your car to the leasing company. But you’re not really “getting out” of anything. The company will sell your car and proceed to sue you for the difference. Your credit score will take a hit and you may have a judgment filed against you or your wages garnished to pay for the shortfall.

Do you have any experience with getting out of a car lease? What did you do? What did you learn?

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Fantasies aren’t necessarily bad, but when they begin to negatively affect your decision making process, it’s time to wake up and smell the coffee. Going through life expecting a large windfall is really a sad way to live. It gives you a false hope and can give you an excuse to make bad financial decisions. After all, if you expect to “one day” hit it big, you can rationalize all sorts of bad decisions.

Here are six typical financial fantasies:

• I’ll win the lottery and get rich!
• I’ll flip houses and get rich!
• I’ll receive an inheritance and get rich!
• I’ll pick stocks and get rich!
• I’ll start a blog and get rich!
• I’ll start an eBay business and get rich!

I’ll win the lottery and get rich!

My 10 year old son has started asking questions about lottery billboards, and thought it would be easy to guess the numbers, so I gave him a shot at guessing which 6 numbers I had written on a piece of paper. He tried over and over, but never got close. After many, many tries, he came to realize how difficult it would be to guess correctly. Finally, he wondered aloud why anyone would waste money on the lottery. It was a proud moment for this Dad!

You won’t win the lottery. Focus instead on learning to manage what you have by creating and living by a budget.

I’ll flip houses and get rich!

Flipping this or flipping that can possibly make you a lot of cash but first, how much real estate experience do you have and buying a personal home doesn’t count. How much design experience do you have? How much cash in reserve do you have. What happens if the house doesn’t sell for 12 to 24 months? Can you handle it?

Flipping houses isn’t easy. Focus instead on finding legitimate ways to make extra money and learning to manage what you make.

I’ll receive an inheritance and get rich!

I’ll skip the part about how distasteful I find it that some people are waiting on a relative to die so they don’t have to learn to manage their own finances. Even if your parents or grandparents have some money, there’s a great chance that their money will be used to pay for their end of life health care and final expenses. Add the fact that any inheritance will be split several ways and probably challenged in court if it isn’t divided equally and hopefully you’ll see that waiting on an inheritance to materialize is a pitiful fantasy.

Don’t count on an inheritance. Even if you do receive on, probate will probably cause it to be much smaller than you think

I’ll pick the right stocks and get rich!

Picking stocks is only for experts and unless you plan to study portfolio management and become intensely knowledgeable about a company or an industry. In How A Second Grader Beats Wall Street, author Alan Roth outlined how 95 percent of stock pickers lose money. What should you do? Read the book and invest in broad based ETFs or mutual funds with low fees.

You won’t be able to pick the next winning stock consistently. Sure you may have a success or two, but you need to match the market’s return over the long haul.

I’ll start a blog and get rich!

No you won’t. It will be a minimum of six months before you get your first check and that’s IF you’ve written about 200 articles and managed to get some strong social media support and links from a lot of other bloggers. It isn’t impossible, but it requires much more work that the average dreamer is willing to do. Blogging is hard work and requires research, a web host, the ability to write, edit, and proofread, as well as the ability to generate buzz.

Building a blog or website is a legitimate way to make extra money, but it takes a lot more work that most people think, and much more work than the sellers of books, ebooks, seminars, or “training programs” will ever admit.

I’ll start an eBay business and get rich!

Yep, you can make money on eBay, but probably not the mega millions promised by shady hucksters hawking seminars and DVDs. The fact is that eBay has made the value of many items more readily accessible and as a result, the prices of everything from baseball cards to antiques have dropped. To make money on eBay, you need to be extremely well versed in your product and know its value. The reality is, with shows like American Pickers and the proliferation of online auctions, making serious money has become much more difficult.

Selling a few personal items here and there on eBay is a great way to clean out the attic, but to make serious money by starting an eBay business is more about creating another job than about getting rich quickly and living life in your pajamas.

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Recession aside, most people are still living beyond their means. Collectively, we’re out of control financially, even though we furiously attempt to convince ourselves otherwise.

Savings rates have increased recently, but I personally fear that it’s a temporary circumstance as the media desperately touts the “recovery” – a recovery with high unemployment, a recovery where the average family still has between $10,000 and $16,000 in credit card debt, a recovery with most of us back at the mall already.

Signs you may be financially out of control

1. You’re saving less than 5 percent of your income.

Some are saving zero. Saving less than 5 percent can mean you haven’t completely bankrolled your emergency fund – flirting with financial disaster.

2. Your credit score is less than 600.

Your credit score is the reputation you have with creditors. A low score means you’re probably in over your head and probably out of control. The higher your score, the better your reputation and your reputation is dependent on:

• Payment history (35%)
• Amounts owed (30%)
• Length of credit history (15%)
• New credit (10%)
• Types of credit used (10%)

Check out Credit Karma to get your free credit score.

3. Your house payment or rent exceeds 28 percent of your income.

That’s 28 percent of your gross income. If your house payment (or rent) exceeds that percentage, you may be in over your head. Conservative mortgage lenders have historically used the 28% number because that percentage of income allows the average person to make their house payment yet still enjoy a reasonable standard of living. Some homeowners can get by spending a higher percentage on their mortgage, particularly if they cut back elsewhere, but it’s a dangerous line to walk.

4. Your credit balances are still rising.

If you’re taking one step forward and two steps back, you may be out of control with debt, relying on credit to finance a lifestyle you simply can’t afford.

5. Your bills are escalating out of control.

Still paying for premium cable even though you’re struggling? How about satellite radio? Entertainment expenses? Multiple cell phones? A motorcycle you don’t ride? Dining out? Too much life insurance?

6. You think of everything in terms of the payment.

Buying on credit and making payments has become a national pastime and it’s considered the new “normal.” It’s much easier, even acceptable, to buy a new anything when the salesperson obfuscates the price to just monthly payments. What’s an extra $45.27 per month?  What’s another $38.96? Another $57.04? Another $29.77? All of these bills add up, and you could nickel and dime yourself right into bankruptcy.

7. You depend on overtime, bonuses, or financial windfalls to pay your bills.

You may not be in financial trouble per se because you aren’t behind on any bills but you’re paying those bills with overtime, bonuses, or some other type of irregular financial windfalls. If you’re becoming used to those funds being there when you need them, but they aren’t guaranteed, you may be in over your head.

If you see yourself in any of these signs, it doesn’t mean you’re a bad person, or that you’re definitely headed for disaster, but it could be a symptom that allows you to uncover a problem before it gets worse.

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Becoming a first time home buyer is a thrill for almost everyone. It was for my wife and me when we bought our first home. People get so wrapped up in their first home they tend to identify themselves with it, I know I did. Have you ever called your neighbors down the street the “blue house” people? Or told someone that you live in “the Victorian on Mountain Crest Road?” We were the home with the “front porch on the corner” people.

When first time home buyers finally get into their home, they can easily fall prey to several serious mistakes that can cause a large amount of financial harm later. Here are a few of those first time home buyer mistakes that I made:

1. I ignored the home inspector.

We were so excited and desperate to get into a home, I was willing to ignore important items … like the crumbling old furnace. I reasoned that I could always fix it later, besides we were buying the house in April. That old furnace made it through one more winter before it died and it cost me $1,500 (in debt) to replace it. Had I known more about the Secrets of Power Negotiating, I could have used the furnace as a pivot point in the purchase negotiations and possibly gotten one for free!

2. I went further into debt after making the purchase.

After all, we needed furniture and new draperies and new blinds and new this and new that. I also needed to have my head examined. Here I was, fresh out of Consumer Credit Counseling, spending money I didn’t have. I still had not learned my lessons about debt.

3. I didn’t calculate my budget properly.

Even though I had gotten a substantial raise that had helped me pay off all my debt, I bought a home that put a severe strain on our budget. Things are much more expensive when you own a home. You have a property taxes to pay, homeowners insurance, a yard to mow, landscaping to do, water and sewer bills, and repair bills. Unless you have a maintenance free exterior, you’ll have to paint every 4 to 6 years, fix little things like the rotted siding on the chimney, and the decomposing cedar posts that hold up the front porch. If you’re on a septic tank, it needs to be cleaned out every few years, you have to fix or pay to fix everything that goes wrong. I didn’t budget for these things and they cost a lot of money.

4. I didn’t fully disclose everything on my financial statement.

Before you panic, let me explain. My boss was gracious enough to give me 100% of my annual raise up front so I would have enough for the down payment, but I got my mortgage based on my new total compensation level spread out over the year. The raise I had received was very, very substantial, but using all of it for a down payment meant I had to go another full year at my old rate of pay.

5. I didn’t negotiate with my Realtor for a better commission rate.

She had us pegged as desperate the moment she laid eyes on us. You don’t have to pay the listed rates, you know. Especially in today’s market, Realtors and home builders are desperately seeking buyers. Under these circumstances, you call more of the shot than you realize and can probably negotiate a much better commission rate. And I also forgot the rule that real estate agents don’t understand finance.

6. I chose a home that was too far away.

They say the three rules of real estate are location, location, location and you know what? It’s true. One reason I chose the home was its price. I reasoned that I could afford it, and I ignored the 19 miles one way it was from my place of work. I also ignored the 16 miles one way it was from my kid’s school, the 22 miles one way it was from my parent’s home, and the 12 miles one way it was from our preferred grocery store. Those miles add up fast and cost me more in gasoline, wear and tear on the car, and just plain old fatigue from driving.

7. I fell for the refinancing craze.

Yep, I did that too. I “pulled the equity” out of my home to make some upgrades. That’s just a fancy way of saying I went into more debt and extended the number of years I would be in mortgage debt in order to shave a few dollars from my payment. I felt like I was so smart!

8. I fell for the refinancing craze … again.

This time I didn’t re-finance, but I probably obliterated my credit in a furious attempt to get an even better interest rate just 18 months later. I thought I would “pull out more equity” and get a better payment. I theorized that I could “lock in” my profits from the appreciation of the home’s value. All I did was take my credit score down a couple of dozen points from all the inquiries. Oh yeah, I also paid $350 for an appraisal and then didn’t re-finance.

9. I had no idea how much closing costs I would incur.

We were using an FHA loan at the time and there were some items the sellers had to pay because of the structure of the loan, but I had no idea how much my portion would be, nor how much it would add to the amount financed. I was too focused on just getting the house.

10. I fell in love with the house before I bought it.

That was my biggest mistake. It was the right size for us at the time, it was in my price range, it had a big back yard and room for a garden, it had a full basement with a workshop, the master bedroom was on the main level and it had a big open kitchen. It was everything my wife and I wanted in a home. What I never realized was that there were probably 250 other houses that would have been everything my wife and I wanted at the time. I lost patience because our lease was almost up at our apartment and the landlord wouldn’t renew on a month to month basis. I had to get into this house, and that was my biggest mistake.

I still love that house, yes, that’s it at the top of this page. Cute isn’t it? But if the truth is told, I wish I had been more selective and had searched for a home that was closer to where we lived our lives and closer to our ability to pay. Don’t make the same mistakes I’ve made.

Patience will pay great dividends when searching for your single largest and most personal investment.

What first time homebuyer mistakes did you make?

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