Renting vs. Buying
I’ve recently had some requests for information on renting during retirement instead of purchasing.
Now, the best answer for me may not be the best answer for you. So, let’s look at some of the pros and cons of doing both.
Have you already set up a possible budget for your retirement? One that you will actually be able to live within, considering your income will in all probability be cut by maybe 1/3 or ½ …maybe even more?
I think we need to look first at your income. Let’s assume you may get $1000 a month for Social Security, plus IRA or Pension of $800 a month. You are looking at an income of perhaps $1800 a month. So that adds up to $21,600 a year. $415 a week. Sure not what you’re used to bringing in, is it? Okay, don’t panic just yet – if you have a partner, they will be adding to the cash pile, even if they have to work for a few more years until they become eligible for Social Security. Now, instead of $415 a week, you may easily have an extra $300 or $400 a week from those wages. That makes your income about $750 a week. That’s a more realistic amount to live on…$39,000 a year, approximately $3250 a month.
You can live in the U.S. easily on that amount, and even quite a bit less, and in a place like Mexico, you can live like a King on that amount. If you do the things I’ve written about on my Money Saving Mexico site and have listed in my book, Retire In Luxury, and make those dollars stretch, you can make it. The original amount, with the income from only one person, $1800 a month, will enable you to live in U.S. or Mexico – and many other places in the world – but, in the U.S., unless you do already own your home, you are going to need to be exceedingly thrifty, whereas in Mexico, you should have no problem living on that amount, even if you need to pay rent or a mortgage.
So far, above we’ve sort of – very loosely – set up a monthly income you may be facing in retirement.
We have one little bit of the whole equation of living during retirement, and it may be far off what you will be living on. Remember, we’re just setting up an example. So, we’ll place the amount of $3250 a month into the income slot.
Probably the next important portion of this financial equation is whether or not you now own your own home. The possible answers include: “Yes, I own my home, free and clear.” “Yes, I’m paying for my home and have a mortgage or a monthly payment I make to a financial institution.” , or, “No, I don’t own any part of my home, I am renting.” I guess another answer is “I don’t pay anything to live where I do, someone else is picking up the tab, but nevertheless, it’s not mine.”
So, now we have to place a money amount for what our answer was. If you own your home, of course, you still pay taxes and upkeep. That can vary so much we’ll skip that right now. So, if you have a mortgage, or are paying rent to someone, let’s put an average of $600 for that expense each month. Remember we’re just setting up an example to work with…this amount may have very little reality to what you are actually paying…everyone is so totally different. This is called an expense. $600 expense for a place to live each month, or $0 if you own your home.
Since this article is supposed to be about renting versus buying, I think the rest of the budget can be listed rather simply – medical insurance, home insurance, home upkeep, automobile payments (if you don’t have that paid for), auto insurance, automobile upkeep, groceries, utilities, savings for unexpected expenses, and miscellaneous.
If at this point, your monthly income is gone, used up, disappeared, then, it’s probably okay – you’ve covered your major expenses. Your income of $1800 a month, with expenses, including housing coming to something under $1800 also, means you’re okay. You may be treading water just to keep your head out of the water, but you are not drowning!
Think that’s enough for today – next article will be: Renting vs. Buying, Part Two
Watch your email for my notice that it’s ready for you to read.
Email from Bill:
I have written several times about our travels in Mexico. We live in Fort Worth and always drive down in our car. This trip we are visiting Saltillo, Real de Catorce, Guanajuato and maybe Zacatecas.
Here is the thing, let’s stop telling the “Gringos” about how great Mexico really is. If they can’t figure it out by now let’s just leave them up there.
My wife enjoys traveling in Mexico, I just haven’t talked her into moving down here yet.
I enjoy your blogs. Keep up the good work. On one of our trips, I’d like to get to P.V. to meet you. May be next trip because we would also like to see the Copper Canyon.
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