Over the next few days, we’re going to take a look at five common New Year’s resolutions that people often adopt for their finances, evaluate some of the traps that people fall into with regards to that resolution, and come up with some real actions that can turn a challenging New Year’s resolution into a success.

On New Year’s Eve 2005, my wife and I made a solemn commitment to start seriously saving for a down payment. We had a one month old child and were living in a tiny apartment that, even with just the three of us, was already getting tight for space. We knew that we would have to upgrade our living quarters soon and so together we resolved to make a change.

It didn’t go so well. Just four months later, we reached our financial low point – and we realized that just making such a resolution didn’t really help anything at all. We needed a plan in place if were were going to make things work, and so we got down to business with a real plan for saving for a down payment. Today, we’re happily entrenched in our own home.

What could we have done differently back then to make our resolution work? Here are some tactics that we used later on for our down payment plans that would fall right in line with such a hefty resolution.

Set a very clear goal right off the bat. So, you want to save up for a down payment. How much money is that?

Surprisingly, many people stumble even at that first question. The idea for a down payment is very vague in their head. I know that our original thoughts on the subject were incredibly vague – we just knew that we needed to save quite a bit of money.

Chasing after such an intangible goal is almost a guarantee that you will fail. Instead, do some basic house hunting in your area and get an idea of the prices on the type of house you would like to buy, then set a savings goal based on that price.

Let’s say, for example, that you decide that a $200,000 house is right for you. How much of a down payment on that house are you going to save for? A 10% down payment? 20%?

The larger the down payment, the better. You’ll need 20% down in order to get a typical fixed rate mortgage at a low interest rate. If you have less than that, you’ll usually have to get separate mortgages (an 80% mortgage along with an additional 10% mortgage) or, if they’re still being sold, an adjustable rate mortgage of some kind.

These two numbers will tell you what your dollar goal is, but what’s your timeline? Are you intending to save $40,000 in four years? That’s roughly $10,000 a year – $800 a month will get you there.

Your timeline, you see, will help you break down this big goal into smaller short-term goals. $800 each month – can you do that? Can you do it if you get creative with it? $800 is a tangible goal that you can shoot for each month – a vague notion of “saving for a down payment” will never push you towards your goal.

Make sure the goal is a realistic one. Once you’ve started breaking things down into real numbers, you’ll probably start gasping at the high amounts. Can I really afford that? Likely, you can make a pretty strong goal each month if you put your mind to it, adopt some frugal strategies, and settle in for the battle.

However, there is often a temptation to make the goals too high. If you’re attempting to save 50% or more of your monthly income for this goal, you’re probably not going to make it.

My suggestion is to try your savings plan for a month or two and see how it works for you. If it’s beyond your means, go back to the drawing board. Don’t be afraid to toss your plans aside and adjust things. Perhaps you can expand your timeline. Perhaps you can set your sights lower in terms of the house you intend to buy.

The key is to not decide that things are hopeless just because you’ve decided that your first attempt at a plan is just too much. Step back, look at the overall plan, and make some adjustments. Don’t just walk away because you find it too difficult.

Figure out where that money is going to come from. So, you’ve elected to save a certain amount of dollars each month. Where is that money going to come from?

In some situations, people are already natural savers and they already spend less than they earn, but this seems to often be the exception rather than the rule. Quite often, people who make a resolution about a down payment aren’t saving much at the moment to begin with, and coming up with a savings plan is going to be difficult.

First, look for ways to easily cut your spending. Look for big pieces and also ones that repeat monthly. Instead of leasing a car, perhaps you can buy a late model used one and drive it for many years, saving yourself a car payment that you can put away for your down payment. Perhaps you can eliminate that monthly Netflix bill, or maybe you can cut back on your cell phone usage – do you really need that many minutes or that big of a text message plan? Maybe you can adopt a “one meal out a week” plan instead of dining out every other evening – that will likely save you $10-20 a meal at least.

Second, adopt some simple long-term cost savers. Install CFLs throughout your apartment to cut down on electrical use. Install a programmable thermostat in your apartment (check with your landlord) and program it so that you’re not wasting money on your heating or cooling bills while you’re at work. Put your home electronics on a switch so you’re not paying for your cable box to sit there idle while you’re not at home. These solutions will save you significant money on your energy bill without thinking about it.

Finally, look for some extra income. Perhaps you could work a part-time job to earn some extra cash, or maybe you have some marketable skills that would work well in a freelance environment. If you can bring in extra cash, that cash could go straight to your savings without skipping a beat.

Automate the savings. As you begin to save, you’ll find that it’s often tricky to keep your savings in balance with your normal spending. You’ll try hard to keep money swept into a savings account, but it doesn’t always work smoothly.

Make it smooth. Institute an automatic savings plan with an online bank that has a good rate of return on their savings account (I use ING Direct). Then, each week, have the plan automatically withdraw a certain amount from your checking account. $190 a week, for example, equals out to roughly the same amount as $800 a month over the course of a year.

With an automatic savings plan, you know that the amount will be withdrawn each week, and you can plan ahead for it. It’ll force you to be much more careful with your spending, even if you seem to have the cash on hand to afford something frivolous. Even better, after a while, you can check that new account and see that the savings is really starting to add up.

Utilize windfalls effectively, even small ones. Another useful tactic is to immediately pass along any windfalls that come your way straight into your savings. Did you just get a small inheritance? Don’t spend it foolishly – instead, apply it directly to your savings without a thought.

This goes for little savings and windfalls, too. Let’s say you find a $20 bill on the street. You might be tempted to spend it on something fun, but why not just go ahead and put it towards your big dream? The same goes for any small savings you might make – let’s say you don’t eat out at all this week and save $25 in the process. Go ahead and sweep that straight into your savings.

What this will do is accelerate your dream just a little bit, and perhaps take some of the pressure off.

The real key to making a resolution to save for a down payment work is persistence. This isn’t a goal that will happen overnight. Instead, you need to provide a degree of constant focus in order to make it work. Good luck!

A few weeks ago, I decided to spend a few hours looking carefully at all of our insurance policies. I knew in general how most of them worked, but in many cases I was a little fuzzy (or more than a little fuzzy) on the specifics.

As I studied our homeowner’s insurance policy, I was surprised at how high the value of the insurance was for replacing home contents. It was one of those little things that threw up a red flag for me, and it kind of stuck in the back of my mind.

About a week later, I was still thinking about that number, so I took a very careful inventory of our home’s contents, adding up how much these items would cost to replace – and sure enough, the cash value of everything in the home was only about 40% of the amount we were insuring. Reducing that number would surely save us a significant amount on our policy, so I was about to call up and start discussing things with our insurers when my wife popped in.

She was curious as to how much value I was putting down for some of our most valuable personal items, like some of the handmade wooden artwork her grandmother made, a painting done by my great grandmother, and some mementos from our wedding.

I went through the list I’d made and rattled off a few prices, which were estimations of what they’d cost to replace with similar items. My wife shook her head and told me, flat out, that I was drastically shortchanging the items.

But was I? This has been a big question for discussion around here for a while, actually.

My wife’s position initially was that such items have a very, very high value. She propositioned it this way: how much would I accept in payment for that painting by my great grandmother? The price would have to be very high – and I don’t think I’d sell it at any price.

That’s the conclusion that many people come to when they consider insuring the property in their home. They look at those irreplaceable and personally valuable items and think about how much they’d feel was an appropriate price to let go of something so valuable. Quite often, that price is insanely inflated – but for good reason. The item has a great deal of personal value.

But consider this: would you be able to replace that item if it were destroyed? Would you even think about replacing it?

My grandmother’s painting is invaluable to me. I can’t even realistically name a price that I would sell it for. But if it were destroyed in a disaster, I wouldn’t even think of replacing it. I’d have my memories of it, and I’d probably lament that it was missing, but how could I possibly replace it?

In our new home, I would probably put up a print on the wall, or possibly an original painting by another artist, but neither one would come close to the value that I personally ascribe to my grandmother’s painting.

This gets back to the original question: how much should my grandmother’s painting be insured for? Considering that it’s not something I would ever be able to replace – nor would I really attempt to – I’d argue that it shouldn’t be insured for much at all.

Then, if you apply that rule of thumb to items in your house that really only have a deep personal value, you’ll often find that the cash value of the contents of your house is not nearly as high as you might think it is. In that case, you’re likely vastly over-insuring the contents of your home – and paying an extra premium for that privilege.

Now, that’s not to say that there isn’t a good argument for insuring on the high side of what you own. You’re far better off having a little bit of breathing room than cutting your insurance down to the bone.

But when you consider the value of the property in your home, think carefully. Ask yourself whether you’re insuring the value that you personally ascribe to things – or the real value of replacing things that you would actually replace. You might just find that you’re over-insuring your contents just because of your own personal feelings – and that’s a financial leak you can easily plug.

Over the last week, several readers have written to me with various comments, suggestions, and questions related to the so-called “small house movement.” Given that it’s a great way to save money (as I’ll discuss below), I thought it’d be worthwhile to investigate the movement in detail.

What is the “small house movement”?
From the website of the Small House Society:

The Small House Society is a voice for the Small House Movement. That movement includes movie stars who have downsized into 3000 square feet, families of five happy in an arts and crafts bungalow, multifamily housing in a variety of forms, and more extreme examples, such as people on houseboats and in trailers with just a few hundred square feet around them. Size is relative, and mainly we promote discussion about the ecological, economic and psychological toll that excessive housing takes on our lives, and what some of us are doing to live better. It’s not a movement about people claiming to be “tinier than thou” but rather people making their own choices toward simpler and smaller living however they feel best fits their life.

In other words, the “small house movement” includes people who are making a conscious choice to live in a smaller home rather than choosing a larger one. It includes people who could afford McMansions but live in only a 3,000 square foot home all the way down to single people living in a tiny one-room home (as depicted beautifully on that site).

There are a lot of reasons for doing this.

Ecology A small home simply uses fewer natural resources than a large one, both in the construction and in the maintenance (energy use, for example).

Psychology Because the home is small, one can invest fewer “mental cycles” in the upkeep of the home as compared to a large home.

Time Not only that, the actual upkeep takes significantly less time as well. With fewer square feet, it takes far less time to get the house clean.

And the big one…

How can a “small house” save me money?
There are several strong financial reasons for considering the “small house movement.”

Less initial cost Purchasing a smaller house means there’s a smaller initial cost to purchase the home. This may mean a smaller mortgage, a potentially lower interest rate on that mortgage, or perhaps even the ability to pay for the house using only cash.

Less maintenance cost With a small home, you’ll have a far lower energy bill. You’ll also have less expense for cleaning materials and fewer repair costs, too – a smaller roof means fewer shingles are needed to re-shingle, after all.

Less room to store unnecessary stuff If you own a smaller house, you have less space for storage, which directly impacts the amount of excess “stuff” you can accumulate. Thus, it becomes more difficult to spend money on impulsive buys – there simply isn’t anywhere to put it!

More time to devote to other money-making endeavors With the decrease in time needed to be spent on housecleaning and home upkeep, one can devote more time to other activities. Take those extra few hours a week and start a side business – or perhaps take up a part-time job for more income.

My personal take
My belief is that part of the recent trend towards large houses was fueled by the crazy housing bubble of the first part of the decade. People would build larger houses than they need under the impression that this house would be a great investment that would make their expenditure worthwhile.

In a normal housing market, you can reasonably expect that your home will appreciate to some degree, perhaps slightly ahead of inflation, but you should not expect that your home will be a great investment. Instead, it makes sound financial sense to view a home purchase as more of a functional investment than as a financial one.

In short, before you buy a home, know what you can afford, compare it to the rental options in your situation, and don’t put pressure on your budget. All three of these factors point toward buying a small home rather than a large one, as a small home is more initially affordable and won’t pressure your budget as much as a large home.

In other words, when it comes time to purchase a home, set your sights lower instead of higher. Taking all factors into consideration, a more modest home might be the right choice for your long-term financial future.

Winter is approaching and in much of the United States, that means very cold temperatures, snow, and ice. Here in the upper Midwest, it gets particularly nasty: we had some amount of ice or snow on our driveway nonstop from October to April last winter.

As a homeowner, this change in the season means one thing: what do I need to do to protect my enormous investment in this house from the brutal change in the weather and keep money in my pocket?

One big first step is to minimize your winter heating bills. I wrote a lengthy post covering twelve tactics for doing this – here they are in a concise list:

Air seal your home.
Make sure the attic is well-insulated.
Dress warmly inside and keep the temperature low.
Get a programmable thermostat.
Minimize or eliminate use of vent fans.
Turn off the heat in unused rooms.
Use space heaters.
Make sure you have a fresh furnace filter.
Use an insulation blanket on your hot water heater (if it needs one).
Keep blinds and curtains open on the sunny side of the house and closed on the other side.
Cook at home using the oven.
Microwave a hot water bottle before bed each night, then dip the temperature.

What else? Here are twelve additional useful steps for preventive maintenance for your home. These steps will help minimize the wear and tear of the changing of the seasons of your home, putting off potential major repairs for many years.

Call an HVAC professional to inspect your furnace and your ductwork. You should always do this before the first winter you spend in a house, as well as every few winters thereafter. It’s essential that your furnace remain in good working order with clean ductwork that’s in good repair, and a professional can properly evaluate things for you quite well.

Prepare your fireplace (if you have one). Make sure the chimney’s swept and that the damper opens and closes. Also, if your chimney is made of brick, examine the brick and mortar to make sure it’s in good repair. Have plenty of firewood cut and on hand for use. You may also want to install a screen on top of the chimney to keep pests out.

Check your roof shingles and do any minor repairs you can. Ice and snow buildup on a roof can wreak havoc, so make sure that your shingles are in good shape. At the very least, do a careful ground inspection of your roof, but it might be better to just go up there on a ladder and look around for yourself. Replace any worn out tiles you find.

Clean out your gutters. Similarly, when the temperature hovers around freezing and you’re facing a lot of melting and freezing water, clogging in your gutters can create a huge logjam of ice on your roof. Prevent most of this by cleaning out your gutters in advance of the winter season, removing leaves and bird nests.

Prepare your lawn-care and garden equipment for winter. Drain the oil and gas from your mower, tiller, and weed eater. Put into careful storage any lawn and garden equipment. Drain all of your hoses and put them into storage as well, as sitting water freezing and re-freezing inside a hose can really damage it.

Service your winter equipment. Make sure your snowblower starts up after you’ve properly tuned it and put gas and oil in it (as per the directions). You don’t want to go out there and fire up your snowblower for the first time and discover that it needs oil or new spark plugs.

Pull all vegetation away from your foundation. Vegetation near your foundation can continue to grow near the warmth of your home, possibly causing the roots to grow towards your foundation. Pull any vegetation near your foundation away from it to keep your foundation in good shape.

Check (or install) your carbon monoxide detector and smoke detectors. You should have a carbon monoxide detector near your furnace and a smoke detector in all rooms in the house. Check them all to make sure they’re in proper working order.

Trim any nearby trees. If you have tree limbs near your house, particularly ones anywhere near windows, trim them back. When they get weighted down with snow and ice, they’ll bend and perhaps break – and that can spell disaster for your windows or your roof.

Seal your driveway and deck. The constant freezing and thawing of a winter season can wreak havoc on unprotected outdoor surfaces. Spend some time in the next few weeks sealing your driveway and your deck to keep the freezing water from damaging your property.

Move in your potted plants. As the weather gets colder, your plants will be affected by the temperatures more and more. Move them inside for the winter and place them in an area with adequate lighting to ensure that they live through the cold season.

Prepare an emergency kit. Major winter storms can sometimes result in multi-day power outages. Have an emergency kit with plenty of flashlights, an emergency radio (that’s powered by batteries or hand crank), plenty of blankets, and some food and water on hand in an easily-available place.

So you’ve just moved into your nice new home. You’ve unloaded the boxes, unpacked most of your stuff, and are just starting to settle into your residence.

Right now is the perfect time to walk through a checklist of ways to save money on your home. Starting on these things as early as possible will allow you to start saving money sooner rather than later.

Here are eighteen things to check on or do immediately that will reduce the energy and maintenance costs of your home over the long haul.

1. Check the insulation in your attic – and install more if needed. If you have an unfinished attic, pop your head up there and take a look around. You should see some insulation up there, and there should be at least six inches of it everywhere (more if you live in the northern part of the United States). If there’s inadequate insulation up there – or the insulation you have appears damaged – install new insulation. Here’s a great guide from the Department of Energy on attic insulation, including specifics on how much you should have depending on where you live.

2. Lower the temperature on your hot water heater down to 120 degrees Fahrenheit (55 degrees Celsius). This is the optimum temperature for your hot water heater. Most people do not utilize water that’s hotter than that, and thus energy used to keep the water that hot isn’t effective. Lower the temperature, save some on your energy bill, and you’ll never skip a beat.

3. Toss a water heater blanket over that hot water heater as well. While most modern hot water heaters are well-insulated, some are insulated better than others and many older heaters aren’t insulated well at all. A small investment in a blanket for your water heater will slowly and gradually save you money on your heating bill over time by keeping the heat in the water instead of letting it spread slowly out into your utility closet.

4. Install ceiling fans in most rooms. Ceiling fans are a low-energy way to keep air moving in your home. Because of the air circulation effect, you can get away with keeping your thermostat a degree or two higher in summer and a degree or two lower in winter, netting a rather large savings. A while back, I wrote a guide to maximizing ceiling fan use – most importantly, the air directly below the fan should be blowing down on you in the summer and should be pulled upwards away from you in the winter – you can use the reversal switch on your fan to switch between the modes.

5. Wrap exposed water pipes with insulation. Exposed hot water pipes lose heat as they move water from your heater to your faucet. Insulating them makes a two to four degree difference in the temperature of the water and also allows hot water to reach your faucet faster. Check the pipes into and out of your hot water heater first, as the first three feet out of the heater (and the last few feet of inlet water) are key. Use good quality pipe insulation for the job – it’s actually quite simple. Find out more about water pipe insulation at the EERE website.

6. Install a programmable thermostat – and learn how to use it. A programmable thermostat allows you to schedule automatic increases and decreases in your home’s temperature. This lets your house naturally warm (or cool in the winter) while you’re at work or asleep, saving quite a bit of energy use, and then when it comes time for you to actively use the house, the thermostat automatically adjusts the temperature of your home back to what you prefer. Such devices save money on cooling in the summer and heating in the winter.

7. Hang a clothes rack in your laundry room (or, better yet, an outdoor clothesline). A clothes dryer can really eat up your energy costs, but it’s convenient for many people. Battle that convenience (and save money) by hanging a clothes rack from the wall in the laundry room and use it for some items – t-shirts and underwear dry great on clothes racks. If you can hang up 20% of the clothes in a load on this rack, you can get away with running the dryer 20% less than before, saving you cash. Even better: if you can, install a clothes line outside where the wind can catch it and hang most of your clothes outside.

8. Check all toilets and under-sink plumbing for leaks or constant running – and check faucets, too. Do a survey of the plumbing in your home before you settle in. If you find a toilet is running constantly, it’s going to cost you money – here’s how to easily fix that constantly-running toilet. You should also peek under the basin of all sinks in your home, just to make sure there aren’t any leaks. Got a leaky faucet? You should repair or replace any of those, because the drip-drip-drip of water is also a drip-drip-drip of money.

9. Replace your air handling filter. When you first move in, you almost always need to replace the air handling filter (don’t worry, it’s easy to do – it takes about ten seconds). Go down to your air handling unit, find where the filter is (it’s almost always a large rectangle), and mark down the measurements (printed around the edges). Then, go to the hardware store and pick up a few of these, then go home and install one of them, replacing the old one. An outdated filter not only doesn’t filter as well, it also has a negative impact on air flow, meaning your air handling system has to work harder to pump out lower quality air.

10. Make sure the vents in all rooms are clear of dust and obstructions. None of the vents in your home should be covered or blocked by anything – doing that makes your heating and cooling work overtime. You should also peek into all of your vents and make sure they’re as dust-free as possible, and brush them out if you see any dust bunnies. This improves air flow into the room, reducing the amount of blowing that needs to happen.

11. Mark any cracks in the basement with dated masking tape. Many homes have a few small cracks in their basement walls from the settling of the foundation and the weight of the house. In a stable home, the small cracks aren’t growing at all – they’re safe. If they’re growing, however, you’ll save a ton of money by getting the problem addressed now rather than later. Take some masking tape and cover up the end of any cracks you notice inside or outside, and write today’s date on the tape. Then, in a few months, check the tape – if you see a crack growing out of the end of the tape, you might have a problem and should call a specialist now before the problem gets out of hand.

12. Install CFL and LED light bulbs in some locations. CFL and LED bulbs can save you a lot of money on energy use over the long haul, plus they have much longer lives than normal incandescent bulbs. Consider installing some in various places – we usually use CFLs for hall lighting and LED bulbs for closet lighting (though LED bulbs are improving all the time…).

13. Choose energy efficient appliances, even if you have to pay more up front. Unless you were lucky enough to buy a fully-furnished home, you’ll likely have to do some appliance shopping. Focus on reliability and energy efficiency above all, even if that seriously increases the cost you have to pay up front. A refrigerator that uses little energy and lasts twenty years is far, far cheaper over the long run than a fridge that runs for seven years and guzzles electricity. (If you’re worried about the up-front cost, check out tip #17.)

14. Set up your home electronics with a SmartStrip or two. Looking forward to getting your television, cable box, DVD player, sound system, and video game console set up? When you do it, set things up with proper surge protection (to protect your equipment). You might also want to consider a SmartStrip, which allows the on-off status of one device (say, the television) to control whether or not there’s power flowing to other devices (say, the DVD player or the video game console). Having the power cut automatically from such auxiliary devices can save a lot of money over time, especially since many such devices eat quite a bit of power as they sit there in standby mode, constantly draining your money.

15. Air-seal your home. Look for any places where air may be leaking directly into or out of your home. These aren’t just air leaks – they’re money leaks. Thankfully, fixing small air leaks is pretty easy – here’s a great Department of Energy guide to caulking and weatherstripping, which will keep such air leaks from costing you.

16. Plant shade trees near your house. Shade trees naturally cool your home during those warm summer months, reducing the amount of direct rays that hit your house. Lowering the external temperature of your home saves significantly on your cooling bills during the summer, plus it increases your property value. Plant them now, so they’ll grow and shade your house sooner.

17. Take advantage of tax benefits for any improvements you make. For starters, there’s the first time home buyer tax credit, which is essentially an interest-free $7,500 loan from the federal government for new homeowners. This is perfect money to help you with fixes you may need to make when you move in, like buying good appliances or putting in shade trees. Similarly, if you make energy-based improvements to your home in 2009, you can receive up to $500 in tax credit for that purchase, essentially making things like insulation tax free. Your state may have even more benefits, so be aware of all of these when you invest money improving the efficiency of your home.

18. Develop a home maintenance checklist – and run through it for the first time. One final tip – create a home maintenance checklist. This list should include regular home maintenance tasks that you’d want to do on a monthly or quarterly or annual basis. Then, make it a habit to run through the items on this list each month. Doing so will extend the life of almost everything in your home, saving you buckets of money over time.

Any other tips along these lines from the readers?

During the summer of 2007, my wife and I purchased our first home. We spent tons of time doing homework and we are still very happy with our purchase, but as first time home buyers, there were simply some things that we didn’t fully understand that fell through the cracks during the process.

Hindsight is 20/20, after all, and now when I look back on that time, I see a lot of little things I wish we had done differently. Here are ten things that we overlooked or didn’t do quite right during our home buying process – and what we should have done instead. Hopefully, you won’t fall into these same traps.

Get serious about saving sooner. The earlier you start saving for that down payment, the easier it gets. We didn’t start worrying about it until it was too late and we had to get a mortgage over 80% of our home’s value (split up to avoid PMI). If we had been on the ball even two years earlier, we wouldn’t have had to do that.

Don’t rush things. We were somewhat forced into our situation. We had largely decided to stay in our apartment for another year until we found out that my wife was pregnant and we quickly realized that having the four of us in such tight quarters would have been untenable. So we rushed. We did manage to find a very nice house, but we didn’t really get to survey all of our options, especially outside of the two towns and surrounding country areas we decided to focus on. The more time you devote to looking, the more likely you are to find the perfect house for you and your budget.

Pad your emergency fund before the move. You’ll be shocked how many little things pop up when you’re moving. Utility fees, beer and pizza for the people helping you move, and countless other little things can eat right through your money before you blink. So, pad your emergency fund in the months while you’re looking and thinking about the move. Then, in the week before you move, put a big chunk of it right in your checking account so you can just pull out the debit card and deal with things.

Spend more time shopping around for a mortgage. I got a mortgage estimate from three different places. One place – the only credit union we tried – had a rate more than half a point lower than the two banks we looked at. So we went with that credit union. Knowing what I know now, I wish we had shopped around more, as saving just half a percentage point on a $200,000 house loan can save you $64 a month – or $23,000 over a 30 year mortgage.

Evaluate the house contents more carefully. During the home inspection process, we thought we did a very thorough job. We went through the house with the home inspector, looked at everything we could think of, and also followed the checklists in some home buying books we were reading. Another hour or two, though, would have been very useful. The big thing that we missed was the deplorable state of the hot water heater, not noticed because we simply didn’t leave the hot water running long enough. If you let the hot water run for about ten minutes, the hot water heater starts percolating madly – and even removing the entire plug fixture and draining the whole tank didn’t fix it. A hot water heater replacement is in our near future – and it’s something we could have asked for from the sellers had we been on the ball about it.

Have an additional set of friendly eyes look at a house with you. We trusted our own judgment on the house that we bought – and we were lucky. If I were to do it again, though, I would have called up one of my friends – likely the one who is so in tune with home construction he built his own as a hobby – and had him walk through the house with us. Different eyes spot different things, and friendly eyes will tell you the problems that they see.

Shop around for homeowners’ insurance. Also, don’t be afraid to move and bundle your auto insurance or other insurance with it. We initially packaged our insurance with our previously-existing auto insurance, but later moved everything to another provider who provided us a much less expensive package. Shop around – you’ll be surprised how much you can save each year with a strong package deal.

Evaluate the actual value of your contents and insure them appropriately. At first, we went with a default amount suggested by our home insurer, simply because we didn’t know. Later, having actually calculated the value of all contents, we adjusted downwards quite a bit. Remember, don’t count irreplaceable items – you wouldn’t replace them, anyway, and they have no real replacement value.

Don’t go furniture shopping the day after you move in. We had a bunch of cheap furniture from our college days at our old apartment that we didn’t bring with us. Again, by pure luck, we happened to stumble upon a liquidation sale at a furniture shop and outfitted our living room very cheaply, but it was really a mistake to decide that we needed new furniture for our new house. Upgrade it later on – you can have empty rooms for a while. Save up until you can afford what you actually want instead of buying furniture just to fill a room.

Offer to help others move for years in advance. How does this help you? Well, imagine over a three year period that you help ten different families move. When you move, you can call all of these people to help you move – five families can unload a truck and unpack boxes at an astounding rate. Our big mistake wasn’t the help we received, but how I managed it. Don’t have everyone come and help you at once. Ask two friends to come one day and two friends to come another day instead of having them all come at once – you’re far more productive that way.

The process of buying your first home is a wonderful experience. Do the readers have any more suggestions for things they’d do differently with their first home purchase?

Ramit Sethi pointed me towards a brilliant little essay entitled The Real Reason We Aren’t Homeowners. It’s surprisingly refreshing, honest, and well worth discussing a bit (in fact, their whole section on homebuying essays, The American McDream, is well worth reading).

The article gives six distinct reasons for why the writer doesn’t want to be a homeowner, each of which are worth some commentary.

We’re too poor to buy a house. Our total household income is only around $55,000 a year. We hold stringently to idea that we should never have a mortgage which is more than double our annual income. We do that because we feel being house-poor is not a good idea, and could unnecessarily tie us down.

Liquidity This is a pretty sound economic reason, and also part of the reason why we elected to purchase a more modestly priced home that was about 1.8 times our combined annual salary (at the time). Note that this does not preclude them saving for a very large down payment – if you can save up $90,000, they could then get a $110,000 mortgage and buy a $200,000 home.

There are no safe, “nice” neighborhoods in our side of town which have 3 bedroom or larger homes available for $110,000. We’re not interested in moving to outlying areas because we have a business in this neighborhood, and value our time too much to waste it commuting.

Environment They prefer to live in the general area that they currently live in, but housing prices have made home ownership in their area quite expensive – far over $110K for the home that they wish to purchase. It’s worth noting that this article was originally written in 2001 – they likely saw far higher prices by 2005 or so.

We can’t earn more than around $50-70K a year because I lack the drive to spend too much of my time and energy earning money. I have too many other interests. I’m happy with making enough to get by.

Diverse interests The author understands clearly who he is and knows that his passions don’t lie in chasing the brass ring. Instead, he follows his diversity of interests and doesn’t worry about earning more and more money. Whether that’s a good choice or a bad choice will depend on your own beliefs – my feeling is that there are different paths that are right for each person and it takes a strong person to know which path is right for him or her.

My wife doesn’t work for money by choice. She educates our children, reads lots of books, gardens, does genealogical research, cooks from scratch everyday, and gives many hours of service to a women’s organization.

Stay-at-home parenting / personal choice The stay-at-home parenting choice is one that my wife and I struggled with for a long time – and we’re somewhat doing it now, with my writing career. Again, this is a choice that has no easy answer, regardless of what either side might say about it, and it takes some fortitude to simply put your foot down and do what you truly believe is right, regardless of the other consequences.

Which brings up another point: we don’t have any spare time in our schedule for home repair, maintenance, or upgrade projects.

Time management Actually, more than time management, it’s a confession that the person has no real interest in taking care of their property. While I find that somewhat disheartening (often, someone unwilling to maintain their living quarters is often unwilling to maintain other parts of their life, too), it’s again honest and straightforward.

And finally, we lack the discipline to save for a downpayment. Every time we get $5,000 to $10,000 together, we go and blow it on another family vacation.

Lack of discipline / other desirables This isn’t so much a lack of discipline – they are able to save up to five figures – it’s a matter of finding the gratification of a family vacation to Disney World followed by a year of renting higher than a family vacation camping followed by home ownership.

The Real Reason
On paper, this individual seems suited for home ownership. There’s a steady income, a tendency to save and spend less than they earn as a normal course of events, and a family situation where housing stability might be at a premium. Yet, through some self-evaluation, the family determined that home ownership wasn’t right for them. Why?

They have different goals in life.

Their goals certainly don’t match mine. I’m very proud to be a homeowner and, since my local area never really had what I wold call much of a real estate bubble, the home will hold value. I love to camp and I don’t have much interest in expensive vacations for my family, at least not until the children are old enough to deeply appreciate it. Those two philosophies alone put me in a different camp than the author of that article.

But what’s really key to notice here is that they set goals and achieved them – they just happened to be different goals than I do (or perhaps you do). Their goals revolve around expensive family vacations and having a stay-at-home parent – and those goals have both notable benefits and drawbacks.

And they’re meeting those goals. They’re regularly spending less than they earn so that one parent can be a stay-at-home parent and so that they can go on nifty family vacations.

Their life may appear different on the surface, but the fundamentals under the hood are the same. Set goals. Spend less than you earn, and sock away the difference.

That will take you to your dreams, no matter what.

Liz writes in with an interesting question:

wonder if you have weighed the pros and cons of switching to pellet/wood stoves for heat this winter? I live in Montana and our heating bills are slated to rise 50%, yes 50% this winter, partially due to the sale of Montana Power to Northwest Energy. Our heating bills (gas for heat and cooking and electric for the usual) get as high as $600 a month in the winter.

Liz, unless you have a very cheap source for a high volume of wood, installing wood heating options won’t save you any money for a very long time. In order to install an indoor wood stove, a fireplace, or an outdoor wood boiler, you have to have a chimney and a blower, which can cost thousands to install. Even if you already have the equipment, without a supply of very inexpensive wood, you won’t do too well.

How much does it cost, exactly? The calculation of how much wood you need is pretty simple. For many homes, the amount of wood you’ll need to replace your other heating is somewhere between three and six cords. A cord of wood costs roughly $150-200 just for the wood, and weighs about 5,600 pounds (2,500 kilograms). You can usually tack on another $50 or so per cord for delivery cost, so the cost of getting that much wood delivered would be about $250 a cord. Thus, your wood cost alone (if you don’t have your own source) is about $1,000 for the winter. That doesn’t include the effort of hauling in wood and so on.

So, unless you have a very cheap source of wood (your own chainsaw and a small forest out back) and are already set up for it, a wood stove is not a good solution for heating.

Incidentally, my father uses a wood stove to heat his garage and goes through probably 50% of a cord each winter. He has a lot of trees nearby and cuts the wood himself for his own use. This makes sense for him because the effort to cut the wood for the stove is not immense, plus he is already set up for it.

Given that, what actions can Liz take? Here are twelve things I’d do in her shoes.

Air seal your home. One sure way to have inflated heating bills is to continually lose heat to the cold outdoors. You can easily reduce this loss of heat by carefully air sealing your home. The Department of Energy’s office of Energy Efficiency and Renewable Energy has a wonderfully useful guide to air sealing an existing home, including walkthroughs on how to detect air leaks and how to caulk and weatherstrip any leaks you do detect. Doing this can save as much as 30% on your heating bill.

Make sure the attic is well-insulated. Since heat rises, it’s not surprising that quite a bit of heat is lost through the roof of your home, hence the need for significant insulation in your attic. Take a peek up there and make sure there’s plenty of insulation to go around. Also, if you can, check the insulation in other ceilings, exterior and basement walls, floors, and crawl spaces. Here’s an excellent EERE guide on home insulation.

Dress warmly inside and keep the temperature low. Why keep the house at a high temperature when you can just toss on an extra sweatshirt instead? Lower your home’s temperature a bit and cuddle up with a blanket – you’ll be toasty warm and you aren’t burning money to keep other parts of your home warm.

Get a programmable thermostat. A programmable thermostat can automatically lower the temperature of your home at night and when you’re at work, making the heat run less when you’re not actively using it. Such a device can pay for itself in a season, making it well worth the investment.

Minimize or eliminate use of vent fans. If you have a vent fan in your kitchen to eliminate cooking smoke, or you have one in your bathroom to get rid of moist air, try as hard as you can not to use them. Use a fan to ventilate the air out of the room into other areas of the house instead. A vent fan will carry that warm air straight outdoors, guaranteeing extensive heat loss.

Turn off the heat in unused rooms. Close the heating vent in the guest bedroom or any other room in the house that you don’t use very much. This works well if you have well-insulated interior walls – if you don’t, this won’t help much at all, but you may get a slight boost from it.

Use space heaters. If you spend most of your time in only one room or two in the house, drop the thermostat even lower and put a space heater in that room where you spend your time. It’s much cheaper just to have a space heater heat up part of a room than to have a furnace heat your whole house.

Make sure you have a fresh furnace filter. Furnace filters are vital at keeping dust out of the passageways in your home, making the furnace work less to keep your home warm (and keeping dust out of the air, too). Along those same lines, ensure that nothing is obstructing your furnace and also get an occasional tune-up to make sure it’s in good working order – once every few years should do it. Here’s some solid information about basic furnace maintenance.

Use an insulation blanket on your hot water heater. Most modern hot water heaters are already well insulated, but many old heaters lose a ton of heat in a very inefficient manner, causing you to waste money heating your utility closet. If you have an older hot water heater, consider getting an insulation blanket for it in order to help it keep the heat inside, keeping your water warm and not losing heat to the environment of your utility closet.

Keep blinds and curtains open on the sunny side of the house and closed on the other side. If sunlight is coming in a window, you should pull back the curtains and let the sunshine in. Otherwise, keep the curtains drawn, as without direct sunlight you’ll lose heat to the outside even through a well-insulated window. Let the sun be your guide here – if the sunlight’s coming in, open up the curtains.

Cook at home using the oven. Since it’s cheaper to cook warm meals at home than it is to go out, you should also take advantage of the fact that cooking in your kitchen adds heat to your home. Instead of going out to eat, fire up the oven and make a delicious meal at home. It might burn a bit more energy than you otherwise would consume, but not much more (since your home needs heat anyway), and the inexpensiveness of eating at home versus eating out makes a huge difference in your overall budget.

Microwave a hot water bottle before bed each night, then dip the temperature. This is a trick I learned from my father, who grew up with a wood stove in his kitchen and no heating in the bedroom. He and his siblings would put a bottle of water on the stove at night, get it very warm (almost boiling), then wrap it gently in a sheet and put it in bed with them, making their cold bed instantly warm. This same technique still works – lower the house temperature about an hour before you go to bed, then get some water boiling in the microwave just before you go (in a tea kettle, for example). Put that boiling water in some sort of sturdy container, wrap it in a pillowcase or two until it’s just nice and warm and not hot, then put it under the covers with you. Instant warm bed!