Many Households Must Cut Spending to Pay for Growing Housing Costs
On Tuesday, the Census Bureau released statistics confirming what many consumers already knew--the cost of housing is consuming more and more of their monthly budget. Across the country, real median home values soared 32 percent, according to new 2005 American Community Survey data released by the U.S. Census Bureau. The number of homeowners spending at least 30% of their gross income on housing
grew from 27% in 2000 to 35% in 2005. For renters, it increased from 37% in 2000 to 46% in 2005. At the same time, wages and income have remained the same.
"This study is creating a stir because the 30% figure of gross income spent on housing is the tipping point. Many households can get by at 30%. However, if it grows much more, many Americans will have to stop saving for retirement, college, and emergencies just to keep a roof over their head," says Bill Hardekopf, CEO of LowCards.com.
The growing shortage of affordable housing in many areas indicates that this is a long-term problem with no easy solution or creative financing magic.
"Households must have a budget and a realistic view of their finances to know what they can afford. If housing costs are increasing, they will have to cut spending in other areas," says Hardekopf. "Our concern is that a greater number of households will be forced to use credit cards just to make ends meet. This may help in the current interest rates while stretching to pay household costs is just mixing ingredients for financial ruin in many households."
For households on the edge, it only takes an emergency auto repair or a child's medical bill to cause serious financial problems. When a credit card goes over-the-limit once, or a payment is late, the apr rates can jump to sky-high default rates not only for that card, but possibly all other credit cards as well. The default rate is punitive with some cards now charging 32.24%.
Here are a few suggestions to help cut costs:
-Get the lowest interest rate possible on your credit cards. If you can't pay off your balance each month, try to get a lower rate. The average APR is close to 14.9%. If you have a good payment history and your APR is over 12%, call and ask for a lower rate. Requesting a lower rate is fairly simple, even if you don't like negotiating and this seems out of your comfort zone. Simply call the number on the back of your credit card or bill. Tell them your name and that you have been
a good customer but you would like a lower rate. You have received several offers with lower rates in the mail and have researched cards with lower rates online. You want a lower rate on your card or you will switch to another card with a lower rate--what can they do to help? Here is a comparison of credit cards with low interest rates: LowCards.com.
-If you carry a balance, take advantage of a credit card with 0% for 12 months for balance transfers and use this time to pay offer your balance. This is a smart move for consumers, but shop around now because card issuers are making changes to these generous offers. Here is a comparison of cards with low intro rates: LowCards.com/bestintrocards.asp
-If you are house hunting, consider using a buyer broker. They work for you, not the seller, and can often negotiate a lower sale price. However, find out if they are showing you a property that they have listed through their firm because there may be a conflict of interest.
- Shop around for homeowner or renter insurance. Your state insurance department can provide a list of typical prices charged by different licensed companies. Call several of the insurers with the lowest rates for price quotes.
-Ask your electric or gas utility provider for a home energy audit. Most companies will do this for free or for a small charge. An energy audit can identify ways to save up to hundreds of dollars a year on home heating, cooling, and energy use.
-Periodically analyze your phone bills from the previous three months to review your telephone usage. Compare phone providers in your area, including wireless and cable, to find the best rate plan for your calling needs. Consider a bundled package or a VOIP provider that offers local, local toll and long distance, and possibly other services, if you heavily use all the services in the bundle. SaveOnPhone.com provides a comprehensive comparison of long distance, cellular and VOIP services.
-Check your phone bill to see if you have optional calling features or additional services, such as inside wire maintenance, that you don't need. Each option you drop could save you $40 or more each year.
On Tuesday, the Census Bureau released statistics confirming what many consumers already knew--the cost of housing is consuming more and more of their monthly budget. Across the country, real median home values soared 32 percent, according to new 2005 American Community Survey data released by the U.S. Census Bureau. The number of homeowners spending at least 30% of their gross income on housing
grew from 27% in 2000 to 35% in 2005. For renters, it increased from 37% in 2000 to 46% in 2005. At the same time, wages and income have remained the same.
"This study is creating a stir because the 30% figure of gross income spent on housing is the tipping point. Many households can get by at 30%. However, if it grows much more, many Americans will have to stop saving for retirement, college, and emergencies just to keep a roof over their head," says Bill Hardekopf, CEO of LowCards.com.
The growing shortage of affordable housing in many areas indicates that this is a long-term problem with no easy solution or creative financing magic.
"Households must have a budget and a realistic view of their finances to know what they can afford. If housing costs are increasing, they will have to cut spending in other areas," says Hardekopf. "Our concern is that a greater number of households will be forced to use credit cards just to make ends meet. This may help in the current interest rates while stretching to pay household costs is just mixing ingredients for financial ruin in many households."
For households on the edge, it only takes an emergency auto repair or a child's medical bill to cause serious financial problems. When a credit card goes over-the-limit once, or a payment is late, the apr rates can jump to sky-high default rates not only for that card, but possibly all other credit cards as well. The default rate is punitive with some cards now charging 32.24%.
Here are a few suggestions to help cut costs:
-Get the lowest interest rate possible on your credit cards. If you can't pay off your balance each month, try to get a lower rate. The average APR is close to 14.9%. If you have a good payment history and your APR is over 12%, call and ask for a lower rate. Requesting a lower rate is fairly simple, even if you don't like negotiating and this seems out of your comfort zone. Simply call the number on the back of your credit card or bill. Tell them your name and that you have been
a good customer but you would like a lower rate. You have received several offers with lower rates in the mail and have researched cards with lower rates online. You want a lower rate on your card or you will switch to another card with a lower rate--what can they do to help? Here is a comparison of credit cards with low interest rates: LowCards.com.
-If you carry a balance, take advantage of a credit card with 0% for 12 months for balance transfers and use this time to pay offer your balance. This is a smart move for consumers, but shop around now because card issuers are making changes to these generous offers. Here is a comparison of cards with low intro rates: LowCards.com/bestintrocards.asp
-If you are house hunting, consider using a buyer broker. They work for you, not the seller, and can often negotiate a lower sale price. However, find out if they are showing you a property that they have listed through their firm because there may be a conflict of interest.
- Shop around for homeowner or renter insurance. Your state insurance department can provide a list of typical prices charged by different licensed companies. Call several of the insurers with the lowest rates for price quotes.
-Ask your electric or gas utility provider for a home energy audit. Most companies will do this for free or for a small charge. An energy audit can identify ways to save up to hundreds of dollars a year on home heating, cooling, and energy use.
-Periodically analyze your phone bills from the previous three months to review your telephone usage. Compare phone providers in your area, including wireless and cable, to find the best rate plan for your calling needs. Consider a bundled package or a VOIP provider that offers local, local toll and long distance, and possibly other services, if you heavily use all the services in the bundle. SaveOnPhone.com provides a comprehensive comparison of long distance, cellular and VOIP services.
-Check your phone bill to see if you have optional calling features or additional services, such as inside wire maintenance, that you don't need. Each option you drop could save you $40 or more each year.
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