Category Archives: Money

Should You Live with Your Parents to Save Money?

Moving out of your parents’ home used to be an established right of passage – a way to escape parental authority and start making your own way in life. The current societal trend is, however, that young adults are making the decision to delay leaving the nest.

A study in 2012 by Pew Social Trends, found that nearly 24% of adults in the 25-34 age group lived with their parents. And the reasons cited, surprisingly enough, are not only financial – the so-called Millennials tend to have good relationships with their parents allowing for collaborative efforts when it comes to day to day living. Further reasons cited include delaying marriage and studying for longer.

Let’s explore whether or not it is a good idea to stay at home in order to save money.

The Advantages of Staying with Your Parents

  • Savings in Rent – While your parents may still require that you pay some form of rent, this is not likely to be as much as you would have to pay on the rental market. There would also be no need to put down a security deposit, which allows you to sock any income away for when you do finally leave the house.
  • Chores are Shared – You’ll probably need to still help out around the house but you won’t be expected to do everything like you would if you lived on your own. The key to making this work is to do your bit – maybe your mom can iron for you and you can cook dinner and take out the trash. It’s important that neither party begins to feel resentful.
  • Company – If you have a good relationship with your parents, you will have company when you get home from school/ work.

The Disadvantages of Staying with Your Parents

  • You are their child – Parents will try hard to treat you as a young adult but there is bound to be some times when both parties fall back into the traditional parent/ child roles.
  • You are not truly independent – You may not have a curfew anymore but you are not entirely independent either – your parents are going to be aware of all your comings and goings and are bound to want to be informed of what your plans are.
  • There is a chance of resentment developing – No matter how well you get on with one another, there is always a chance that one or both parties may begin to feel resentful. You might feel that they are interfering in your life too much and they may feel that you are not respecting them. It can be a fine line to tread.

In the end though, there is no set answer to whether or not you should move in with your parents in order to save money. A lot is going to depend on what your relationship with your parents is like and what expectations you have of each other.

Before making the final decision, it is a good idea to talk to your parents about what expectations they have in terms of how much you’ll help out, what rules will apply and also to let them know what your expectations are in turn.

I did not live at home after graduating college, but I did live at my future in-laws house for nearly 9 months while engaged to their daughter. We were able to save and contribute more to the wedding as a result, and it was a good bonding experience, too. I never would have expected to enjoy it or think it was worth it, but it really turned out to be not only bearable, but enjoyable, too.

At the end of the day, if you are able to set proper boundaries up from the word go, this can be a mutually beneficial arrangement for both you and your parents.

Why Renting Could be the Best Thing for You

There is a saying out there, “Why rent and pay off someone else’s mortgage when you could be paying of you own?” Seems like pretty sound advice, doesn’t it? Except that things aren’t always the way they seem. What a lot of people fail to consider is that there are vast differences between renting a property and actually buying it.

A Cautionary Tale

An acquaintance of mine, let’s call him Ted (identity disguised to protect the dummy), used that very saying about owning a property and paying off your own mortgage on me. I advised Ted not to do it as the mortgage installment was bound to be higher. He had been living in a place and paying rent of about $1000 per month.

He ignored me and bought the house. The mortgage was $2000 per month and he was now responsible for repairs on the house and taxes, etc. Within 6 months, he admitted that he’d made a big mistake – he simply could not afford the place and he sold it a short while later.

Fortunately for him, he did not lose much as he got a bit lucky with the market timing. It certainly cost him a lot of stress, but when it was all said and done, it could have turned out a lot worse if the market had moved the other way during those 6 months.

This may seem like an extreme example but it does happen to a lot of people – especially first time buyers. You simply don’t know how much extra expense being the owner of a house can bring.

When Renting is the Better Option

Even if you can easily afford the mortgage and extra costs, here are some other reasons why you might want to rent instead of buy:

Your Life Could Change

Have you settled down in the town you are living in and are happy there or do you yearn for a bit more excitement in your life? Have you found the career path that suits you to a tee? If not, you probably should not buy a house – what happens if you have to leave?

This happened to another acquaintance – let’s call him Tim. He bought a house and got married 6 months later. His company then moved Tim to Australia and they bought a new house. They figured that the old house would sell fairly quickly.

That was a few years ago and they are now battling to pay both mortgages. They are stuck – both houses are mortgaged to the maximum and their new home needs some repairs.

I know that this is an extreme example but it just goes to show what can really happen. As a tenant, you have a lot more flexibility when it comes to moving.

You Can Just Barely Afford it

Here I also blame the estate agents – they always seem to show you dream properties that are a little higher priced than what you can truly afford. If the installment of the house that you are considering buying is at the very top end of what you can afford, carry on renting.

Will you be able to enjoy your new home when the payment is a stretch? What if some urgent repairs are needed? How will you handle the property taxes?

In this case, you are better off continuing to rent.

You Can Rent in a Better Area

There are areas that are very desirable to live in and, as a result, homes there sell at a premium. You could still possibly afford to rent a home there and enjoy the benefits of the good area without the headache of having to come up with a huge mortgage payment.

You Need to Know What you Are Doing

Buying a house is no small matter and requires some research into the area that you are considering. While houses usually appreciate in value, if you choose the wrong house in the wrong area, you could actually lose money when it comes to selling, or might end up, like Tim, with a house that will not sell at all.

There are advantages and disadvantages to both renting and owning a home. It can’t be reduced to a simple little saying and all the pros and cons should be given due consideration.

Various Strategies to Use in Your Options Trading System

If you want to make money investing, you need some kind of strategy. This is as true for real estate as it is for traditional stocks and commodities. An options trading system is just as essential. Although trading options comes with many advantages all on its own, none compare to a finely-tuned system. The following strategies are popular ones that you may want to add to your system to reap the most benefits.

Options Trading System

Covered Calls

With this move, your options trading system would involve buying an asset outright. At the same time, you’re also writing a call option on this asset for the same amount you just bought. This is a good move for traders who have a neutral opinion and short-term position on the asset being used. Despite your lukewarm feelings on an asset, this strategy can both garner profits and protect you from the impending decline of said asset.

Married Put

If your options trading system has you owning an asset you’re bullish on (or one you plan on purchase soon), you may want to use a married put. This is where you purchase a put option for the asset in the exact same amount. By doing this, you can protect your investment from short-term losses with what essentially amounts to an insurance policy. A married put also establishes a floor, just in case the asset drops dramatically out of nowhere.

Bull Card Spread

With a bull card spread, you’ll once again be taking simultaneous action, this time by purchasing call options at two different strike prices, though both for the same amount of calls. Both of these calls will be for the same asset and with the same expiration month. This is a great move for an options trading system where you are bullish on the underlying asset and think it will show modest growth in the next month or so.

Bear Put Spread

Like the bull card spread, the bear put spread is a vertical spread strategy. This time, though, you’ll be purchasing put options at a strike price and selling the exact same number of puts, but doing so at a lower price. Just like before, you’re doing this on the same underlying asset and with the same expiration date. Bear put spreads are for traders that feel bearish about an asset and believe its price will be declining in the near future.

Protective Collar

Lastly, a protective collar is a smart way to lock in profits after you’ve incurred substantial gains, without actually having to sell your shares. To do this, you buy an out-of-the-money put option and write an out-of-the-money call option simultaneously, both for the same asset.

Your options trading system will never be finishes. As you mature as a trader, the system will constantly be refined. However, the above are basic strategies that every options trader should regularly be making use of, no matter how long they’ve been in the game for.