November 27, 2013

A Place We Can Afford (A Place to Call Home: Part 4)

The philosopher Christopher Wallace once said, "Mo money, Mo problems." The corollary could be "No money, even more problems." In an ideal world Kristy and I would just like to live on our homestead completely separate from the money economy and to be economically self-sufficient. But that is just not entirely realistic.

Our plan, however, is to subsist on much less money than we are currently making with the intention that the amount of money we spend on expenditures will also be much less than we currently need. Housing and food are two of the major costs that we and most people have. On our homestead we plan on building our own house without taking out a mortgage and providing for most of our own food. The hope is that with these reduced expenses, we can live a more frugal life and have our balance sheets end up in the black, if not by much.


Yet money is still a major concern. Especially because we need the necessary capital to purchase our homestead in the first place. We also need to take into account how expensive it will be to live wherever we choose to live. The following criteria dealwith factors relating to finances.

For a review of how we created our point system read Criteria for a Place to Call Home: Part 3.

 

Most Important Factors (up to 10 points)

Cost of Living Index (according to city-data.com)

Definition: A theoretical price index that measures relative cost of living over time & regions. It is an index that measures differences in the price of goods and services.

Reason:  There are apparently different ways to calculate this. There are different websites that allow one to compare the cost of living between one city and another in real dollar values. The two websites we used actually gave each place a number by which to make a comparison. I will be forthright and admit that I do not know the exact methodology that either city-data.com or bestplaces.net used to get their numbers. But I assumed that the numbers were consistent within each site. I decided to use the cost of living data from both sites for a more varied sample size.


1050
Cost of Living Index (100 is average)
92 or less   92.1-101  101.1 or greater


Cost of Living Index (according to bestplaces.net)

Definition: Same as above.

Reason:  Same as above.


1050
Cost of Living Index (100 is average) 107 or less   108-124  125 or more


Price of Land 

Definition:  The average price to purchase land using the very scientific protocol of looking up real estate websites and getting the general impression of whether there was anything worthwhile in our
price range.



Reason:  The cost of land will be one our largest purchases and we are currently saving money for this purpose. Land prices vary across the country and the same amount of money can buy different amounts of land and of differing quality depending on where the land is located. Our rule of thumb was that if we could not find land of at least 5 acres under $100,000, then we probably could not afford to live there.


1050
Price of Land to buy 5-10 acres  $0-50,000   $50,000-100,000  Greater than $100,000  


Average Property Tax (by county)

Definition:  A levy on property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located.

Reason:  Property tax will be an ongoing expense for our family. The lower our tax burden, the more money we will have in our pockets for other expenses. The Tax Foundation's website allows users to look up property tax rates for every county in the United States. CNN Money also has an interactive map for looking up property taxes.


1050
Avg. Property Tax  0.5% or less   0.51-0.78%   0.79-1.05% 


Sales Tax Rate (Combining state and local sales tax rates)

Definition:  A tax paid to a governing body for the sales of certain goods and services. Usually laws allow (or require) the seller to collect funds for the tax from the consumer at the point of purchase. Can be levied by both states and local municipalities.

Reason:  Like property tax, the lower the sales tax the better for us. We also found this information through The Tax Foundation.


1050
Avg. Combined Sales Tax (%) No sales tax   6.0-7.5%   7.6% or greater


Well that is it for now. Next week I will discuss criteria related to quality of life in our search for a homestead. Cheers.

2 comments:

  1. Admittedly I am not familiar with the US and how it allocates spending for tax dollars, but I assume that one implication of living in an area with lower taxes would be fewer social services available to your family. Is that something you'll factor in to your decisions? The quality of schools and other social services might become more relevant if you choose to have kids later on and they may or may not be tied to the collection and use of tax dollars.

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  2. Hey Livia. You make some good points. We are intending on having kids within the next five years and and the presence or absence of social services will be a major consideration. Kristy and I are planning on homeschooling our kids, partly because we are dissatisfied with the quality of the current educational system. As far as social services go, that is trickier. There is not always an obvious relationship between what we would pay and what would actually be offered. As you might know, health care in this country is in flux/turmoil and only time will tell how it will affect us on the homestead. I am thinking of incorporating this comment into my next blog post and can hopefully flesh out more of the issues you brought up. Thanks for keeping us honest.

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