Americans are highly mobile, moving an average of every five years. Some move across town to a better neighborhood; others clear across the country or the world.
Relocating is exciting. A new city often means a new neighborhood, a new job, and a new start. However, it can be challenging and even scary as well. Few people move often enough to feel entirely comfortable with the process.
Everyone knows moving can cost money. But setting aside a small fund isn’t enough. It’s just as vital to assess the myriad decisions that arise over the course of a move, to choose options you can afford and which will serve your needs. Hiring a financial advisor is a great first step.
New Expenses Mean New Challenges
People relocate for all kinds of reasons: because they have a new job, purchased their first house, or are starting out on their own for the first time.
In all of these cases, your life is changing in more ways than just your address. Everything from budgeting for a house to managing the subway system may be new to you. You might have to pay for parking monthly or manage transportation without having a car at all. If you are becoming a homeowner, you’ll need to budget for home maintenance which used to be handled by your landlord.
Your tax situation may also change. If you move from one state to another, you will have to file taxes in both states at the end of the year. Even if you’re only changing cities or counties, you may end up paying more or less tax than before.
Handling these expenses wisely is a challenge, which is where a professional financial advisor comes in. They can help you create a budget for your new life before you get there.
Rent or Buy?
Most Americans see homeownership as a life goal— that white picket fence everyone dreams of owning in a utopian suburb. They’re not wrong, because a house is an excellent way to build wealth. But, it can be a disaster to buy a new home before you’re financially ready.
A mortgage may be less expensive than rent, depending on your area. Unlike rent, however, you have to pay a large sum up front. Traditionally, a down payment is 20% of the price of a house. While some programs can reduce the size of the down payment you’ll need to pay, the more you can pay now, the more favorable the terms of your mortgage are likely to be.
The process of home buying and selling is also time-consuming and expensive. Many experts suggest you shouldn’t buy a home unless you plan to stay there for at least five years. Otherwise, any money you save is likely to be eaten up in the cost of selling it when you move. If your move is a temporary one, or if you don’t yet know if you like the area, it’s wise to rent at first.
Realtors can help you buy a home and loan officers can help you get a mortgage, but neither is obliged to tell you if you’re making bad decisions for your own finances. Too often, loan officers will convince clients to take on more debt than they can really handle. To decide if you are financially ready to buy a home, it’s best to find an objective financial advisor who isn’t selling anything beyond their own expertise.
Once you’ve found a place in your new location, you’ll need to figure out how to get yourself and your possessions into your new home. If you’re a young, single person with only a few pieces of furniture, you can probably handle the move yourself or with a few friends. If you’ve been established in the same place for years, you might need to hire a moving company. In some cases, this expense will be reimbursed by your employer, so be sure to take advantage of this option if it’s offered.
Once you arrive in your new location, you’ll need to set up utilities in your name. The previous owner may be able to point you to the right numbers to call to get everything transferred. If you ask the important questions in advance, you should be able to budget for your new utilities cost and decide what services you need and can afford ahead of time.
Moving can be daunting. We’ve all heard horror stories of sketchy landlords or ballooning mortgages. Even smart people can make mistakes in a move, because it’s something we only do a limited number of times in our life.
Luckily, this isn’t a life change you have to navigate alone. There are experts ready to help you consider the pros and cons of a move, plan for renting or homebuying, and navigate the challenges that crop up along the way. Contact us to be matched with a financial planner today!