The Cost of Moving to the Suburbs

The suburbs have always seemed like an extremely affordable place to live, especially when you compare the suburbs to city living.

Suburban houses are generally larger and less expensive, and you can usually expect things like gas to be cheaper as well. However, there are a few things that contribute to some hidden costs of moving to the suburbs.

If you are planning on moving to the suburbs, you are more than likely going to be moving into a larger place than your current abode. The median home in a city center is about 1,238 square feet, and in the suburbs, the median home size is 1,540 square feet or more.

Here are a few extra costs that you will need to keep in mind before selling your current home and moving to the suburbs.

HOA Fees

In most suburbs, you will be required to pay a homeowner’s association (HOA) fee every month. This will cover the costs of neighborhood upkeep and amenities such as a pool or a playground.

If there is an HOA, chances are the home price will be higher as well. Houses in a neighborhood that have an HOA typically sell for 4% more than non-HOA neighborhoods.

Bigger Home, Bigger Yard, Bigger Costs

Even if you are moving from the city and have a yard, chances are it isn’t anywhere near as large as one that is in a suburban community. If you are planning on taking care of the yard by yourself, you will need to invest in the proper equipment to do so.

The proper equipment includes a lawnmower, weed whacker, fertilizer, and more items depending on what you are wanting to do. However, if you are not interested in taking care of the yard yourself, you will need to hire someone else to do it for you. This will be a cost you will need to expect to pay every month.

If you are planning on hiring a cleaning service to maintain your home for you, this will also be more expensive in the suburbs. A bigger house means more to clean, so you will have to consider that as well.

Furniture Shopping

When you move to a house that has more space, you are going to need more furniture to fill the space. This could mean a new bedroom suite for a spare room to be used as a guest room, a bigger couch for your living room, or an entire set of furniture for a basement.

Furniture is not cheap, and these expenses can add up quickly. Typically, a homebuyer will spend more than $8,000 on new furniture and decorations within their first two years of living in a new home. Make sure you have this cost accounted for if you need some new things.

Utilities

A larger home comes with larger bills, and that doesn’t just mean a larger house payment. There is more space and an open area that will need to be heated and cooled.

You will also likely have larger appliances that will need more energy to power. You will be using more electricity, water, and gas than you would in a smaller place.

For example, if your monthly electric bill costs you about $100 in the city, you can expect to pay about $120 in the suburbs. This seems like only a $20 difference, but these costs will add up quickly before you know it. That extra $20 a month adds up to $240 a year.

You will also need to remember that you will likely be paying for trash removal in the suburbs. This service can cost you anywhere from $30 to $50 depending on where you live.

Car Payments

When you live in a city, there are means of public transportation that are easily accessible from just about anywhere you would need. In the suburbs, there are way fewer options for public transportation, meaning you will need to own a car if you don’t already.

Owning a car is not a cheap expense. In 2019, the average car payment for a new car was over $550. You will also need to think about the costs associated with owning a car like insurance, maintenance, and gas prices. Speaking of gas prices, this will also make your commute to and from work more expensive.

Natural Disasters

In the suburbs, especially in a house with a basement, flooding is a massive problem that is experienced. If the area you are moving to has a higher number of trees, you can expect to have debris blown into your home, and you face a higher risk of trees falling on your property. It’s also possible for tree roots to break pipes that are underneath the yard.

Property Taxes

Property taxes are a major cost to consider because they can be wildly more expensive than you would think. Look at Chicago for example, the suburbs have rates of about 2% in the suburbs and 1.74% in the city. This is common because the suburbs have larger lot sizes than in the city, so you will have more space to pay for.

Sticking with the Chicago example, the property taxes in some counties of Illinois can range between $6,000 and $7,000 per year, costing more than $500 per month. In some cases, this could even be as much as your mortgage payment.

Property tax is one of the largest costs you will need to pay for your home, so make sure you are aware of how much it is going to cost you.

Conclusion

Living in the suburbs seems like an extremely ideal situation because you get more bang for your buck. You get more house and more yard than you do in the city at a lower price. Hard to pass up on, right? However, you will need to take into consideration all of the extra costs that living in the suburbs comes with.

Chances are, the suburb you are moving to has an HOA fee that needs to be paid every month. You will also need to prepare for higher utilities and transportation costs as well. There is less public transportation, so you will have to have a car, pay for insurance on it, and pay for gas to get to and from work. Check out even more details at the link below:

https://suburbanfinance.com/costs-of-living-in-the-suburbs/

Moving to the suburbs is a great choice if you are wanting to raise a family in a safe, spacious home. As long as you are aware of the costs and you can afford it, absolutely move to the suburbs.

For more great Suburban Finance articles, consider reading these:

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Check the New IRS Tax Withholding Estimator Now So You Aren’t In Trouble Come April 2020

tax withholding

Tax time is a funny time of year. Some people are really excited when April rolls around. That’s because they get a lot of tax withholding money taken out of their paychecks throughout the year. Therefore, after filing their taxes, they get a nice big refund.

On the other hand, if you’re the type who tends to owe money, then tax time is no fun at all. One of the best ways to avoid the dread of this season is to act in advance. If you make sure that you’re withholding enough from your paycheck throughout the year, then you don’t have to stress about tax time in April.

The IRS has released a new tool that can help.

New IRS Tax Withholding Estimator

The IRS has always offered a tax withholding calculator. However, there were a lot of changes to taxes last year. Therefore, they felt that it was an important time to update. They’ve released a new tax withholding estimator that takes into account all of the latest tax rules.

You can use the tool to enter some basic information about your paycheck and current tax withholdings. Before using the tool, you should gather your recent pay stubs and last year’s tax forms. Then you can easily use this information to enter the required details into the withholding estimator.

The tool will also ask you a few basic questions that affect how much you’ll pay in taxes. For example, it will ask how many dependent children you have. The more accurately you answer all of the questions, the better result you’ll get from the estimator.

This tool will tell you how much money you should have withheld from each paycheck. If you follow the advice, then you shouldn’t owe any money come April 2020.

How to Use Information from the Tax Withholding Estimator

The Tax Withholding Estimator will give you a number. That number is the amount that you should have withheld from your taxes. It’s a good guess that should leave you owing nothing come tax time.

You can use this information to your advantage in a few different ways. For example, let’s say that the tool estimates you should have $500 withheld from each paycheck. If you withhold that amount, then you should break even come tax time. Now you can look at how much you’re currently getting withheld and make some choices.

Let’s say that you’re currently getting exactly $500 withheld. You could make the choice to keep things exactly as they are. Alternatively, you could make the choice to increase that slightly. This would cover any unexpected costs that might arise to help guarantee that you don’t owe taxes in April. Plus it might mean that you get some refund money back come tax time.

On the other hand, let’s say that your tax withholding is currently $1000. After the tax laws changed, people didn’t need to pay as much. However, if your taxes were already set up with your employer, perhaps nothing changed. Therefore, you’re paying in much more than you need to. You could keep things as they are and get all of that money back come tax time. On the other hand, you could safely reduce your tax withholding, which would give you more money in each paycheck now.

How will you use the new Tax Withholding Estimator to help you adjust your paycheck?

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401K Drawbacks: Don’t Forget That Money Is Taxed When You Use It

401k drawbacks

More and more people are focused on growing their 401K retirement savings. That’s a great thing. You need to have money when you retire. You want to have a diverse array of retirement income options. Maxing out your 401k contributions is a wise thing to do. However, there are 401K drawbacks. You shouldn’t forget about those as you plan for your future.

401K Money Is Taxed When You Withdraw It

People frequently seem to forget that one of the biggest 401K drawbacks is that you have to pay taxes on that money. You don’t pay taxes when you deposit it. People love that part. In fact, contributing to your 401K plan is a great tax benefit when you’re still working.

However, when you reach your retirement and start using that money, you’ll have to pay taxes. That can be a huge shock if you haven’t planned for it in advance. The money is taxed as though relative to your income. Therefore, if you’ve done a great job of setting yourself up with a high level of retirement income, you could find that you have to pay more than a third of your 401K withdrawal money to taxes.

On the plus side, if you’re in a lower income bracket post-retirement than you were before you retired, then you may have set yourself up for some success. You’ll still need to pay taxes on that money, of course, but the hit might not be as big as it would have been if you didn’t set that money aside. There are clearly pros and cons.

Plan Ahead for Withdrawing Your 401K Money

The big question isn’t whether or not to set aside money in your 401K. If you have the option, the benefits outweigh 401K drawbacks. The issue is that you simply have to plan ahead. Make sure that you’re fully aware of how much money you’re going to have to pay to taxes when the time comes.

The biggest problem is if you fail to think about taxes when you mentally plan for your retirement years. If you just look at what’s in your 401K and assume that’s how much money you’ll have when you retire then you’re going to be in for a shock. Make sure that you’re thinking realistically about how you’ll use that money each year and what amount of it will go to taxes.

Other Tips for Minimizing 401K Drawbacks

You might want to look now to see if you should have a Roth 401K instead of or in addition to your traditional 401K. That money gets taxed ahead of time, which means that you won’t have to worry about paying taxes on it once you’re in retirement. If you have the ability to maximize contributions to both types of accounts now then you’ll set yourself up well for financial success in retirement.

Then, once you’re in retirement, make sure that you use the Roth 401K money first. Or for that matter, use any money that isn’t taxable in retirement. You want to withdraw as little money as possible that will require you to pay taxes. Pay attention to your tax bracket and the impact that withdrawals will have on that. As long as you plan in advance, you can minimize 401K drawbacks and make the most of your money.

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