Your Money_ The Missing Manual Part 14

Lowering maintenance costs Proper upkeep can save you big bucks over the life of your car. A 2007 article from Consumer Reports found that driving your car to death (keeping it for 200,000 miles or more) can let you save enough money to buy a new car-but only if you take good care of your current vehicle and diligently set aside funds for the new one.

A well-maintained car is safer and cheaper to run. To save money on maintenance, remember to: - Read the manual. This one's obvious, but how many people actually do it? Reading the manual can teach you how to operate your car safely and efficiently. Be sure to check out the manufacturer's recommended maintenance schedule-and do your best to follow it.

- Change the oil regularly. Changing your oil every 3,000 miles is essentially a scam, a marketing ploy from the quick-lube industry. You might need oil changes that often if you drive lots of miles under rough conditions, but for most vehicles, it's okay to change the oil every 5,000 miles or 6 months (whichever comes first). Check the manual or ask your mechanic what's best for your car.TipIf you need a replacement part, you can save money by picking it up from a junkyard. Despite what many people think, junkyards aren't scary. Simply call around to see who has the best price on the part you need, and then ask if they'll pull it for you. If not, bring your own tools to get the part off the car. If you don't know much about cars, bring somebody who does. And dress appropriately-you'll probably get dirty. Finally, keep in mind that many junkyards only accept cash.

- Keep your tires full. If your tires are under-inflated, your car won't handle as well or get the best mileage. If they're over-inflated, they're more likely to get damaged, your ride will be rougher, and you'll have a tougher time stopping when it's wet out.

- Park in the garage, if you have one. (If necessary, get rid of all the Stuff that's hogging the s.p.a.ce-see The Tyranny of Stuff The Tyranny of Stuff.) Letting your car live indoors is easier on the paint job and helps prolong the life of your battery, starter, and motor oil.

- Deal with trouble before it starts. If you notice strange sounds or vibrations, look into them right away so they don't turn into pricey repairs.

Saving on gas Gas is the thing you buy most frequently for your car, which gives you lots of chances to save on it. Here are some ways to save at the pump: - Get a fuel-efficient car. This one's obvious, but the numbers are still pretty eye-opening. As an extreme example, a Hummer H2 uses about five times as much gas as a Toyota Prius. If you can't replace your current car right now, keep fuel economy in mind the next time you're in the market for a vehicle. FuelEconomy.gov has an online calculator (http://tinyurl.com/gascalc) that lets you compare the cost difference between two vehicles based on their mileage per gallon.TipCostToDrive.com lets you estimate your fuel costs for long trips. Simply enter your starting location and your destination, provide some basic info about your car, and the site calculates how much gas you'll use and how much the trip will cost.

- Take good care of your car. "The best way to get the most from a tank of gas is to follow the vehicle manufacturer's service schedule," advises Consumer Reports. That means checking and replacing the air filter at regular intervals, keeping the tires properly inflated, and using the recommended grade of motor oil.TipDon't waste your money on gas-saving products. Both Consumer Reports and the Federal Trade Commission warn that most of these gadgets and additives are bogus. And even when they do work, the savings are miniscule.

- Drive sensibly. Edmunds.com found that the best way to improve fuel efficiency was to accelerate slowly and brake over long distances. Here are some other tips: - Drive at a constant, moderate pace. Cruise control can help with this.

- Don't speed. According to FuelEconomy.gov, each 5 MPH you drive over 60 adds about 25 cents per gallon to your fuel costs.

- Avoid idling. Hypermilers-people obsessed with getting the best fuel economy-recommend turning off your engine if you stop for more than 10 seconds. Even if you're not that hardcore, try to commute when traffic is lighter and plan routes with as few traffic signals as possible to spend less time idling.

- Consolidate trips. If you can, buy groceries, take your clothes to the dry-cleaner, and then drop little Johnny at soccer practice all in one trip.

NoteAir conditioning or windows down? This raging debate has no simple answer; it depends on your car and your driving habits. In general, studies show that it's more fuel-efficient to roll your windows down for city driving and use AC on the highway, but the differences are so small that you should just do what's comfortable.

- Save at the pump. If it's convenient to buy gas at a cheaper place, do it; if not, don't. It usually doesn't make sense to go more than a mile out of your way to find cheaper gas. For example, on a 10-gallon fill-up, saving five cents a gallon only nets you 50 cents.If you plan ahead, you can find cheap gas using GasBuddy.com, which lets people enter current prices at service stations in their neighborhoods. Just type in your Zip code to find gas prices near you. (If you don't get results, that's because n.o.body has entered prices for your area in the past 72 hours.) TipIf you want to track your fuel economy, check out Fuelly (www.fuelly.com), a site that lets you record your vehicle's gas mileage and compare data with other drivers. When you enter info about each fill-up, Fuelly computes your average miles per gallon, cost per tank, and more. There's also a version of the site you can use with mobile gadgets like iPhones.

Car-Free Living The best way to save money on a car is to not own one. Each year, AAA publishes an estimate of driving costs (http://tinyurl.com/driving-costs). They figure the average American spends about $9,369 each year to own a car. That works out to over $25 a day, or $750 per month. Imagine what else you could do with that money if you ditched your car!

Not everyone has the option of going car-free. But for millions of people in cities like New York, Boston, Atlanta, and Los Angeles, giving up a vehicle is a viable option. In Chicago, for example, you can buy a week-long pa.s.s for unlimited subway and bus trips for only $24-that's just $96 per month.

Though many people like the idea of going car-free, it can be tough to actually make the leap. Still, with rising gas prices, more folks are looking for ways to live well without wheels. Most people who give up their vehicles aren't radical, anti-car environmentalists; they've simply decided they'd rather use their time and money in different ways. (For an example, see the story of Chris Guillebeau on Reduce clutter Reduce clutter.) Even if you keep your car, just driving less can save you money. And it may seem old-fashioned, but don't forget walking and biking as ways to get around (and burn a few calories). Or check out the public transportation in your area. If those options won't cut it, look into getting a scooter (you can read about one Get Rich Slowly reader's scooter-based lifestyle at http://tinyurl.com/GRS-scooter.) Or check out car-sharing organizations like Zipcar (www.zipcar.com).

NoteIf the idea of a car-free lifestyle intrigues you, pick up a copy of How to Live Well Without Owning a Car (Ten Speed Press, 2006) by Chris Balish. It includes tips for getting to work without a car, as well as some hints on what do with all the money you'll save!

Finding Deals on Vacation and Travel As you learned in Chapter1 Chapter1, experiences are more likely to make you happy than Stuff. Traveling can create lasting memories, but it can also be expensive: airfare, hotels, restaurants-the costs add up quickly. But you don't need to stay in a luxury hotel to have a good time on vacation. You can travel on the cheap, volunteer, or even stay home.

The best way to keep travel costs down is to set a budget so you know exactly how much you can spend. But because you buy so many little things while on vacation, it's easy to lose track. To keep things in check, use a spending log: Every time you pay for something, write it down. At the end of each day, tally the totals to be sure you're still on budget. You might also want to use envelope budgeting (Envelope Budgeting): Withdraw cash and divide it into envelopes for each day. Once the cash is gone, stop spending until the next day. (Visit Get Rich Slowly to read more about how to track travel expenses and stick to a vacation budget: http://tinyurl.com/vacation-budget.) If you're planning a trip overseas, take exchange rates into consideration. For example, if you're choosing between Paris and London right now, you'll get the most bang for your buck in merry old England. (Exchange rates change constantly, so check around before you travel.) TipHow far will your dollar go? Use Tripbase.com's travel-cost calculator (http://tinyurl.com/trip-calculator) to get a rough idea.

If you're trying to pick a place to vacation in the U.S., keep cost of living in mind. Look for areas where you can stretch your dollar. You can have just as much fun in Minneapolis as you can in New York for a lot less money.

TipTo get more money-saving ideas, follow the adventures of Matt Gross, the Frugal Traveler: http://frugaltraveler.blogs.nytimes.com/. Gross travels around the country-and the world-describing how he saves on hotels, food, and entertainment.

Here are some more tips for making your vacations fun and affordable: - Save up and pay cash. Enough said.

- Plan ahead. While you can sometimes find great last-minute bargains, you're usually better off making travel plans as early as possible. Before you leave, make a list of sightseeing priorities. Use the Web to find free and inexpensive attractions.TipIf you're traveling to Europe, be sure to take advice from Rick Steves (www.ricksteves.com). His website, books, and TV show are packed with info on how to make Europe fun and affordable. I'm a huge fan of his packing philosophy: http://tinyurl.com/RS-packing.

- Travel light. Experienced travelers always give this advice, but rookies seldom heed it. Even if you're staying in the same hotel for 3 weeks, packing light can prevent headaches. For example, don't bother taking stuff you can buy there, like shampoo.

- Settle for less. If you want luxurious meals and accommodations, you'll pay luxury prices. You can still have a wonderful experience traveling second or third cla.s.s. Yes, this may mean stepping outside your comfort zone, but you'll save money and have a more memorable trip. My wife and I honeymooned in Victoria, British Columbia, for instance. Because our budget was tight, we stayed at a $40-a-night dive outside the city so we could afford to splurge on exploring the island.

- Carry a guidebook. A travel guide is worth its weight in gold. You'll pay $20$30 for a good one, but ultimately the book will save you money. It can give you the inside scoop on the best days to visit museums and tell you about free events.NoteShould you buy travel insurance? According to Consumer Reports, the answer is usually no (http://tinyurl.com/CR-travel-insurance), though it might make sense if you're in poor health and traveling overseas. If you do opt for insurance, check out the comparison site InsureMyTrip.com.

- Look for discounts. If you're traveling in the U.S., order a copy of the Entertainment Book for your destination city from Entertainment.com. It includes coupons, pa.s.ses, and discounts for a variety of restaurants, hotels, and attractions. Also consider getting a National Parks Pa.s.s (www.nps.gov/fees_pa.s.ses.htm) or a AAA membership (www.aaa.com).

- Be flexible. Don't be a slave to your itinerary. Some places will be more interesting than you expected and others less, so give yourself the freedom to adjust your schedule accordingly.

- Eat cheap. You'll want to eat out at least a few times, but for many meals, you can save money by picking up food at a grocery store. Stock up on your first day and eat light-and-easy meals throughout your trip. You'll find this especially handy on days when you're rushed.

- Manage your money. Know which payment method is best for each situation. For example, Visa charges a 1% overseas usage fee regardless of whether you use a credit card or a debit card. And some cards charge more than others to make withdrawals from foreign or out-of-network ATMs. Before you travel, find out your accounts' policies.TipIf you're going overseas, remember to let your bank and credit card companies know you'll be gone so they don't freeze your accounts for unusual charges. Also, be sure to make two copies of important doc.u.ments (like your pa.s.sport, credit cards, and driver license); leave one copy with somebody you trust, and take the other with you.

- Steer clear of souvenirs. Souvenirs are almost always Stuff-you bring them home and they turn into clutter. If you want a keepsake, choose something practical. When we toured Ireland, for example, I bought a wool sweater; whenever I wear it, I remember our trip.

Like so much of personal finance, saving on travel comes down to two things: doing it yourself and going against the flow. When you take self-guided tours, prepare your own meals, and arrange your own travel, you make your vacation dollars last longer. And by avoiding tourist traps, traveling during the off-season, and staying in modest hotels, you can save even more.

Travel for the Adventurous If you're a little daring and have the time, you can use slow travel to escape the tourist traps and get a deeper look at a culture-while saving money, to boot. With slow travel, you avoid hotels and instead base your trip around longer stays in hostels, apartments, rental homes, or other creative accommodations. By staying put for a week or more, you can gradually explore the local culture. In many cases, you'll prepare your own food or share a table with your hosts.

There are two ways to ease into slow travel: - Consider a vacation rental, furnished home, or apartment that you can rent for a week or longer. These kinds of places are often less expensive and more comfortable than hotels. Renting a home in another city gives you s.p.a.ce and flexibility. For more info, check out Vacation Rentals by Owner (www.vrbo.com), which connects homeowners with travelers. For each available rental, you can view photos, read about its features, and look at renter reviews. Another option is to swap homes with other vacationers; check out HomeLink (www.homelinkint.org) and HomeExchange (www.homeexchange.com) to learn more.

- For an even cheaper place to stay, look into hostels. Hostels provide travelers with a bed (usually in a dorm-like setting), shared bathroom, and often a kitchen for cooking your own meals. In big cities like New York or London, hostels can run up to $35 per night-still just a fraction of the cost for a hotel. In smaller cities, they can be as cheap as $10 per night. Though hostels are more commonly used by younger folks, most welcome travelers of all ages. For more info, visit Hostelling International USA (www.hiusa.org).

You can learn all about slow travel at www.slowtrav.com and and www.sloweurope.com. The following two sections cover two more slow-travel techniques: hospitality exchanges and volunteer tourism.

NoteProfessional traveler Nora Dunn has a brilliant piece at IWillTeachYoutoBeRich.com that describes how to travel the world full-time for less than $14,000 per year: http://tinyurl.com/dunn-travel. If you've ever dreamed of touring the world, this is a must-read article.

Hospitality exchanges If you like meeting new people, a hospitality exchange is a great way to save money. These exchanges connect folks who have extra room in their homes with travelers who need places to stay. Costs are minimal, and you get an excellent introduction to another culture-even if it's just in the next state!

CouchSurfing (www.couchsurfing.org) is a free hospitality-exchange network with over a million members worldwide. When you join, you fill out a profile. You can then volunteer to host-by offering a spare couch or bed to travelers-or request to "surf" in somebody else's home. Couch-surfing lets you save money and make new friends in the cities you visit. (Here's a real-life overview of the couch-surfing experience: http://tinyurl.com/GRS-couchsurfing.) You'll find similar communities at The Hospitality Club (http://hospitalityclub.org), Airbnb (http://airbnb.com), and Servas (http://usservas.org/), which has been around for over 60 years. (Note that you have to pay to join Servas.) TipHi Everywhere! (http://hieverywhere.com) is a free site that helps you find (or be) a volunteer tour guide. You tell the site when and where you plan to travel, and if a local guide is available, she can sign up to show you around the city.

Volunteer tourism Some folks want to go beyond sightseeing and get a real feel for the culture, and volunteer tourism is a great way to do just that. Groups like Volunteer Adventures (http://volunteeradventures.com), Volunteers for Peace (http://vfp.org), and Se7en (http://the7interchange.com/) connect people with organizations that need help around the world.

While it's rewarding, volunteering can still be expensive. If you need to keep costs down, consider a work exchange. The site Workaway.info helps travelers see more of the countries they visit while giving something back to the local community. You put in a few hours of hard work each day in exchange for meals and somewhere to sleep. In the process, you experience the local culture, save money, and maybe even learn a new language. The box below has a real-life example.

Your Money And Your Life: A Volunteer VacationJohn is a retired shop teacher from Portland, Oregon. At 73, he spends his summers fishing in Alaska and his winters in New Zealand (where it's summer that time of year).John lives on his own fishing boat while in Alaska, and keeps his costs low in New Zealand by "WWOOFing it." World Wide Opportunities on Organic Farms-or WWOOF, for short-connects volunteers like John with hosts who need help on their farms.John stays on each farm for about 3 weeks doing carpentry, gardening, and yard work. This sort of volunteering helps him escape the tourist mindset: "The real benefit of WWOOFing is being in the culture. When I'm there, I get to do all the things the locals do. It really puts you in touch with the rhythm of things."WWOOF lets you travel the world without spending a fortune. Though John spends 3 months in New Zealand every year moving from farm to farm, his only real cost is the round-trip plane ticket. "You do your work in exchange for room and board," he explains. "I probably don't spend any more than $200 total while I'm actually there."To learn more about WWOOF visit http://wwoof.org, where you can read about the group's philosophy and learn how to volunteer your talents for a few days or weeks-or even years.

Travel Tools You used to have to rely on a travel agent to help you find the best deals, but nowadays you can often track down good prices on airfare, tours, and lodging from the comfort of your own computer. There are number of robust websites to help travelers save money on their adventures.

You're probably familiar with the online travel agencies like Orbitz.com, Expedia.com, Travelocity.com, and Priceline.com. But there's another group of lesser-known sites called aggregators-they go out, find the best deals from a variety of sources (including the online travel agencies), and gather that info all in one place. This saves you from having to dig around on dozens of different sites yourself.

Kayak.com, Momondo.com, Mobissimo.com, and Skyscanner.net are all good fare aggregators (though Kayak is by far the most popular). You can't book anything through them, but they help you search for the cheapest flights, hotel rooms, and rental cars, and then point you to the places where you can make reservations.

The problem with big aggregation sites like the ones listed above is that they don't include many small, budget airlines. For that, you need a site like WhichBudget.com, a favorite among international travelers. WhichBudget can tell you which budget airlines fly specific routes. This is especially useful if you can't find a larger airline to get you where you want to go. Budget Flight Finder (www.budgetflightfinder.com) offers a similar service.

The web is filled with other tools you can use to get better deals on travel, including: - Travelzoo.com, which bills itself as the largest publisher of travel deals on the Internet. At the site, you can sign up for a weekly email list of the top 20 travel deals on the web.TipMy wife swears by TripAdvisor.com. This site won't help you find the best deals, but it can help you find the best values. TripAdvisor members rate and review hotels, restaurants, and destinations. Using this feedback, you can find out which places are overpriced-and which offer the best bang for your buck.

- Airfare Watchdog (www.airfarewatchdog.com) sends you daily or weekly email updates about travel between destinations you choose. If, for example, you want to travel from Pittsburgh to visit your cousins in Phoenix, you can ask Airfare Watchdog to keep you updated on ticket prices. The site also features its top 50 fares of the day.

- If you're in school, Student Universe (www.studentuniverse.com) often has the best deals on airfare. (These offers apply to college students and faculty.) The site also helps you research hotels, rental cars, and more. EF College Break (www.efcollegebreak.com) is another great resource for students, providing affordable tours of other countries.

- If you want to take a cruise, VacationsToGo.com is a must-visit site. When the cruise lines can't fill their ships, they discount the unsold cabins and sell them through this website. You'll find the best bargains during a cruise's slow season-and usually in the last 90 days before departure. You may also want to take a look at CruiseCompete.com, which lets travel agencies blindly bid for your business.

- Tired of getting stuck in the worst seat on the plane? SeatGuru.com contains a library of layouts for over 700 different planes, as well as info on where to find power outlets, overhead TVs, and bathrooms. SeatGuru won't save you money, but it can certainly make your trips more comfortable.

- Yapta.com (short for Your Amazing Personal Travel a.s.sistant) can help you find flights, track fares, and get alerts when a fare drops into your price range. Yapta also acts as a sort of PriceProtectr.com (The Tyranny of Stuff) for travel: Enter your flight confirmation number, and Yapta tracks ticket prices. If the price drops below what you paid for it, Yapta sends you an alert so you can take advantage of the better price.

Savvy travelers suggest using these web-based tools to find the flights and hotels you want-but then purchasing tickets or accommodations directly from the source. The tools will help you find the best deal, but you'll usually save even more by booking directly with the hotel or airline.

Hometown Vacations When was the last time you vacationed in your city? I've lived in and around Portland, Oregon all my life, but never really viewed it through the eyes of a tourist. A couple of years ago, I spent a day doing touristy stuff with a friend from L.A. I had a great time, and learned more about my city in those few hours than ever before.

A hometown vacation-a staycation-can be both frugal and fun. As the site Finance for a Freelance Life notes in the article at http://tinyurl.com/MM-staycations, there are lots of advantages to hometown tourism: You save big on accommodations, since you don't pay for any. You also save on gas and travel expenses, and by packing meals from home. Perhaps best of all, vacationing in your hometown lets you stay in your comfort zone; you can use your knowledge of the area to pick cheap attractions.

But you don't have to pinch pennies during a staycation. You'll still save money even if you stay in a nice hotel, dine in fancy restaurants, see a show, and take a couple of tours. Because you don't pay any travel costs and you're familiar with the area, your vacation dollars go much further in your own city.

Regardless of how much you choose to spend, here are some tips for enjoying a vacation close to home: - Set a budget. Whether you opt to take the frugal approach or splurge, create a spending plan and stick to it, just like you would on a regular vacation.

- Grab a guidebook. Tourist guides contain great info about cheap eats, cool spots, and local history. You can find guidebooks at local bookstores or better yet, borrow one from your public library. If you're a member of AAA, pick one up for free at the local office.

- Book a tour. Tours can be a fun way to get to know a city's history and trivia-even if you've lived there all your life. For example, Portland offers walking tours of local microbreweries. What's your city known for?

- Be adventurous. Be bold and try new things. If you live near a river, go kayaking. If you live near the mountains, go hiking or skiing.

- Chat it up. Talk with the actual tourists. Ask them what they like about the city. Get recommendations for cheap or fun spots to visit. Answer their questions. Talking with tourists is an excellent way to see your surroundings with new eyes.

- Be unreachable. Pretend you're vacationing out of town, even if you're still at home: Ignore the phone and don't check email. After all, a vacation is a time to relax and forget the cares of the workaday world-whether you're on a Caribbean cruise or simply walking down Main Street.

- Swap houses. Have some like-minded friends? Swap houses for a week (or a weekend). This cheap change of scenery can make you feel like you're in a completely different city. It may also give you insight into neighborhoods you haven't explored.

- Mix things up. When you've lived in the same city for 5, 10, or 40 years, you tend to have favorite routes, places, and things to do. A staycation is a chance to explore. While preparing for your vacation, keep a list of things you'd like to see and do. Ask your friends where they take out-of-town visitors. Use the events guide in your local paper to research activities.

TipIn their book America's Cheapest Family, Steve and Annette Economides suggest using a staycation for a mix of work and play. They write that, in addition to saving money, there's another benefit to taking a hometown vacation: "Completing a home improvement project during a week of vacation may sound illogical, but it can really be a stress reliever."

You can probably have a better time in your own city than you would somewhere hundreds of miles away-and for much, much less.

Cash Is King Did you notice something about the recommendations in this chapter? In each case, the best way to save money on big things is to save money for them. When you use cash instead of credit to pay for a car or vacation, you can save hundreds (or even thousands) of dollars. All the money you would have otherwise paid in interest goes directly to boosting your cash flow, making it easier to save for retirement-and to pay cash again in the future. So planning ahead and saving for expenses isn't just a great way to get organized-it actually saves money.

In the next chapter, you'll learn ways to save on the biggest expense of all: housing.

Chapter10.House and Home.

"A house is made of brick and mortar, but home is made by the people who live there."-M.K. Soni Housing is by far the largest expense in most people's budgets. According to the U.S. government's 2008 Consumer Expenditure Survey, the average American family spends $1,747.83 on housing and related expenses every month. That's more than they spend on food, clothing, healthcare, and entertainment put together. So if you want a quick way to improve your financial health, housing is the place to look.

So far, you've read about a lot of different ways to save money: You know how to spend less on groceries, trim your transportation budget, and use credit wisely. Everyday thrift can boost your cash flow, helping you to get out of debt and save money. But even all those changes combined don't have the power to affect your budget like what you spend on housing.

This chapter will give you the facts you need to make smart housing decisions.

The Eternal Question: Rent or Buy?

Deciding whether to rent or buy is a complicated financial and emotional decision. Real-estate agents like to say, "Renting is like throwing your money away." On its surface, this advice seems to make sense, so it gets repeated a lot in popular culture. But in a 2008 issue of Newsweek (http://tinyurl.com/nw-rentok), Robert Shiller, a professor of economics at Yale University, wrote, "The popular argument that renting is equivalent to throwing money down the drain is really fallacious."

In some cases, it does make financial sense to buy a home. But in other situations, renting is the better choice. And often, there's not a lot of difference between the two, especially if you're smart and keep costs low. The decision usually comes down to personal preference. Let's take a brief look at the pros and cons of each.

Here are the advantages of owning your home: - Stability. When you take out a mortgage, you know what your payments will be for years to come. There's no landlord to change the rules, and you don't need to worry about being kicked out at a moment's notice.

- Equity. As you make your mortgage payments, and as the property's value increases, you build equity, which is the difference between what you owe on your house and what you could sell it for. In other words, it's how much value you have stored in your home. For example, if your house is worth $225,000 and you owe $175,000, you've got $50,000 in equity.

- Freedom. You can do what you want with your home and yard, like plant a garden, paint the ceiling purple, or install a wet bar in the bas.e.m.e.nt.

On the other hand, the advantages of renting include: - Flexibility. With a rental, you don't have a long-term commitment. You can move on short notice, whether to get away from bad neighbors or to take advantage of lower rents elsewhere. There's also a wider range of rental options than homes for sale. It's difficult to buy a tiny house, for example, but you can easily find one- or two-room rentals.

- Lower costs. In the June 2007 issue of Kiplinger's Personal Finance Kiplinger's Personal Finance ( (http://tinyurl.com/kip0607), editor Knight Kiplinger wrote, "It often costs less to rent. The annual cost of owning a property, be it a house or a condo, is usually greater than the cost of renting, after taxes." True, you don't build equity when you rent, but you're not burdened with taxes, insurance, and maintenance costs either. You can use the money you save to travel or buy stocks.

- Lack of responsibility. When you rent, somebody else does the yard work and repairs the leaky showerhead. (Of course, this can be a disadvantage if your landlord is slow to respond to problems.) All you do is stick to the terms of your lease or rental agreement and someone else takes care of the rest.

Both sides of the rent vs. buy argument can trot out numbers and statistics to prove why they're right and the other side is wrong. The bottom line is that the decision isn't just a financial one, so it's hard to generalize. Yes, renting can save you money and it comes with far fewer ha.s.sles than owning. But owning your home can give you non-financial benefits.

The best way to decide is to think about your goals and figure out what makes sense for you. Ask yourself these questions: - How long will you stay in one place? The longer you plan to stay put, the more sense it makes to buy a home. Buying lets you recover your costs and build equity.

- How do costs compare? Find a good rent-vs.-buy calculator and crunch the numbers. The New York Times has a nifty web-based calculator (http://tinyurl.com/NYT-rbcalc) that can help you compare costs for renting vs. owning. The site lets you plug in numbers for your situation, and then shows you how long it would take to break even with buying.

- How would you spend the savings? When renting is cheaper, you can use the money you save to pursue other goals. Sure, you could spend the cash on purses and videogames, but you'll be better off in the long run if you use it to fund your retirement (see Chapter13 Chapter13), budget for a new car-or even save for a down payment on a house.

- How do you feel about homeownership? For some, owning a home is a piece of the American Dream. For others, the ch.o.r.es and maintenance are a nightmare. Your feelings about homeownership are just as important as the financial stuff.

NoteHere's an excellent article from the New York Times (http://tinyurl.com/NYT-buying) that explains why the author-a long-time renter-decided to buy a home. It does a good job of laying out the pros and cons of each choice.

If you decide to buy, do it for the right reasons: because it fits your goals and will make you happy. Don't do it because you think it's a good investment. A mortgage is not a retirement plan-it won't make you rich. Instead, think of it as an investment in a certain lifestyle. If homeownership is a lifestyle you want and can afford, then buy; if not, rent.

Tips for Renters One advantage to renting over buying is you have a lot more options, so make the most of it. Be choosy; don't settle for the first thing you see.

Pick a neighborhood close to work or school, and one with stores and entertainment options. If exercise is important to you, find a spot that gives you access to s.p.a.ces for biking or running. By finding a rental in a walkable neighborhood, or next to a bus or train line, you can save tons by not owning a car (see Car-Free Living Car-Free Living).

TipTo find out how walkable an address is, check out WalkScore.com, which calculates how close it is to things like restaurants, libraries, and grocery stores.

Don't rent a place if it's going to cost so much you can't afford to have a social life or meet your financial goals. A good rule of thumb is to limit your monthly rent to no more that 25% of your pre-tax pay. You can use the Rentometer (www.rentometer.com) to find affordable rentals in your area.

TipIf you have the time and inclination, you can save money by taking a gig as an apartment manager. Yes, you'll have to deal with locked-out tenants and leaky faucets, but you'll get free (or at least reduced) rent. The box on Renting out a spare room Renting out a spare room has an example of someone who does this. has an example of someone who does this.

Before you sign a lease or rental agreement, tour the unit you'll live in. This may seem like common sense, but you'd be surprised at how many people rent places sight unseen. If you can, visit the unit at various times of the day, and maybe once over the weekend. A neighborhood that's quiet on a weekday morning may be party central on Friday nights.