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Living a 'Less than average' Life: Housing

Danny Kofke and family In these troubled economic times, there's a lot of anxiety about providing the finer things in life for your family in order to keep up with the Joneses, that mythological, average American family who seems to have it all. But for people who are willing to step off that endless cycle of acquisition, the rewards can be great. Some who embrace a "less is more" ethos -- who are perfectly satisfied being "less than average" -- are motivated solely by the desire to live a simpler life. But scaling back can also yield serious savings.

This is the first in a series of pieces about living "below the average." WalletPop has interviewed real Americans who've made a conscious decision to scale back their homes, their cars and various personal luxuries in the name of saving big bucks. We also spoke with financial experts who offer their professional advice about the best ways to cut back so you're no longer trying to keep up with those darn Joneses.

Home, sweet home
Home may be where the heart is, but it's also where a majority of the debt is for the average American. Some devotees of living a "less than average" life reduce that burden by choosing where they live based on cost of living rather than family ties or career opportunities.

Take Danny Kofke, for example. Kofke moved his family from Florida to Georgia four years ago in order to lower their cost of living so his wife could be a stay-at-home mom to their two daughters. And the difference in the cost of housing was so great, Kofke was able to refinance to a 15-year, rather than a 30-year, mortgage to pay off his home in half the time. "We live below our means to make it off my teacher's salary," he told WalletPop.

According to the National Association of Realtors, the average single-family home price in January was $163,600. Although experts recommend putting down 20% when buying a home, the reality is that most of us don't do that. According to NAR spokesperson Walter Molony, first-time homebuyers put down a median of only 4% of the purchase price. Repeat homebuyers put down 15%, still less than the historic 20%.

What this means is, if you were a statistically average first-time homebuyer and paying the current average interest rate, you'd be paying $850.81 each month for your mortgage. (Keep in mind, this total doesn't include private mortgage insurance, which most lenders require if you put less than 20 % down.)

If you already own your home, there's a good chance you're paying much more than that each month. Census data from 2008 shows that the average purchase price of an existing, previously occupied home was a much heftier $296,400. In other words, if you were a first-time homebuyer putting down 4% (the average down payment for this group of buyers in 2008, too) and paying the then-average interest rate of 6.03%, you'd be looking at a monthly bill of $1,711.48, plus PMI.

Any way you slice it, that's a significant chunk of change. So what can you do to trim that number? Elisabeth Leamy, savings expert and author of Save Big, says the best move to make to help pare your housing costs to the bone is a bold one: Move.

"Buy a cheaper house than you can afford," Leamy advises. And don't get suckered into those estimates put out by Realtors and banks about how much you "should" be able to afford. After all, Leamy points out, "The more you buy, the more they make." If you're a first-time buyer, it's much smarter to shoot for a monthly mortgage that's around what you're currently paying in rent, she advises.

While this might sound drastic, we here at WalletPop have heard from many Americans who've done or are planning to do just that. Betsy Talbot moved from the suburbs of Boston to a smaller home in Seattle a few years ago in order to save money. "We have a lot more disposable income now than we ever did with the bigger home," she says, adding, "There are so many hidden (and not-so-hidden) costs in living in a large home and trying to 'keep up' with the neighbors."

Utah resident Sheryl Parsons is another American working to free herself from the burden of a monthly mortgage payment. She and her husband pay an extra $400 toward the principal every single month so their mortgage debt will be completely paid off by the time they retire in five years.

If this sounds like too much for you, get ready: There are some people who've taken their housing frugality to the max, like Erie, Pa., resident Andrea Reynolds, who has recently taken to the road to save on housing. She lives in a converted van, which is outfitted with a bed, small fridge and microwave, portable heater and a solar-powered radio. She parks in WalMart lots, at churches or in friends' driveways. (She also house-sits to supplement her income and enjoy the comforts of four walls and no wheels once in a while.) Reynolds estimates this drastic step will save her $12,000 a year, which she can put toward her eventual retirement.

While living off the grid (and showering in truck stops) isn't for everyone, Reynolds is far from the only person to take such a drastic step. Websites like RV-Dreams.com offer tips and how-tos for people who want to effectively camp as a way of life. Elisabeth Leamy says that while she has a couple of free-spirited acquaintances who love the mobility and freedom of a wheeled existence, there are some practical matters that need to be addressed, such as making sure a vehicle has the appropriate insurance if it's also going to double as Home Sweet Home.

And finally, if all this sounds way too drastic to even comprehend, Leamy says a much more painless way to save money on your housing costs and live beneath your means is to appeal your property tax bill if you're a homeowner. "Taxes are very much on peoples' minds right now. People go to all sorts of lengths to lower their income taxes, but only 2% of homeowners bother to appeal [their property taxes]," she points out.

Even before the housing bust, one tax-focused think tank estimated that 60% of homes in the U.S. were over-assessed, and cash-strapped local governments haven't had the resources to update their tax rolls to reflect today's real estate market. Challenging your tax burden can be as simple as writing a letter and filling out a form in many jurisdictions. If you succeed in lowering your tax bill, sock away those extra dollars and start (or keep!) living beneath your means.

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