FINANCING
How to profit from your move

By Marilyn Kennedy Melia
Special to the Tribune
Published June 16, 2002

The financial anxiety associated with a whopping new mortgage payment is a key reason why moving is considered a stressful event.

In the first year or two in a house, when owners typically spend a lot on home furnishings, budgets are particularly pinched. But financial experts say that a move is also an ideal time to adopt new budgeting practices and pare expenses like utility and insurance bills.

Here are some suggestions of financial moves that fit right in with unpacking boxes and establishing a new household:

- Tracking, then trimming expenses.

Like therapists who ask their patients to keep a journal to uncover daily emotions, financial planners routinely ask cash-squeezed clients to record every purchase for a month.

"You must write down everything, even the very small things, because you can be nickel and dimed to death," says Gwen Reichbach, director of the National Institute for Consumer Education at Eastern Michigan University in Ypsilanti. Ideally, start recording spending a month before you move in order to discover discretionary purchases that can be eliminated, Reichbach says. After you move in, keep the journal for another month. Then, devise a plan for buying within a reasonable budget.

- Cut regular household bills.

You're going to be calling the cable company, phone companies, Internet service and utility companies to establish new service. It's a great time to scout out the most economical plan. "Households spend a greater portion of their budget [on utilities and services] than they need to, particularly long distance," says Allan Keiter, president of MyRatePlan.com.

Sites like MyRatePlan.com and LowerMyBills.com allow consumers to enter information about how they use services such as phone and satellite TV, and then be presented with suggestions of the most economical plans.

- Hold down insurance costs.

Before you move, you'll be required to obtain homeowners insurance coverage for your new place. Mortgage lenders don't let you close on your new home without it, and they often add the premiums for homeowners coverage to your monthly mortgage bill.

The insurance portion is likely to inflate your mortgage payment significantly, because insurance companies lately have been raising rates dramatically. "Especially if you are able to keep an emergency cash fund, it's smart to go with a high deductible on your insurance, because the higher the deductible, the lower the premium," counsels Leisa Aiken, a financial planner with Kabarec Financial Advisors, Palatine.

- Adjust withholding.

The upside to being faced with a bigger mortgage bill is that you'll also be deducting more interest and real estate taxes on your federal income tax return. Especially if your mortgage is significantly higher, you might want to capture some of the tax savings immediately by adjusting the amount of tax your employer withholds from your paycheck. "If you do your own taxes and use software like TurboTax, you can plug in your new interest and taxes and any points you paid on your mortgage to see how much extra you're going to save on taxes and how much you can adjust your withholding," Aiken says.

Homeowners can take the withholding questions to their tax accountant, adds Gus Vidal of McBeath, Fates & McClean in Roselle, or may find that their employer's human resources department at work can provide advice. "Just make sure you don't end up withholding too little and owing money at tax time," he cautions.

- Bank better to save fees.

Consumers are notoriously loyal to their bank, because it's just too much of a hassle to change banking relationships. Moving to a new location, where your old bank is no longer conveniently around the corner, may be a good time to find a more economical banking plan. "Look at your habits, like whether you write a lot of checks or whether you use ATMs a lot," Reichbach suggests. "Then look for the bank that's going to give you the most -- free or low-cost checking if you write a lot of checks, or free ATMs near places that are convenient to you."

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