Buying a home can be a sound financial decision. As you gain equity in your home by paying off your mortgage, you want to make sure that you setting a financial foundation that will allow you to be happy and carefree in the future. The following are ten tips that can help you achieve the financial freedom and security your family needs.
- Save for Emergencies: Life happens. And when it does, you need money. Try to keep $500 to $1000 in your savings at all times. Most everyday financial emergencies are somewhere in that range. When an emergency comes along, you can take care of it.
- Set up a home repair and maintenance budget: Your home will probably be the biggest investment you will make. Protect your investment by keeping it in good repair. Little problems can become big problems fast. With a repair and maintenance budget, you can take care of problems as they come along. It’s good to keep at least 1%-2% of the value of your home in savings.
- Get into the budgeting habit: A budget is simply a plan for how to spend your money. It can’t tell you what to do but it can help you achieve your financial dreams. Sit down and write out YOUR monthly plan for spending YOUR money. Be realistic. Put an amount down for everything you spend throughout the month. Then decide if you’re spending in a manner that achieves your financial goals. If it doesn’t, decide what changes you can live with.And don’t let that nasty budget bully you.
- Live below your means: You should be able to save at least 10% of your income every month. If your budget is too tight to manage that, you need to trim a little. Not saving is called living paycheck to paycheck. And it’s miserable. Even a bunch of small changes can add up to big things.
- Put your accounts on autopilot: Late payments can sabotage your plan. Penalties can add up fast. The average late fee on credit cards is $35. If you have trouble remembering your due dates, set up automatic payments through your banks. Keep your hard earned cash for your goals, not your credit card company’s goals.
- Don’t finance household luxuries: It’s great to move into a brand new home. Then you move your old furniture in and suddenly it’s time to buy a new couch. Is it really worth your financial security to have that new couch right now? Sitting on your ratty old couch for a few months will allow you to save for your next couch. They you can buy it for cash and pay no interest charges. You may even be able to negotiate a discount for paying cash. Many retailers will knock off around 5% if you pay in full with cash.
- Cash is king: Studies show that most people who pay with credit cards instead of cash spend almost 50% more than their cashy counterparts.
- Treat debt like a deadly disease: All debt is toxic. How can you tell? Get laid off and you’ll know it immediately. That credit card payment that you thought you could handle looks a little different when you don’t have much cash coming in. Sometimes debt is necessary. It’s difficult to purchase a home without it, but try to keep your debt down to necessary debt. Credit cards should be paid in full each month. When you’ve paid off your car, continue paying your car payment to your savings account and you’ll never have another car payment.
- Clean up your credit: Maintaining a good credit score will actually help you save money. Auto insurance providers base their rates, in part, on your credit. Low scores can cost you on a monthly basis. If you have to borrow money, a low score can make borrowing very expensive. If you lose your job and need to move quickly, you won’t be able to finance a new home at a low rate. Aim for the mid700’s. Also, check your credit at least once a year for free at www.annualcreditreport.com to correct errors or make sure that nobody is using your credit for their own. You’re entitled to one report free from each credit bureau every 12 months.
- Have some fun: Life should be fun. You work in order to maintain your lifestyle. If you’re not having any fun, what’s the point? Set aside some money in your budget, monthly, for a little bit of fun. I doesn’t have to be a lot. Go out for ice cream or order a pizza on a Friday night.
