Search Results for: budget

Making Your Way From Broke to First Time Homebuyer, Here’s How

February 18, 2020 By Susan Paige Leave a Comment

If you’re one of the many Americans counting down the days until you’re no longer “throwing money away” for rent, you’re not alone. Buying a home is the largest purchase the average person will make in their lifetime, which is why it’s essential to prepare for such a significant investment. If you’re ready to make your way from broke to a first-time homebuyer, keep reading.

Determine your budget

Before you begin dreaming of mini-mansions, you need to know how much house you can comfortably afford with your current income. The word “comfortably” is used purposely here because many real estate agents and mortgage lenders will show you homes at the upper end of your budget, which is great if you want to survive on rice and peanut butter each month.

Use one of the many free mortgage calculators online to determine how much house you can afford with your monthly housing budget. Again, try to stay on the low side of that number to make sure you have enough money left over each month to save for unexpected home maintenance and repairs.

How’s your credit?

Quick — what’s your credit score? If you can’t answer right away, it’s time to run a credit report and find out where you stand. If your credit score is on the low side, now is the time to develop a strategy to raise your score to get you into a home by qualifying for a mortgage with a decent interest rate.

If you have overdue bills, begin working with collections agencies to pay off those outstanding balances and get the “dings” removed from your credit report. Specifically, ask the representative for the balance you need to “pay to delete” the debt collection from your credit report and get it in writing.

Many younger buyers struggle with low credit score simply because they haven’t amassed enough credit. Consider asking a parent to add you as a registered user on one of their cards to help you build credit; only do this if your parent has a solid credit score and history of on-time payments, or you could adversely affect your credit rating. You can also open a credit card with a small line of credit and use it each month to amass a history of revolving payments. Most of all, be patient, as building your credit takes time.

Save for your downpayment

If this is the first foray into your first time home buying education, you need to know that you don’t necessarily have to have twenty percent saved for a downpayment. When you use a mortgage calculator, you can also have it show you the amount you’ll need for a downpayment, but this amount will vary depending on your circumstances.

When you’re saving up for your first home, realize that your down payment percentages could be as high as 10 or 20 percent, or as low as 3.5 percent to zero down; it all depends on the type of loan you’re after. If you struggle to save, then a first time homebuyer or FHA loan may be the best option, only requiring 3.5 percent down to purchase. However, if you have no problem saving ten percent, a conventional loan may save you money in the long run. Talk with a mortgage lender to determine the types of loans you’re eligible for, and which one makes the most sense for your financial situation. Remember, this is the largest purchase you’ll make in your lifetime, so be sure to weigh all of your options.

Expect the unexpected

If you think everything’s smooth sailing once you sign the paperwork and move into your new home, you’re mistaken. There are several surprises you’ll encounter as a first time homebuyer, including taxes, homeowners association fees, insurance, and maintenance costs. Again, this is why you don’t want to max out your monthly housing budget with your mortgage payment, as things will invariably pop up.

It’s not uncommon for things to go wrong with your home shortly after purchasing, and you’ll quickly find out that even something as minor as having to have a plumber come out for a repair can be costly. So, just in case your furnace decides to quit, or your central air conditioning stops pushing cold air, you have funds set aside each month as a failsafe.

When you research your options, you’ll find that the road to homeownership is straighter than you’d originally imagined, and perhaps even a little shorter. Planning, patience, and persistence will take you from broke to first-time homebuyer.

4 Ways TV Watching is Hurting Your Finances

February 3, 2020 By MelissaB Leave a Comment

There’s nothing better after a long, hard day of work than to kick back and watch your favorite television show. However, what you consider to be a harmless way to unwind may be affecting your wallet in ways that you hadn’t even considered. In fact, there are 4 ways TV watching is hurting your finances.

Expense of Cable

At the most obvious level, you’re paying money to have the television set, pay for the cable, and use the electricity. If you still have cable, you’re likely paying $60 or more for the privilege of watching a wide variety of channels. That is at least $720 a year. If you’ve broken up with cable, congratulations, you’re saving yourself some serious money.

4 Ways TV Viewing Is Hurting Your Finances — Photo by freestocks.org on Unsplash

However, you likely pay for Netflix or other similar programs. You might be spending as little as $11 a month on this, so you’re looking at approximately $130 a year, much better than paying for cable. While you can pat yourself on the back for this smart move, know that watching shows is still costing you money, but in different ways.

Unrealistic Expectations

Watching television shows and movies can fill you with unrealistic expectations. While you may make a modest salary and be in the market for a modest house, thanks to shows like House Hunters, you expect a large master suite, a perfectly manicured lawn, and a three car garage. Your expectations have been elevated outside the realm of your own budget thanks to television.

Likewise, you may see characters like Rachel on Friends struggling to make it working as a coffee shop waitress, yet she wears glamorous clothes and has a nice New York City apartment. This is not reality, but television isn’t about being real. It’s about selling a dream, and most of the audience accepts the dream at the cost of their own finances.

Takes Time Away from Other Pursuits

The average American aged 35 to 49 watches five hours of television a day! (NY Daily News). That is 35 hours a week. Imagine all of the other things you could do with that time. You could invest your time in growing your income, whether that means a side hustle, going back to school to increase your future income, taking online classes, or reading a book. Your time could be used in so many other productive ways. Plus, advertisers would not be able to reach you as they reach those passively watching television, which means you’d likely keep more money in your pocket.

Health Issues

Finally, those 35 hours of passive television watching can take quite a toll on your health. Not only are you likely to indulge in unhealthy snack foods while watching television, you’re also not exercising. Years of excessive TV watching can lead to an increase in weight and health issues. In fact, according to CNN, researchers discovered that “for every additional two hours people spend glued to the tube on a typical day, their risk of developing type 2 diabetes increases by 20% and their risk of heart disease increases by 15%.”

While watching television may seem like a harmless pastime, keep in mind how much it’s really costing you. If you want to relax, consider grabbing a book instead or hanging out with friends.

How much television do you watch? Do you agree that T.V. viewing is affecting your finances, or do you not feel it has an effect?

The Best Spacing of Children for Your Finances

January 30, 2020 By MelissaB Leave a Comment

My husband and I have three kids. The first two are 4.4 years apart, and the second two are 17 months apart. Our younger two get along great and are playmates most of the time, save for the occasional fight. Our oldest is so far apart in age from them that he doesn’t really have much to do with either of the younger ones.

If you’re just starting your family or planning to do so, you may wonder what the perfect age separation is between your children. That can vary wildly depending on your family, your kids, and their interests. However, if you’re looking at the best spacing of children for your finances, I’d recommend having children 4 to 5 years apart.

Why? There are several reasons:

Braces

The Best Spacing of Children for Your Finances — Photo by Luis Quintero on Unsplash

My oldest got braces when he was 11.5, but they didn’t come off until he was 13.5. We paid in installments (interest free) almost that entire time. As soon as his braces were paid off, literally the next month, our middle child started the process of expanding her jaw to prepare for braces. I’m thankful that we didn’t have to pay for braces for two kids at once. I’m also thankful that it looks like our youngest won’t need braces, so I still won’t have to pay for braces for two kids at the same time.

Growth Spurts

I think our oldest is on a permanent growth spurt, and his appetite is no joke. It was nice, for a few years when his rapid growth and appetite were larger than my husband’s, to still have two smaller children who had much smaller appetites. I can’t imagine having three ravenous teenage children at once who are eating me out of house and home.

Day Care Costs

Our oldest attended day care and preschool while I continued to work. He had almost finished preschool and was nearly ready to go to a public kindergarten (read free!) when we had our second child. I did get ample maternity leave with my second, so we didn’t have to worry about paying for two kids in day care.

However, I was only back to work a short while before I became pregnant with #3. When I thought about returning to work and looked at the daycare costs for two children under two, I realized I would be working simply to pay for daycare. I quit my job and have been working as a freelance writer from home ever since.

College

This is probably the biggest reason to space your children four or five years apart. You can get one child through college before the next one starts. Sure, if you have more than one child in college you’ll likely qualify for more financial aid, but it will still cost you more than if you were paying for only one child in college.

Empty Nest

Okay, this one doesn’t have much to do with finances, but when you space your children further apart, you become an empty nester much more slowly. When my oldest leaves home, I’ll likely still have several years at home with my younger two. I can’t imagine having all of my kids move out around the same time if they are closely spaced together.

Of course, there are many considerations, not just financial, when deciding how closely to have your children. However, the best spacing of children for your finances is four to five years apart.

If you have kids, did you decide on spacing based on finances or other factors? How far apart did you space your kids and why?