Keep reading to see how to make it happen so you can make a budget that works for you. When you learn how to make a budget-and do it every month-you’re giving your money purpose. It’s a plan for what’s coming in and what’s going out. It’s not a restriction on spending-it’s a plan for what you’ll do with your money. Real quick though, let’s define the word budget. Make a New Budget Before the Month Begins.Here’s how to make a budget in five steps. So, here we go-bite by bite, step by step. (You go one bite at a time.) And no one leaps into budgeting like a pro. Because no one eats an elephant by swallowing it whole. A buyer’s agent fights for your best interests at the negotiation table and saves you an average of 5% on your home purchase.Making a budget might seem overwhelming at first, but hear this: You can do it. Now here’s how to keep more of it when you buy: Partner with a fantastic real estate agent. You’ve worked hard to save your money for a home. Lots of folks have done it, and you can too! You won’t regret it. You also want to wait until you have a fully funded emergency fund to cover any unexpected expenses that come your way, plus you want enough cash to put at least 10–20% down on your new home. If debt is taking up any percentage of your income right now, hold off on purchasing a home and work at becoming debt-free first. It’s not the American Dream if you live under a leaky roof you can’t afford to fix! That’s because Dave recommends paying off all non-mortgage debts before taking the leap into home ownership. You may have noticed one category wasn’t included in our sample budget: debt. Related: Want to learn more about how to save up a down payment on a house fast? Our 5-Day Home Buyer Savings Planwill help you discover simple tricks to save a five-figure down payment by this time next year! Isn’t Something Missing? Feel free to make it your own! Just make sure your mortgage payment doesn’t eat up more than a quarter of your monthly income so you have enough money to cover the other categories without straining your budget. If some of these categories don’t fit, repurpose your money elsewhere. We’ve assumed some things in this sample. Why is zero the magic number? Because that means you’ve given every dollar a purpose.Įverybody’s budget is going to be different. The magic happens when your income minus outgo equals zero. Don’t forget to save a little extra each month to cover regular maintenance as well as well as future home improvements and furniture replacement. Dave recommends keeping your mortgage payment to no more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage. That leaves $1,500 to cover housing costs. Here are a few common categories to consider. Start by adding up every source of income that comes into your checking account each month. If you need help figuring out how much house you can afford, try our free mortgage calculator. If you’re not ready to make an all-cash offer, however, you need to factor a mortgage payment into your monthly budget. If you follow Dave’s favorite home-buying plan-paying cash for your home-you’re only limited by how much you can save. Let’s break it down into a real-world example to see how it works. Budgeting may get a bad rap, but it’s really quite simple to do. That’s where the dreaded B-word comes in. But how do you know how much home you can afford? Owning a home is a huge blessing when you have the money to make it work.
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