Are you on the lookout for a home?
For many Australians, becoming a homeowner is one of our top 10 biggest dreams in life, isn’t it?
That moment when you’ve managed to accumulate enough savings for a deposit on your dream house… pretty close to a heavenly feeling.
Unfortunately, what comes next is less heavenly for many people.
Once you’ve bought a house, your financial situation can get gloomy pretty fast. Your bank account lowers while your monthly expenses increase. That wasn’t your happy homeowner expectation, was it?
Hear me out: This doesn’t have to be your homeowner experience.
I believe buying a home should be a joyful and fulfilling experience. It’s an achievement after all.
This is why I am going to share with you a few bullet-proof ways to not only protect but increase your wealth, even after you’ve become a homeowner.
Keep your emergency fund fully-stocked
When thinking of buying a house, a lot of people use their emergency fund as their deposit for their new house.
Is this a wise financial move?
I don’t think so. Here’s why.
More often than not, your homeowner status comes coupled with some unanticipated expenses, such as:
- little renovations here and there
- unexpected pipe bursts (oops)
- furnishings exceeding your initial budget
These are all emergency fund expenses.
Do you see the problem?
Once you’ve used up your emergency fund on your down payment, you’ll have no funds when you need them the most.
My advice: Keep your emergency fund fully-stocked and use it only for emergency expenses. Create a down payment fund for your house and you’ll be a financially secure homeowner.
Keep saving for your retirement
Here’s a mistake I’ve seen many people make once they become homeowners: they forget about their retirement savings. The focus of all their savings is on their newly acquired home.
Don’t make the same mistake. Keep saving for your retirement, even after you’ve bought the home of your dreams.
My recommendation is to settle on a mortgage payment that allows you to keep saving for your retirement. In the long run, you’ll be happy you made this wise financial move.
It’s never too early to start a budget for your new home expenses
I know budgeting might be a boring topic. Planning and budgeting is the wise thing to do, especially when you’re thinking about buying a home.
Tip: Budgets help you foresee and prepare for future expenses. The more specific you are with your budgets, the better.
Here are some expenses you can prepare for in your new home budget:
- property taxes
- homeowners insurance and HOA (Homeowners Association) dues
- landscaping costs
- increased utility costs
- commuting expenses
- general maintenance costs
Have you heard about housing ratio?
Is a debt-to-income ratio stating your monthly mortgage payments shouldn’t add up to more than 28% before your taxes.
Let’s have a quick chat about debt
The reality is everyone has their own share of debt. Some get a hold of it while some are held captive by it.
Here’s a friendly advice for your financial security:
- keep your debt under control
- try to get rid of it as fast as you can (ideally)
Assessing your debt and keeping it under control will help your credit score. A good credit score will increase the chances of you becoming a happy homeowner.
So let’s take a look at some practical ways to ensure you get a good credit score:
- assess all your credit card and loan debt and look for realistic ways to pay them off
- lower your debt-to-income ratio as much as you can to make your mortgage payments manageable in the long run
Assess your life plans
Most of us want to become homeowners sooner rather than later, isn’t it?
The majority of your life changes will happen in your 20s and early 30s. It’s wise to make a realistic assessment of all your life plans and make sure they align with your plan to become a homeowner. Ask yourself:
- Do I have a stable job to sustain all the new house expenses?
- Is this space family-friendly?
- Do I have plans to move to another area in the future?
These are all great questions to start assessing your long-term plans and goals. You want to make sure your plans of buying a house right now is compatible with your other life plans. This is also called smart investing.
Don’t buy into the idea that purchasing a house is most stressful and expensive. With some wise planning and preparation, you can make it a joyful achievement, which is exactly what it should be.
Buy a home and get wealthy at the same time
Let’s celebrate your home ownership! It might be one of your biggest achievements so far. I want to help you protect and increase your wealth while enjoying its rewards. Let’s get in touch!
Jim Mills
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