Get real about your budget before you buy a home
Ah, January. It's the time of year when many of us are reeling a bit from holiday bills and starting to think about tax season. As a result, it is a perfect time to review your finances. Plus, if you are thinking about house hunting this year, it pays to get real about your budget before you buy.
Below are a few steps that can help you get a handle on your budget before starting your house hunt:
Review last year's spending
If you use an online budget management tool, such as Mint or Quicken, it should be easy to pull together all your expenses from 2016. If not, use your bank's online report tools or simply review your printed bank statements. Categorize your spending into groups that include: housing costs, groceries, dining out, entertainment, auto costs, medical and more.
Understanding where your money went last year will help you plan for the new year. It will also highlight areas where you might be able to trim expenses. For example, maybe you don't need to spend $300 per month dining out, especially if it means you would be able to afford your dream home.
Consolidate all sources of income
For many people, income goes beyond a monthly paycheck. Be sure to account for all income sources, from freelance work to stock options and other investments. This list of the most common income sources might help remind you of additional income you can access.
Identify budget priorities
Ideally, your budget priorities will reflect your life priorities. Your spending should align with what brings you a sense of enjoyment and satisfaction. While some expenses are relatively fixed, there are ways to save money in almost all budget categories, from insurance to travel. When you identify your top priorities (including buying a home and building savings), you can better manage your financial life to support your personal goals.
Get ready to buy
Before you commit to a large purchase or a mortgage payment, it is helpful to know just how big a payment will be comfortable. Doing your homework ahead of time will allow you to find a perfect home without straining your personal finances and freedom.
Note: This information is for educational purposes only and is not intended to be professional financial advice. Seek the counsel of a licensed financial advisor with specific financial planning questions.
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