Budgeting — Keys to Successful Homeownership

BUDGETING - Keys to Successful Homeownership

A budget is a plan that lays out your income and expenses as precisely as possible.  Budgets and spending plans are critical to using credit wisely and to meeting financial goals, such as saving up for your down payment or making a monthly mortgage payment.  With the tips provided here, you’ll uncover your spending patterns and discover places where you can save.

Budget your way to a better standard of living

If there is one reason why most attempts at budgeting fail, it is the “you must cut expenses ‘till it hurts” mentality.  When establishing a budget, it’s easy to look only superficially at expenses and start slashing.  For most households, the biggest or most obvious expenses are mortgage or rent payments, utilities, food, transportation, clothing and entertainment.

Following the “cut ‘till hurts” plan, you could:

  • Move to a less expensive neighborhood or apartment
  • Reduce home heating by keeping the thermostat at 62 degrees and wearing lots of sweaters
  • Cut air conditioning expenses by cooling to only 80 degrees
  • Walk or ride a bike to work
  • Avoid clothing purchases
  • Eliminate entertainment expenses

Adhering to such a budget would certainly amount to enormous savings, but what would it do to your quality of life?  You need a budget that will help you guide your spending so that you can enjoy your life!

Budgeting doesn’t have to hurt

It really is too bad that there are so many negative perceptions about budgeting.  A well-thought-out household budget can be the single most powerful means of improving your standard of living.

Identify your expenses

One of the most challenging aspects of budgeting is not cutting expenses, but rather identifying them.  The best place to begin is to keep a detailed record of all income and expenses.  This record should include all of your expenses, including that morning latte.  You will be surprised at what you didn’t know you were spending your money on.

Thinking ahead

To be successful as a homeowner, it will be important to set aside funds in your monthly budget for home maintenance.  It costs money to own a home and you will continually incur a variety of expenses that will both maintain and improve your home.

Get it down in writing

It’s one thing to say that you’re going to put yourself on a budget.  However, by writing it down you will be better able to keep promises to yourself.  Getting organized makes things manageable.  So think about where your money is really going, and write it down.

Make simple, logical changes

Once you understand where your money is going, it is usually easy to see where changes can be made.  Small sacrifices can add up to big savings and the reward of homeownership.

Perhaps you will decide to discontinue the cable TV service – or at least get rid of a premium channel.  Maybe you will bring your lunch to work more often, or cancel unread magazine subscriptions.  The first budget may be the most challenging, however in time it will become easier as you miss those extra less and find yourself investing in your future more.

Think about reserves

Having a contingency plan just makes life a little easier.  It’s a good practice to have 3 to 6 months’ living expenses in savings in addition to savings for those big ticket items.

Tips for successful budgeting

  • Talk with other family members to understand what is important to them
  • Be specific with your goals so you know when you’ve achieved them.
  • Be prepared to compromise, and create a financial partnership with those who share your goals.
  • Exercise will power and stick with the plan.
  • Be flexible. Adjustments are okay as life needs change.
  • Develop a good record-keeping system.

Creating a budget now can help you reach your down payment goal faster and help you determine whether you will be able to manage your mortgage payment as well as your current expenses when you are a homeowner.

 

This information is provided by MGIC, that nation’s largest provider of mortgage insurance.  Visit mgic.com for additional information and homebuyer education.

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