Saturday, April 4, 2015

Evaluating the Competency and Integrity of Your Financial Advisor

Today’s financial world is very complex. So when you are in need of financial advice or products, where do you turn or who do you trust?
When speaking about his investment product, a business colleague used to say, “A person without integrity will cheat you deliberately. A person without competency will cheat you inadvertently.”
So how do you protect yourself against the unscrupulous and the incompetent?
The best way is to be informed.
In my book “Money Matters Made Simple” an entire chapter is devoted to this topic, For purposes of this article, I’ll touch on just a few of the points from that chapter.
Evaluating the competency and integrity of a financial advisor involves a 3-legged stool.
First leg of the stool is Credentials.
Financial advisor, financial consultant, financial planner, certified financial planner, investment rep, investment advisor –  all sound alike and seem interchangeable.
EACH term and credential has a very specific meaning. Let’s start with explaining:
Certifications, Designations and Accreditations
The average person is confronted with an alphabet soup of acronyms dealing with advisor’s qualifications. Some certifications involve extensive training and demonstration of competence, others involve simply attending class.
As a foundation for comparison, let’s start with the Certified Financial Planner® (CFP®) designation. To be become a CFP® requires a demonstration of both competency and the ability to integrate the major areas of personal finance, which include:
·         Preparing and analyzing Financial statements

·         Preparing Budgets

·         types of and managing Debt

·         Taxes – how impact financially

·         Insurance – appropriate use of

·         Investment – types of, diversification of, appropriateness

·         Retirement planning – calculating financial needs to prepare for as well as during

·         Estate planning – protecting assets while alive as well as after your passing.
In addition, the CFP® MUST ADHERE TO CFP ETHICAL STANDARDS and fiduciary responsibilities or risk losing their designation.
Because obtaining the CFP® is among the most vigorous processes, it is considered to be among the prestigious. Throughout most of the country, a person is required to have CFP®™ or comparable designation to refer to themselves as “financial planner.” Someone who calls themselves a financial planner without the appropriate designations should raise a red flag.
Some designations involve a more limited scope of personal finance such as Accredited Financial Counselor (AFC); others are geared to specific areas i.e., divorce planning, retirement specialists or geriatric planning. Each carries different requirements, some no more than attending a class. They may – or may not – carry a fiduciary requirement.  
Where does one go to learn meaning of and compare various designations? One website is FINRA (Financial Industry Regulatory Authority) is the agency that regulates investment representatives. Their site offers information on the various designations and the requirements for achieving them. Another good site for research is
Second set of credentials involves specific licensing, such as for insurance, real estate, securities (investments). WHY is licensing important? Because an advisor can only be compensated for products or services for which they are licensed.
For instance, a person licensed for insurance but not for securities can only be compensated for insurance, they can’t sell investments. The same is true of securities reps that are not insurance licensed.  
Here’s where it gets a bit more complicated: some products are a hybrid of insurance and investments. These hybrids – called “variable” products - evolved because investments inside insurance products have preferential tax treatment. To be compensated on those products, then, requires the agent to have both insurance and securities licenses. The products in question include variable life insurance and variable annuity.
But here is where much confusion enters: some insurance products mimic variable products. These products do not actually invest. Instead they use an index to determine your return. Indexed annuity is one example. I have heard them advertised as “get the same return as the market without the risk” and touted as “like investments.” But they are insurance products not investments!
SO BE CAREFUL – know what you are getting into and do your homework.Good question to ask the advisor: are there other products that are a better fit for my situation?
IF NOT OFFERED, ASK ADVISOR FOR HIS/HER CREDENTIALS. Ask what licenses they hold and which (if any) accreditation and certifications have been obtained? This will tell you whether they are limited in what they can offer which influences the advisor’s recommendations.
The second leg of 3 legged stool is Compensation.
Just like you expect to be paid for the work you do, so does your financial advisor. And just like most humans, advisors are influenced by the compensation they will receive for their work. Whether consciously or not, an advisor’s recommendation may be influenced by a number of factors such as
·         Whether higher commissions are paid on certain products,

·         Whether sales of certain products will qualify him/her for awards, trips, bonuses, or

·         Whether the sales will contribute to earning higher compensation levels.
So know how your advisor will be compensated.
Compensation may be one or a combination of 3 methods:
1.      Salaried employee from who typically one can expect unbiased recommendations. The employee, however, may be influenced by employer incentives to promote specific products or services.

2.      Commission – to receive a commission almost always requires licensing such as is required for securities (investments), insurance, real estate broker, and mortgage broker. The agent may be influenced by higher commissions on certain products, such as proprietary products. Sometimes the commission is paid by you upfront or on the back end, such as with certain classes of mutual funds. Other times it is factored into the price you pay. This is especially true of insurance products so you may be unaware of how much commission was paid to the agent. It is okay to ask whether and how much commission will be received.  It is also oaky to ask whether the advisor will receive incentives.

3.      Fee based –can take several forms:

a.      Retainer – which is a pre-set dollar amount paid monthly or quarterly in return for specified services;

b.      Flat Fee for service such $2000 to prepare a comprehensive customized financial plan;

c.       Hourly rate; or

d.      Management fee – typical of when someone manages your investments and receives percentage based on the value of assets being managed.
These compensation methods are not mutually exclusive.
If this information is not volunteered, ask! Know how they are compensated so you can make an informed decision as to whether the recommendations are in your best interest or the advisor’s interest.
The third leg is Experience.
Prior experience influences advisor’s recommendations. How long has the person been in the current role? What was his/her previous career?
For instance, back in 1999 when the stock market was exploding, one agent with whom I was acquainted (who had been an investment rep for 3 years and had not experienced a full market cycle) stated he never put his clients into bonds. After all, he said, why would he when he got such fabulous returns for them in the stock market. Both he and his clients rued that decision when the market plummeted in 2000.
In summary, learn as much about your financial advisor as you are able and make informed decisions!

To read more on this topic, you are encouraged to purchase “Money Matters Made Simple: A Woman’s Guide to Financial Health and Wealth” on either or through my website where you can receive a discount code for 10%.


Saturday, March 28, 2015

Real Estate and Income Taxes: What Is Deductible? What Is Not?

Recently I received a phone call from client who had made an offer to purchase a new home and he and his wife were very excited about this new home – until they got the home inspection report.

Turns out that the Home inspection revealed a faulty hot water heater that would need to be replaced. In addition, the hot water tank had leaked causing damage to floorboards and carpeting, all of which will need to be replaced.

This couple asked whether, if they went through with the purchase of this home and made those repairs, they would be able to deduct those expenses.

SORRY! I told them, they are not deductible.
They then mentioned that wood on the porch was rotting and cited a whole host of other major repairs that would be needed. They asked if any of those expenses would be deductible.

NOPE! I said, they are not.
Their confusion as to what is deductible is understandable as there are different rules for real estate used for income, investment, or rentals versus used as your home.

On investment property, virtually all expenses associated with the property are deductible. Not so for primary residence.
What home expenses are deductible? It’s a very short list:

·       Mortgage interest – only the interest is deductible though, not the full mortgage payment. Keep in mind that a mortgage payment consists of two parts: one part is principal (paying down the debt) and the second part is the interest. Only the interest component is tax deductible.

·       Fully deductible in the year paid are real estate taxes.

·       Also deductible in the year paid are points paid in conjunction with the home purchase. Points are money paid upfront at closing to improve the mortgage rate. Points are among the closing costs, but other closing costs are not deductible – only the points associated with the mortgage. Points associated with a refinance cannot be deducted in full in the year incurred but must be spread out over 27.5 years.
The above mentioned expenses are deductible on Schedule A of your tax return as Itemized Deductions
  • NEW IN 2015: PMI is tax deductible in 2015. What is PMI? PMI is private mortgage insurance – it protects the lender if you default on your loan. PMI is usually required if do not have at least 20% equity in your property. PMI expense will be deductible on primary and secondary homes.
Even though deductions are limited, owning your home usually has 3 advantages over renting.

1.       Expenses mentioned previously will usually reduce your overall INCOME taxes. That is because each taxpayer receives the greater of the standard deduction or the total of itemized deductions. The inclusion of real estate taxes and interest usually results in greater itemized deductions which lowers the overall taxes payable. In my book “Money Matters Made Simple: A Woman’s Guide to Financial Health and Wealth” I refer to taxes as a “wealth vampire” because taxes suck the life blood out of your ability to become wealthy. Every dollar saved in taxes is a dollar you can use for your other financial priorities.

2.       Generally real estate appreciates in value.

3.       Over time, real estate usually builds equity.
When combined, these last two points can be very powerful. Let’s illustrate how powerful they can be.

Say you buy a home for $300,000 with $100,000 down and mortgage $200,000 at 4% interest. In 10 years, the mortgage balance is down to approximately $157,000, thus gaining $43,000 in equity.
Continuing with the example, if the property appreciates modest 2% per year, in 10 years the value will have increased to $365,000, resulting in a gain in equity of $65K.

Add the two together: $43,000+$65,000 = $108,000.
If the property is sold, after mortgage is paid off, you have approximately $208,000 cash in hand (not taking closing costs into account). The original equity of $100,000 has grown to $208,000, more than doubling your original equity. This money can be applied towards purchasing another home or towards other financial goals.

There is ANOTHER COMMON AREA OF MISUNDERSTANDING and that concerns the tax treatment on the sale of your home. In the past, you were able to roll over the entire gain from the sale of your home into a new home of equal or greater value to avoid paying capital gains on profit.
Many people mistakenly believe that is still the case – it is not! A 1997 law changed that – ROLLOVER of capital gains NO LONGER APPLIES.

The current treatment allows a certain amount of gain to be exempt from taxation if a married couple, the exemption is the first $500,000 of profit; if single the exemption amount is $250,000. Any profit greater than the exemption amount is subject to income taxes.
Most people are not affected when they sell their home. The people primarily affected are those who have been in their home for a long time. Let’s use an example.

Say you bought a home in Glen Ellyn in 1985 (30 years ago) for $200,000. If a married couple sells in 2015 for $800,000, they would realize a $600,000 gain, of which the first $500,000 is exempt from taxation. The additional $100,000, however, is subject to capital gains tax and is added to income for income tax purposes.
While the capital gains tax rate may be low, the additional income may cause your overall tax rate to be higher as ordinary income (such as wages and interest) are taxed at your highest tax rate based on total income.

To reduce the gain subject to taxes on the sale of your home, keep a good record of improvements you have made. Those costs can be added to your basis resulting in a higher basis when you sell and reducing the profit subject to taxes.
Let’s digress a moment to explain what BASIS is:

-        Basis I not only how much you originally paid for the property, it also includes expenses associated with the purchase of that property.

-        Basis also includes any improvements made to the property. The cost of those improvements add to the basis. Keep in mind that repairs and maintenance have no effect on basis.
Using the prior example, say the married couple added the following improvements:
·         Added a sunroom at a cost of $100,000;
·         Tore down a 1 car garage and replaced it with a 3 car garage for $75,000;
·         Finished the basement at an expense of $100,000.

In this scenario, additions totaled $275,000. When added to the original basis of $200,000, the new basis is $475,000. If the property sells for $800,000, the gain is only $325,000 which is below the exemption amount so no capital gains tax is due.
Again, fixing leaky faucets, painting walls or other repairs and maintenance are expenses and not improvements and usually do not add to basis.

For more elaboration on this topic, please refer to my book “Money Matters Made Simple: A Woman’s Guide to Financial Health and Wealth” which can be purchased from my website, at  or at
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Saturday, March 14, 2015

Rental Real Estate – Good Idea or Bad Idea?

Recently I had a conversation with a young family man who bought a new home and was thinking about renting out his current property instead of selling it. He said that he had heard that rentals in his area were in demand which was pushing up rents the owners received.
In the course of our conversation, it became evident that this young man was not aware of the many advantages of owning rental real estate. There are many advantages, here are just a few.

In most situations, rental income exceeds property expenses. That additional income can be applied to other priorities important to you.

Expenses associated with the property are tax deductible and those deductions may reduce the amount of income taxes you pay. For instance, if rental expenses exceed income, you can take up to $25,000 in losses that can offset income from other sources such as wages or interest.

What expenses are deductible?
o       Virtually any expenses associated with the property is deductible including, but not limited to, mortgage interest, property tax, operating expenses, repairs or credit check on your prospective tenant.
o       One of the major expenses, however, that is a “paper expense”  (that is, there is no actual cash outlay) is Depreciation. When depreciation is added to the other expenses a paper loss is usually created. Here is our depreciation works.

On residential real estate, depreciation of the property is over 27.5 years. So take for example a property whose basis is $275,000. Divide the basis by 27.5 equal $10,000.  In this example, each year can depreciate $10k against rental income.
Adding depreciation to expenses usually results in “paper loss.”
A symbiosis occurs with real estate – as the mortgage principal decreases with each mortgage payment, the property value increases. The symbiosis occurs on the sale of the property resulting in more cash out.

Take for instance a property that is bought for $300,000 with $100,000 down and $200,000 mortgage. Let's say over time the mortgage principal is down to $150,000 and the value appreciates to $350,000. If you sell that property for $350,000 and pay off the mortgage of $150,000, you now have a cash out of $200,000. Remember, only $100,000 was put down on the property and the sale, the cash return has doubled.

Is Now a Good Time to Invest in Real Estate?There is a wise saying in the investment world: Buy low, sell high.
The Reality? People inadvertently buy high and sell low. Why does that happen?
It happens because investing is counterintuitive. All investments go thru cycles – up, then down, then up, then down ... By the time the general public hears about a good investment, the market is usually accelerating and the inexperienced investor ends up buying at or near the high of the market.
When the investment's values fall, the inexperienced investor becomes concerned, which concern turns into panic, which panic causes the casual investor to sell low to stem further losses.
The astute investor looks for the undervalued opportunities, not what has been performing better than average so picks up the investments that others have sold at a loss and the cycle starts over.
How does that relate to today’s market?
Beginning about 15 years ago, real estate experienced above average appreciation in values. In the Chicago area, real estate averages appreciation of about 3% annually. During the first decade of the 21st century, many areas saw 10%, 20% and even as much as 30% or 40% in some places.
Then the market collapsed - big time!
Since then, the market has been rebounding, albeit slowly. This has created some tremendous buying opportunities  as many properties are still selling at below market values. Couple that with historically low mortgage rates creates ideal conditions for buying property.
When buying property, though, more than price needs to be considered.
Rental real estate can be a good idea – but  it is not for everyone.
If you are considering investing or converting real estate property, keep the following in mind:
o       You will be dealing with renters and all the headaches associated with renters (such as late rents, damage to property, or calls in the middle of the night). If you have no desire to deal with renters than this option may not be for you unless you hire a property manager.
o       You should have enough savings to cover emergencies or major repairs/replacements. If you do not, you may have to use credit which creates more debt.
o       Buy what you can afford, not what you want.
o       There are tax implications on the sale of a rental property of which you should be aware.

Finally, not everyone is eligible to take advantage of  the tax benefits due to income limitations and other restrictions. However, losses are not lost. Unused losses carry forward into future years and can be used to offset income from that property, such as the capital gains on the sale of the property.
If you are considering investment real estate, work with a qualified financial planner who can perform the number crunching and provide guidance so that you make informed - and smart  - decisions.

This topic is elaborated on in my book "Money Matters Made Simple: A Woman's Guide to Financial Health and Wealth." To purchase a copy or for a sneak peek, visit

For more information on Anne, visit  

Saturday, February 28, 2015

Behind On Your Mortgage? What Are Your Options?

When someone falls behind on their mortgage, the first thought he or she usually has is to walk away and allow the property to be foreclosed upon by the lender.
While foreclosure may be the first thought, it should be the last resort.

There are actions that you can take in an attempt to save your home. At the very least, the options will help you stay in your home longer.
So first consider these other options.

1.       Loan mitigation/modification: If you are working and drawing a steady income, you may qualify for a loan mitigation with your lender. Loan mitigation involves submitting an application to your lender documenting your income and expenses along with an explanation as to why you are having trouble paying your mortgage.

Loan mitigation is essentially a negotiation with your lender which may reduce

·   Principal amount owed;

·   Interest rate which will reduce the monthly payment; and/or

·   Monthly payment regardless of the other aspects of your loan;

·   Or possibly a combination of one or more of these terms.

2.       Short sale: What is short sale? A short sale involves selling your home for less than what it is owed on the mortgage. The buyer’s offer to purchase is submitted to the lender who then decides whether or not to accept the offer.
      The lender may accept the sales price as payment in full on your debt. In most cases, the lender will not attempt to recoup the balance owed. If the lender opts to not pursue collection the additional balance owed, it is called forbearance.
In many instances, you may be able to negotiate a cash payment from the lender for moving expense, usually a few thousand dollars.
Here is an example of how a short sale works. Say you owe $300,000 on your mortgage. If you attempt to sell your home and a buyer offers $250,000, you accept the offer and submit it to the lender for approval. The lender may accept the $250,000 as payment in full and discharge the remaining $50,000 of debt. The lender, however, is not required to forgive the remaining debt and may continue to hold you responsible for the unpaid balance.
Another advantage to a short sale is that attorney fees, realtor commissions and closing costs are usually borne by the lender and buyer.
3.       Deed in lieu of foreclosure: Deed in lieu of involves turning over the deed to the property (ownership) to the lender. In exchange, the lender agrees to not pursue foreclosure through the court process. This avoids a public record of foreclosure.

4.       Keys for cash:  Keys for cash is similar to deed in lieu of. The difference is that with keys for cash, the lender will give you a cash payment in return for turning over the keys to the property. If the property is in good condition and has been maintained, this may be a viable option. This option also avoids the very public foreclosure process.
If your lender has already filed for foreclosure, there are still actions you can take to possibly keep you in your home longer, though those actions are more limited. At this stage of the process, it is important that you show up for all court dates. By doing so, you will know what is happening with your case as well as potential opportunities to explain your situation to the judge to ask for more time to receive a short sale, or work out another resolution with the lender.
Taking these steps usually will help keep you in your home for several months, maybe even years. I know of several instances where the homeowner has been in the foreclosure process for several years.
If you are dealing with mortgage issues, do not hesitate to ask for professional help.

DISCLAIMER: Nothing in this article is intended to offer legal advice

This topic is elaborated on in my book “Money Matters Made Simple: A Woman’s Guide to Financial Health and Wealth” which can be purchased from my website or on Enter code X5S2AAZR for a 10% discount.

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For a sneak preview of "Money Matters Made Simple: A Woman's Guide to Financial Health and Wealth" visit

Saturday, February 14, 2015

5 Actions to Remain Financially Healthy in Your New Home

Buying a home is an exciting life event – which can also be financially stressful.
Here are five actions you can take to help you remain financially healthy in your new home.

1.  Minimize use of credit, if possible.

Debt is a financial cancer that can quickly spiral out of control. If you must use credit, have a plan to pay off the debt. For example, if you have bought furniture for $2000, plan to pay it off in one year by paying at least $167 each month towards the balance.

What actions can you take to avoid taking on debt? That brings us to our next three points.

2.   Start a savings program if you don’t already have one.

You know that certain things in your home will eventually need to be repaired or replaced. Appliances break down and furnaces don’t last forever. Anticipate your future costs and expenses and have a savings plan to pay for those expenses when they come up. For instance, if your roof will need to be replaced in 10 years at a cost of $10,000, you will need to save $1000 per year or $83/month to have enough accumulated to cover that expense.

Even if you can only save $10 per week, that’s $500 more per year than you would have had if you hadn’t saved.

3.   In addition to a savings plan, set up an emergency fund.

What is the difference between savings and emergency funds? The difference is that savings are accumulated to pay for anticipated expenses, while an emergency fund is available in the event of an unexpected crises.

For example, if a storm topples a tree on your roof, not only will you have to remove the tree, you may encounter repairs such as a damaged roof, siding, windows, or perhaps even structural issues. While home insurance may help to defray some of those costs, insurance won’t help when your refrigerator conks out prematurely.

How much should be in an emergency fund? The rule of thumb is that it should be large enough to cover at least 3-6 months’ worth of expenses. If self-employed or your income varies, it is recommended that your emergency fund be large enough to cover at least 6-12 months’ worth of expenses.

4.   Develop a budget.

A budget will tell you if you are spending more than you earn. Why is that important?

If you are spending more than you are earning, then you are going into debt and it would behoove you to look for ways to reduce your expenses.

People tend to avoid budgeting because it feels painful. It doesn’t have to be. It is a simple process that can be completed in about 30 minutes and will help identify expenses that can be reduced or eliminated without significantly impacting your lifestyle. One client recently saved $100 per month simply by switching cable companies.

Start by listing all your expenses, then subtract that from your income. What is left over is discretionary income – money that is available for you to apply to other things that are important to you, such as building up your savings or emergency fund.

After doing the math, if you have money left over, you are doing great! Keep it up and continue to add to savings/emergency funds on a regular basis. If, on the other hand, you are in the hole, look for ways to reduce expenses.

5.    Avoid depleting savings.

If you deplete your savings, you will be dependent on credit to pay for those expenses. As has already been mentioned, debt is a financial cancer that can quickly spiral out of control. Additionally, it may not be available when you need it.

In summary, don’t take on more than you can afford. If you need help with budgeting or reducing expenses, work with a professional financial planner who can assist and guide you.

To learn more about becoming and remaining financially healthy, order the book “Money Matters Made Simple: A Woman’s Guide to Financial Health and Wealth which can be acquired at To receive a 20% introductory discount, available only thru Feb. 28, 2015, use the contact form on the website and reference RER215.

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Monday, February 2, 2015


Unexpected Costs That May Get You Into Trouble Financially

Buying your first home is an exciting personal milestone. You've qualified for the mortgage and you know what your monthly expense will be. Or do you?

Whenever we do something for the first time, we do not know what to anticipate. The same is true if you are buying your first home. All too often many new homeowners are unaware of the costs of homeownership. Not knowing what those costs are can get you into financial trouble.

What are those costs and how do you prepare for them? Let's start with the expenses that will need to be paid for at closing.

First, you’ll want to have an attorney review your contract and for that service you should allow at least $350 or more. This fee is usually paid at closing and increases the amount of cash you need to bring to the closing. Buying property without an attorney review is a decision that can haunt you for as long as you own the property.

Just like the attorney contract review, a home inspection should be performed. This inspection will uncover problems that will become your problems as soon as you are handed the keys. For this service expect to pay around $400-$500.

If you are obtaining a mortgage, you’ll be required to have an appraisal that will run in the range of $500. All of the afore mentioned  expenses may be higher depending upon the complexity of your transaction.

At closing, you may be responsible for paying all or some of the title company and closing company fees. The title company insures that a clean title is passed to the new owner by performing a search for encumbrances on the property such as mechanic liens and are responsible if a title passes with unidentified liens.

One recent situation involved Pasquinelli Builders when they filed for bankruptcy. Unpaid mechanic liens on one of their developments had been recorded but the title company did not identify those liens. When the mechanics sued the homeowners for payment, the title company was responsible and the homeowners were exonerated.

The business where the closing is conducted prepares all the documents, issues payments and files the necessary documents. The fees for these services usually run $1000-$2000.
Whether or not you had renter's insurance before, you will definitely want homeowner's insurance which will cost about $1000 per year or more depending upon the coverage you have.
You can also expect your utility bills to be higher, especially heating costs if poorly insulated or electric cost for air conditioning.
One client bought a condo in an older building with electric heat and windows facing west. His electric costs were about $300 per month in both winter (electric heat is not as efficient) and summer (more energy was needed to counter the effects of the hot afternoon sun).

As a renter you may not have had to pay for water, sewer, or garbage. Those are all new expenses you should expect.

3.       FIX THINGS
You no longer have a landlord that will come in and fix things - when something breaks down is now your responsibilities. Expenses that you can expect include plumbing leaks, painting the interior, repairs, hot water heater, gutter cleaning. These are all costs that you will need to pick up.

For example, you will want to clean your gutters at least twice each year. While most people anticipate fall clean up, they don't expect late spring gutter cleaning. Seeds from trees and bushes can quickly build up in the gutters causing them to clog. When they clog, the weight of rainwater can literally pull off the gutter, resulting in a repair more costly than cleaning. Each cleaning will run about $100, and more if you have a 2 or 3 story.

Or maybe the garbage disposal is inoperative, there is a plumbing leak or the hot water heater will need to be replaced within the first few months you are in your home. The home inspection you had done will give you a good idea of what to expect and when so you can anticipate and plan for the costs.
Just as your car requires regular maintenance (oil changes, new brakes, tire and belt replacements), everything inside and outside of your property will require regular maintenance. If you have bushes or trees that die or become diseased, you will need to remove them.
Certain things will eventually need to be replaced due to aging, such the roof or the furnace.  Those expenses generally run in the thousands of dollars. Don't forget appliances that break down, driveway and sidewalk repairs, or gutters that need to be replaced.

If you know the age of the component, you can usually anticipate when the repair or replacement will be needed. This is. again, where a home inspection comes in handy as it identifies the issues so you can anticipate the cost and when it will occur.

Age of the component is no guarantee, however.  One client had her refrigerator's compressor break down when the frig was only 3 years old and the dishwasher had to be replaced 2 years later, each costing more than $1000.
It is not usual to believe that your new home is perfect and will not need any work. Amazingly, once you have moved into your new home, suddenly your old furniture looks ratty. Or perhaps the window treatments do not really suit you.
If you now have a yard, deck or patio, you’ll probably want to buy lawn furniture, or maybe a grill. All those items run a few hundred and up.

New living room or bedroom furniture can easily run in the thousands. If you do buy new furniture, BEWARE, however, of store incentives that offer no interest for 12 months. If the full balance is not paid within that time frame, interest could be very steep (as much as 20% or more) and is calculated from the date of purchase.  On a $2000 purchase, for instance, the interest could add another $400 in cost.
How will you pay for those expenses? Savings? Credit? Or "I don't know."


1.       DON’T TAKE ON MORE THAN YOU CAN AFFORD. Anticipate the costs and start a savings program if you haven’t already. Even $10 per week adds up to over $500 per year.

2.       Establish an emergency fund that is at least 3-6 months worth of expenses. An emergency fund can help defray the cost of those unexpected expenses or should you have a loss of income.

3.       Avoid using credit, if possible. Debt is a financial cancer that can quickly spiral out of control. If you do use credit develop a plan to pay off the amount owed. For instance, if you buy furniture for $2000 with no interest for one year, you will need to pay at least $167 to pay off the balance during that time frame.

4.       Do not deplete your savings. If you do so, you'll have to rely entirely on credit and there is no guarantee that you will qualify for the credit. Even if you do qualify for the credit, how will the additional payment affect your overall finances?

5.       Budget! Many people cringe when they hear that word or tune out everything else you say next. To be financially healthy, though, you cannot spend more than you earn. Without a budget, you are flying blind as to whether you are running a deficit or have a surplus.

To best enjoy your new home, stay financially healthy. Do not hesitate to ask for professional help if you have difficulty developing a budget or have other financial issues and concerns.


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