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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