I know it's not Friday, but I didn't get a chance to write this out and post it on Friday, so I am doing it today. As some of you may know, I'm studying up to be a Financial Planner. I thought it would be good practice for me (and hopefully helpful to you) if I came up with some useful financial thoughts once a week. These articles will be coming to you by Stefu (Smart and Trustworthy Everyday Financial Understanding). Please leave your feedback so I can improve the content of future posts).
The largest investment that most of you will make in your lifetime is the investment to buy your own home. I wanted to share some ideas that should help you get into your first home, or renovate the one you already bought.
Those of you who are not yet homeowners are probably renting (or camping out in an abandoned part of town like I keep trying to convince my wife to try). If you are renting and want to save up some money for a down payment on a house, here is a useful tip that I have been trying. The first thing you need to know is what percentage of your income should be going toward your rent. Most experts will tell you that you shouldn't spend more than 28% of your monthly income on your rent. So if you are making $5,000 a month, then you shouldn't be paying more than $1,400/month for your rent (or mortgage payment).
This brings us to my suggestion: if you should be able to afford $1,400/month and you are only paying $900 then it makes sense to put the extra $500 under your mattress to help save for that happy home you hope to have. Now, if you are in a 12 month lease, and you tuck your money under the mattress, you will come up with an extra $6,000 to help with that house down payment (or closing costs, or finders fees, or whatever you anticipate paying for in connection with that perfect white picket fence).
Assuming you want to get a better return than your mattress can offer (and a cheaper chiropractor bill), here is what you can do: save the first 6 months for a total of $3,000. Put this amount into a six month Certificate of Deposit and continue saving during this last six month period. This will give you a small boost in your savings while keeping it nice and safe.
If you already own a house, use this money to make those much-needed renovations you've been thinking about. Go ahead, get the wallpaper.
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5 comments:
I am really going to like this feature. That is awesome advice.
This is my favorite thing! Thanks to your financial advice, we will soon rule the world! Thanks Steven!
Kidding... :)
This is a seriously awesome post about saving. I shared it on reader because it was so great.
And Sir Luke did too!
Glad to hear that all of you enjoyed this one! I'm still working on coming up with the next post.
Might I ask if the 28% is in relation to net or gross income?
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