The Voice for Local Real Estate


Good Money Habits

Develop a family budget. Instead of budgeting what you would like to spend, use receipts to create a budget for what you have actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses (such as car repairs, illnesses, etc.) as well as predictable costs. Factor in necessities first: mortgage, utilities, auto, food, etc.

Keep your debt low. When you applied for a mortgage your lender looked at your debt-to-income ratio. Typically, lenders suggest that your total debt-to-income ratio should be no higher than 36 to 41 percent of income. This figure includes your mortgage, which typically ranges between 25 percent and 29 percent of income. You should try to keep your debt as low as possible. Installment debt—car loans, student loans and revolving balances on credit cards—should be paid down to between 8 percent and 10 percent of your total income.

Get a handle on expenses. You probably know how much you spend on your mortgage payment and utilities, but little unexpected expenses add up. Try writing down everything you spend for one month. You’ll probably see some great ways to save.

Pay bills on time. Make sure you pay all bills by the due date. If you can, pay off the entire balance promptly. It’s important that you don’t get behind on payments because that can lead to foreclosure and bankruptcy. Also, if you have high amounts of debt, it’s hard to get loans or credit.

Prepay your mortgage. When you make an additional payment on your mortgage, you save a lot of money in interest over the life of the loan. Your payment goes toward reducing the principal, which reduces the interest amount over the life of the loan. Try paying an extra $50 a month or even a year, and you’ll save thousands of dollars.

Keep good records. An important investment for your home is a filing cabinet where you put all your financial documents. You will want to keep files of paid bills, receipts, mortgage documents, contracts, owner’s manuals, warranties, tax information and other important documents. Whenever there is a problem, you have all the information in one place.

Create a reserve fund. In case you lose your job, become ill for a period of time or suffer a financial crisis, you should have three months of living expenses reserved. Also, make sure you have auto, homeowners, medical and dental insurance which can help buffer unforeseen expenses.

Act fast. If you begin to have problems paying your bills for whatever reason, talk to a housing or credit counselor. It is better to act fast than wait until you are in over your head.


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