The Financial Road Blocks To Home Ownership
There are many stumbling blocks that can happen between deciding that now is the
time to buy a home and actually securing a mortgage, finding a home and moving in. You must look at your finances in an impartial way be truthful with yourself. Most people dont even know where they spend money so the first step is to find out where your money goes to go into the business of yourself.No business operates with out books and recordkeeping neither should you in your life. You are a business as is your life. Go back over 6 months of bank statement and record to find out where you are spending. If you have no records then start now. Keep all receipts (and most importantly get receipts) for items and services purchased. Get a notebook or ledger or use a computer spreadsheet and itemize your expenses. You should have a column for housing, transportation, communications, medical, insurance, groceries, entertainment, clothing, online shopping, debt repayment, etc. Once you have a 6 month record or so to work from begin to add up each area of expenditure and calculate it as a percentage of your total income. Make sure that you use your after-tax income for this calculation or alternatively have a column for taxes and then calculate from gross income, also calculating the amount you are paying in taxes (although we cant help you there). I guarantee you will be surprised by what the figures tell you. The figures never lie!
As a general guideline no more than 30% of your income shold be used to pay your mortgage, with 15% toward transportation, 10% for savings and 15% for debt repayment. Look for areas where you are exceeding these amounts and look for ways to curb these expenses.
You will need to prioritize spending to meet your short and long term goals. If you are spending 25% of your income on entertainment you may be able as a single person to affford it but if your long-term goal is marriage and a family and home then you might be moving in a better direction to limit your spending now to save more toward this goal.
Keep the record-keeping going though regardless. You will never meet your goals if you dont have a yardstick to ensure that you are on track. You should also make a budget. Keep it realistic and then keep on track. This will help you realize your goals. By keeping a budget vs actual expense log you will know if and where you are going wrong.
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