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[D151]Degree In Financial Planning

by Cj De Heer, Cj

Everyone wonders what kind of financial shape they are going to be in after purchasing a home. The difference between someone who is prepared for the purchase and an impulse purchaser is the fact that if the home purchase is planned then the buyer will know what their financial position is after the sale. Making the monetary arrangements for a home purchase is one of the most important financial things that a person can ever do. If a home purchase is well planned and done from a position of intelligence and education then the purchase and subsequent living should be relatively stress free. On the other hand, if a home is purchased on impulse without any planning an owner can quickly find themselves in deep water or foreclosure and this is a horrible thing to have to go through.

There are some major mistakes that people make when preparing for a home purchase. Many of them are regarding the financial aspect of the purchase. One of the most common of these mistakes is getting into a situation where there is too much house and mortgage payments that are financially crippling. Sometimes these arrangements are entered into in good confidence and with good reason but life has a way of changing at inappropriate times and as home owners we need to be prepared for such incidents. We have seen more foreclosures in this country in the last year than ever before and this is a direct result of the prevalence of sub-prime loans and the rising cost of living.

If you are a first time home buyer then there are many costs associated with owning a home that may not occur to you at first. Property taxes, repairs, maintenance all cost the owner. Moving from a rental situation to an ownership situation can be surprising in cost. When purchasing a home is is a good idea to ask the current owners about the average monthly bills. What did it cost them to live in the home on a monthly basis. Make sure that you have these costs figured into your monthly budget along with your mortgage payments and any other financial responsibilities. Be sure that you have room to breathe financially in case of any emergencies. It always pays to have contingency plans in case they are necessary. Home owning is a great experience unlike anything else but it requires careful planning and an attention to finances. Don't sell yourself short, make sure your new home plan covers all the bases.

What's wrong with this picture?

Money saved for retirement is not separated from you as the writer suggests. It's still your money. If you want to part with your hard earned income, I suggest you visit a casino. You'll quickly realize the difference between putting dollars in a slot machine and a retirement plan.

But this column isn't about retirement plans, it's about the attitude that investing money for future needs is less important than satisfying your immediate needs.

The rate of savings in America is atrocious. The average Japanese saves twice as much as we do, and Europeans save four times that amount.

Consumer spending relative to the Gross Domestic Product (GDP) is at an all time high, much of it driven by home equity loans. Sucking out the life-blood of a home to leverage an investment has always been an iffy proposition, but spending the money for no possible return is simply a dead end.

Financial Planners have different opinions on the basic building blocks of financial security, but here are the most common:

1. Control Credit Card Debt - This comes in many forms, but credit card debt can be the most serious. There's nothing "priceless" about interest rates that exceed 20%. Current estimates are that close to 650 million credit cards have accounted for more than $1.5 trillion in spending by consumers. The average credit card debt per family is $8,000 - and growing. If payments are missed, additional fees and interest charges are tacked on. The missed payments affect the consumer's credit rating, or FICO score, which can lead to higher rates for additional loans. This can easily spiral out of control. So, rule number one - if you can't afford it, don't buy it.

2. Set up a Savings Plan - Systematically save for those unexpected needs. A cash reserve can help prevent further borrowing and, if for some reason it's not used, then it will still be there. Systematically saving on a monthly basis also teaches good financial discipline. Most people will find that they can easily adjust to their new saving habits. If you don't have it, you won't spend it. So you skip a few nights out each month - it's not going to kill you.

3. Invest in a Retirement Plan - Yes, the odds are that you will grow old and develop gray hair over the years; and, if you think you'll make ends meet with Social Security alone, then you really haven't been paying attention. With the variety of retirement plans that currently exist, there is no excuse not to get involved with at least one of them. Look, first, at 401(k) plans in which your employer stands ready to match a portion of your contribution. If that's not available, then there's always an Individual Retirement Account (IRA).

4. Build Home Equity - A home is still the biggest single asset most people will ever own. Building equity (the piece you actually own) would seem like a no brainer. Apparently others are trying to convince us differently. Here's a direct quote from a mortgage company:

"Wouldn't it be great to use this asset to reduce your monthly payment and put extra cash in your pocket?"

I'm all for reducing monthly payments, and declines in interest rates can determine whether refinancing is to your advantage. But, I just don't understand this "cash in your pocket." That isn't money you earned, it's money you borrowed and will have to be paid back with interest. Over time, you'll not only pay back all that money in your pocket, you'll also need to find another pocket with some money in it just to pay the interest. This is a good deal?

These are, of course, only some of the ways to build a solid financial future. Another good rule to live by is "always pay yourself first." Think like the squirrel who knows winter is coming and put some nuts away. Just don't scamper out in front of my car while you're doing it.

Article Source : Perth Australia Real Estate

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Both Cj De Heer & Glenn are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Cj De Heer has sinced written about articles on various topics from Real Estate, Medicine and Real Estate. CJ de Heer is a certified REALTOR;? specializing in the Santa Cruz real estate market. For access to some of the most stunning. Cj De Heer's top article generates over 60500 views. Bookmark Cj De Heer to your Favourites.

Glenn has sinced written about articles on various topics from tax, Investing and Trading and Real Estate. . Glenn's top article generates over 5400 views. Bookmark Glenn to your Favourites.