18 | October 2018 | Real Hero Report
Improve Your Financial
Habits Today
The Great Recession of 2008-2009 served as a wake-up call
for many Americans who previously had abandoned sound
financial habits in favor of excessive spending and expanding
debt. However, the further that shake-up gets in the rear-view mirror,
the easier it is to slip back into old habits. The first step toward
regaining financial control may simply be returning to sound, timetested
practices. Here are a few tips for getting back on the right path.
Create a financial strategy. Take time to write down your goals in
detail. Think about your future and your priorities. How much income
will you need in retirement? Do you plan on paying for some or all of
your children’s college education? What kind of healthcare costs might
you incur? Do you have an emergency fund with at least three to six
months’ worth of expenses? A financial advisor can help you plan
today for what you otherwise might put off until tomorrow.
Put money into savings every month. The practice of saving
creates an emotional lift. And, watching your savings grow can give
you a feeling of accomplishment that makes your hard work worth the
effort and motivates you to continue saving. The practice delivers big
rewards in the form of feelings of financial security.
Spend less than you make. It sounds simple enough, but you can
save a lot by making small changes, such as planning menus around
grocery store sales, taking advantage of your local library for movies
and books, and cutting back on spending for services you can do
yourself. Make cutting costs a game and keep a monthly total of what
you’ve saved.
Work to reduce and pay off debt. Boost your savings-to-debt ratio
by diligently paying down debt and regularly contributing to savings.
We often get our mission or work requirements from a higher
authority, but your own financial security will never be assigned that
way. You have to assign the mission to yourself. Once you get focused
on arriving at the next phase of life in a more secure position, you can
start the planning process and make it happen. The primary difference
between those who are financially secure and those who have limited
options is whether they adopted some of these habits (and how early
they adopted them).
It’s easy to be caught up in the day-to-day grind. Take a few
minutes to review where you are now and where you want to be, and
adopt the habits that will get you there. Otherwise, you will be 65 and
looking back at what you should have done.
Make Buying Your First Home
Simple
Buying your first home can be one of the biggest commitments of
your entire life. However, when a buyer is well-informed of the
home buying process, they’ll have the information and confidence
needed to apply for a mortgage and shop for a new home. Here are a
few points to consider when buying your first home.
How much home can I afford?
Before you start shopping for a new home, it’s important to find out how
much home you can afford by being approved by a qualified mortgage
lender. A rule of thumb in the mortgage industry is to keep your
proposed monthly mortgage payments (Principal, Interest, Taxes, and
Insurance, or PITI) no more than 30% of your gross monthly income. The
last thing you want is to be in a new home you can’t afford.
Prepare yourself for the mortgage process.
Check your credit, and if there are any issues on your report, you’ll
want to address these items with your mortgage lender during the loan
process. One way to improve your scores would be to pay down on your
revolving accounts or credit cards. Also, you’ll want to avoid opening
any new lines of credit or credit card accounts, as this could also affect
credit scores. You’ll need to gather the most recent two years of tax
returns and related W2s, recent paystubs, bank statements, investment
statements, etc.
Shopping for a mortgage.
It pays to shop for a mortgage prior to finding your dream home. All too
often this step is overlooked and the pre-approval process is started
after a home is found. Keep in mind that there are many loan programs
available requiring as little as 3.5% to $0 down.
Shopping for a new home when pre-approved.
Shopping for a new home can be an exciting yet stressful experience.
Therefore, exercise due diligence when choosing your real estate
professional, as he/she can help you remain within your pre-approved
loan amount, while finding the ideal home.
Making an offer.
Your real estate professional can help you decide what should be offered
for the house along with any additional conditions you may want to
include in your offer, e.g., seller contribution to closing costs, seller
repairs to be made, etc. If you reach an agreement, you’ll be required in
most cases to submit a good-faith or earnest money deposit to begin the
purchase process.
Obtain a home inspection.
Even if the home you’ve chosen to purchase appears to be in great
condition, a professional home inspection should be completed. If the
home inspection uncovers serious defects not disclosed by the seller,
you may be able to rescind your offer and get your deposit back, or
renegotiate the contract by having the seller make repairs or adjust the
purchase price.