Recap/Budget

Budget isn't a word to be scared of....it is your most effective weapon for bringing down debt and planning your future. Here is a few reminders; write down every purchase for 3 months or to make it easier use your debit/credit card so you can get a monthly statement from your financial institution and review, then after this time frame analyze your spending and build a budget on what you have read  ( remember our first blog about wants and needs!!)  This is a rough chart you can go by as everyone has different circumstances in life. A) If your renting; 35% for housing, 40% for living expenses, 2% for emergency/insurance, 15% for personal and 8% for savings  B) Single with a house; 45% for housing, 25% for living expenses, 6% for emergency/insurance, 14% for personal and 10% for savings  C) Married with house; 37% for housing, 25% for living expenses, 8% for emergency/insurance, 20% for personal and 10% for savings  D) House with kids; 37% for housing, 30% for living expenses, 10% for emergency/insurance, 15% for personal/pleasure and 8% for savings.

Save Cash with Money!!

By paying for all your purchases with cash.....a couple of things, your spending only what you have and your saving on the fees from any form of plastic you decide to use. So besides getting some stares lol ( as it so rare to see it anymore) cash might be the way for you to save. Some tips to follow if using the moolah !!     A) Ask/look for discounts....some merchants give back coupons/store dollars for cash buys ( think of gas stations/grocery stores tied in together or a certain hardware store that gives its customers 3.5c per dollar back in paper money ) Also ask the vendor what they will do for you as these sellers are being charged by the cc companies fees to accept plastic, hence why they pass their savings onto you the customer and to build a following    B)  Make sure not to use a competitors ATM machine and get charged for this service, know where your branch outlets are  C)  Ask for a receipt that says paid on it for possible return or for warranty work   D) Finally write down all your buys for your records to track where all the cash went and as a bonus it will be a learning curve to create a successful budget in the future to save for your goals.

Renting as an Investment

Now with the money saved from the previous blogs/lessons i am going to say that renting is an investment and no i am not trying to be funny, hear me out.  There are various factors that come into play here for buying a place to reside and maybe some of these will work out for you like the timing of the housing market, location, sweat equity and maybe its just family needs. But in my humble opinion renting has the most upswing for investment purposes, i will explain!!  For comparison, lets take an average mortgage of $300,000 ( 20yrs @ 5% = $1971.38 per month and that's if the mortgage rates stay at its historical lows???) add property taxes, heating, power, water, insurance etc, so approx $2,700 per month and your rent say is for $1,300 everything included. With that extra fourteen hundred dollars per month, that is $16,800 per year..... that doubles in 12yrs ( the 72 rule, i will explain in a future blog) so have after 12yrs its $403,200 (12yrs x $16,800 = $201,600 and double that to get our total ) and that's worry free. Meanwhile your home is now 12years old if bought new or even worse if an older dwelling, sure the equity has gone up on average 5% per year but factor in these additional costs  A) at the beginning you would have spent 5% for closing costs ( deed transfer tax, lawyers fees etc) = $10,000+   B) getting ready for a new roof, as a life span is 15-20 years for most new shingles = $10,000   C)  need new furnace/oil tank =$5,000   D) septic field maybe?=$10,000   E) upgrade kitchen/bathrooms =$15,000   F) replace the appliances = $10,000+   G) new backdeck/front doorway  = $10,000    H) windows = $15,000   I) siding/paint outside =$10,000 and so on. So really what a mortgage does is forces you to save, but if you have the discipline to put that extra money in an investment that would pay out between 5-6%, you are much farther ahead after you take in account all the additional expenses of owing a home which would offset any equity gained over time of ownership.