5 Budgeting Tips for First Time Homeowners
David Bakke writes about money management topics including real estate, insurance, and home improvement on the blog, Money Crashers Personal Finance.
Buying a home is a grueling but satisfying process. However, now that it’s done, you have the significant responsibility of making a monthly mortgage payment, which is much different than paying rent. If you fall behind on your rent, you’ll likely get a nasty letter from the complex manager. However, if you fail to make your mortgage payment, the stakes are much higher: You could lose your home.
However, there’s no need to worry. Put in place some simple yet effective budgeting strategies and you can enjoy your abode stress-free.
1. Establish a Personal Budget
Now that you’re a homeowner, having a personal budget crucial. You never want to miss a mortgage payment due to not having sufficient funds; plus, paying your monthly bills on time and in full also improves your credit score.
Write all your income on one side of a page and all your fixed monthly expenses on the other. Subtract the fixed expenses from your income, and what you have left is what you can use for discretionary spending. Just make sure you have entries for annual expenses, such as auto insurance and property taxes.
2. Utilize the Proper Credit Card
When I purchased my first home, I was blindsided by all the supposed minor expenses. You typically have to furnish the whole place, and all the appliances and other small purchases add up in a hurry. If you don’t have funds set aside for this, open up a credit card with a teaser 0% introductory APR. One of your best bets is the Citi Simplicity Card which offers 0% for the first 18 months and comes with no annual fee. Use this card for all your new home purchases, and then establish a plan to pay off the balance before the introductory term expires.
3. Research Monthly Service Providers
When buying a home, you’ll need to save a little extra cash wherever possible. Keep in mind that competition is high among the cable TV and Internet service providers, so make sure you investigate the competition and find the best rate before you make a decision. Try to avoid signing a contract whenever possible in case you want to switch companies in the future.
4. Temporarily Reduce Personal Spending
If your monthly mortgage payment is higher than what you were paying in rent, and you’re not used to paying for things like water and garbage pickup, your best bet is to put a hold on personal spending until everything settles down and you have a better picture of what your finances look like.
5. Create an Emergency Fund
If your refrigerator goes on the fritz or the air conditioning unit breaks down, you can’t call the maintenance man anymore. Therefore, consider establishing an emergency fund for such expenses. The last thing you want is to be in debt because of an unexpected expense.
If you find that you do have a little extra at the end of each month, consider applying it to your monthly mortgage payment. Mail in an extra 1/12 of your mortgage payment each month to pay off your loan faster. You can also drop your private mortgage insurance sooner. As long as you keep your eye on the ball and do a little planning, you can enjoy your new home without a significant effect on your overall finances.
What are you doing to save money as a first-time home buyer?