When you’re looking to purchase a home in Gwinnett or any other North Metro Atlanta area, the smart thing to do is review your budget. This is a great time to see where you are in accomplishing your financial goals and retaining your financial freedom. There’s nothing worse than making a major change in your life’s situation and then six months later, finding out that you can’t afford your new life after all. That’s why before moving into a new home or making any major new purchase, you should work out (or review) your basic budget before pulling the trigger on any major life decision.
When working out your basic budget, the first thing you need to do is calculate how much money is actually coming in. Ideally, when buying a home, your maximize amount should be 33% of your total household income. This allows you some savings in addition to not being stressed about your mortgage when unexpected costs come up. a simple way to calculate your net income would be to take your gross monthly take home income and subtract the taxes, health care costs deductions, payroll deductions, savings auto transfers, and whatever money you place in your 401k. The amount you have left over is your net monthly income before your bills are paid. This is your total monthly “spendable income.”
Spendable income is a deceptive name for it though as there are still many monthly bills you still need to pay. Take your spendable income money and subtract all the knowable and reliable bills you see every month. Rent, cable bill, cell phone bill, utilities, insurance payments, car payments, budget for upkeep and repairs, add it all together and subtract that amount from your spendable income. If you don’t know, or can’t track some bills or utilities reliably, use the average from the last three months to give you a good idea of how much you spend on those items.
After you’ve taken out all the money that you spend on the bills you know about, this will be your disposable income. You can set more of this money aside for other priorities that aren’t normally thought of for bills. This can include money for your monthly food budget, daily coffee stand runs, or prescription medication you may need. Whatever is left over will be your surplus money. This surplus money is beyond your disposable income. This is money that has no purpose! And that’s a good thing!
At the end of each month, you should find yourself with a surplus of money. If you’re smart with your surplus, then you will put it in savings or in an account that isn’t easy for you to access and is specifically designed for purchases that are beyond the scope of what you normally buy during the course of the year or month. This money can be good to set aside for a down payment on a house, unexpected bills or debts that you’d like to clear from your credit report earlier than your original budget called for. There’s nothing more satisfying then reaching your financial goals earlier than you expected. Using this surplus money as a way to pay down those debts earlier than you expected can give your budget and financial plans a boost far ahead of where you thought you’d be.
Saving money doesn’t have to be a hassle. It should be the goal of everyone out there who has financial goals they want to achieve. Money is the lifeblood of how you make it in the world. Having a surplus or amount of money that allows you to weather bad luck, or an accident you didn’t see coming can mean the difference between living on the streets and being secure. Working out your basic budget before moving into your new home should be the number one priority of every homeowner after they buy a house. Prepare for the worst, but expect the best! That’s how good financial planners look at their finances, and you should too!