A couple of years ago, I tried to get into the housing marketing. I did all of the home ownership classes and received 2 pre-approvals of about $150,000 each. I was trying to get in the house market because of the low home values. From a financial standpoint, I would have been about the same cost to own as it was to rent.
As I went through the process, I became aggravated. I ran into so much red tape and income restrictions for the down payment assistance programs and housing programs. I was paying money out for home inspections and application fees for houses I could not get. The realtor I worked with did her best to keep my posted on new houses and regulation changes. I decided to wait 6 months and try again.
During my 6-month "time-out", I realized that owning home is not as high on my bucket list as I thought. As time passed, I just simply gave up for several reasons. One, I am not handy. I don't anything about replacing or fixing pipes, gutters, etc. The second reason is I having a very busy life right now. I am hardly in my apartment. The same would be true for my house. Another reason: student loans. If I did not get my master's degree, I could most definitely afford a home that is reasonably priced. Also, the job market has been in the toilet for about the last 2 years. It would not have been a good move to buy house when my employment had a high risk of changing for the worst. And lastly, I would not have had any substantial financial benefits.
There are two reasons why people by a house: for the space and the financial benefits. I didn’t really need the space. But who passes up a financial benefit? Not this gal! So I finally sat down and did some math of how much homeownership would have cost me and how it would have impacted my tax situation.
My monthly housing payment would have been $230 more, along with an increase in utility payments of an additional $140 each month. My grand total of expenses as a new homeowner would have been roughly $1,150 each month, which represents a $510 (44%) increase. I included $250 extra each month for updates and repairs. I would have been able to deduct my mortgage interest and my mortgage insurance if I itemized. To create a tax savings, my state income taxes, mortgage interest, and insurance would have to equal or than $5,700 annually. Based on my estimates, I would have had $12,090 in itemized deductions. In the end, I would have saved $2,327 in federal taxes only. My state tax return would have been exactly the same. The tax benefit would have been only $193 each month.
I’d rather keep my additional $510 to fund my Roth IRA, save for a vacation, or pay off debt. I am not homeowner, and proud of it.
I frequently get updates via email about the latest news headlines, etc. I received one that caught my eye for two reasons: it was about money and marriage. Being that money is usually the number reason why married couples fight and get divorced, I never thought the two mixed very well. And honestly, I feel that what’s mine is mine! But the article gives a brief summary about why one should go through the suggested checklist. But I am going to provide a clear do-it-yourself debt credit cleanup (if necessary) for you and your future spouse.
Don’t just take out the trash; take out your credit reports/scores too.
Every year, you and your future spouse are allowed to get 3 free credit reports. You are allowed one from each bureau: Transunion, Experian, and Equifax. I strongly suggest checking all three, as errors can be listed on all reports, some, or just one. By combing through the reports, both of you can literally see what you two are up against financially. Once, you checked the reports, I would suggest checking your scores as well. Typically, you can get access to your score from each of the bureaus for a fee. But sometimes you can get access to your score for free if you sign up for a monthly membership and cancel it after the trial period. Note: I recommend that you use the 3 sites above only. There are a lot of “knock-off” credit score websites out there.
Talk the talk, and walk the walk
Now that all of your financial skeletons are out to the closet: talk about it. Create two set of goals: one for short-term goals to be met in 1 month up to 1 year, and anything else should be considered long-term. Also, be sure to include something rewarding, like a vacation or some luxury item that is affordable. Make a budget based on all sources of regular income, and compare it with your goals for a reality check. If you are having trouble making a budget give me a call or try a “budget theory” like this one. Something will probably have to be put aside if it is not a high priority. For instance, purchasing a new 90 inch HD TV in 6 months can be a financial goal and a reward. But let’s not give it artificial priority when a high interest credit card could be paid off in the same time frame. One last thing, open a joint account for the wedding and establish a regular savings plan! If you are having trouble
Cross all the T’s and Dot all the I’s
Exchange and vows and become one. Then make all the necessary adjustments and updates regarding: health insurances (pick the best option), life insurance policies (again, pick the best), bank accounts, and credit card accounts. If you are sharing everything, then do it all the way! Also, this would be a great time create a will and, or a living will.
Shoot for the moon and the stars
Again, this is another planning step. But it’s planning for your life after marriage and in the future. Do you want a home? Are you going to travel frequently as a couple? Are you going to have children? Whose is going to retire first? There is a boat load of questions that need to be answered before and after marriage. As long as it is feasible and affordable, why not incorporate it in your plan? Even if it sounds ridiculous to you but is the dream of your spouse, look into it. Honestly, your financial plans should mirror your lives. As result, it will change as life changes.
Have a question about this article? Ask me here!
Credit scores should be viewed as a person's financial report cards. Each credit score given by each credit bureau is simply an assessment of your financial ranking as a consumer. Credit scores are important because these numbers determine how much interest you will pay when obtaining credit cards and installment loans. Credit scores are also used by insurance companies to determine eligibility and rates, and by potential employers. Here's how to fix your score in four steps that take less than a day.
1). Find out what your score is or could be. To find out what your credit scores are, you can sign up for free trial at www.freecreditscore.com. But you would have to remember to cancel your membership before the promotional period is over. Another option is estimating your credit score with FICO calculator at www.myfico.com. I have used this numerous times, and found it to be within a 10-point range of my actual credit score. Both methods should require no more than 15 minutes of your time. You cannot improve your credit score if you do not know what is on your credit reports.
2). Review your credit report. The next step in improving your credit score is getting a free credit report from each of the 3 credit bureaus. This can be accomplished by visiting www.annualcreditreport.com. Consumers are allowed 1 free credit report from each bureau, each year by law. Each credit report should be reviewed for and negative incorrect information. If any information is incorrect, you should contact bureau(s) right away to update the information and request that it changes are made immediately. Reviewing your credit reports may vary time due to each person's financial history. I would suggest spending at least 20 minutes looking at each credit report.
3). Create a plan, and work that plan. The final step to improving your credit score is creating a budget plan that will either pay down or pay off your debts within 90 days to 6 months. It typically takes 30 days for a credit bureau to update balances. If you have substantial debt (over $30,000), create plan that you can accomplish in 18 months to 3 years. Allocate about 1 hour to creating your budget plan.
4). Don't believe the hype. The most common misunderstanding about credit is that a zero credit score is a negative thing. Having a credit score of 0 means simply that you don't have debt with a financial institution. In situations where major lending may be required, your financial habits can be verified through alternative sources of credit. Alternative sources typically include utility payments, cell phone accounts, rental history, and medical bills. Another common misunderstanding is making regular and timely payments on your accounts will automatically improve your scores. The reality is that paying your balances in full each month will increase your credit score. If you are just making the minimum payments on your accounts, do not expect a credit score anywhere near 750.
"Putting My Money Where My Mouth Is" is a journal about real life experiences and concerns of Jéneen R. Perkins. The purpose of the blog is to exhibit the real life challenges and answer the tough questions posed by the concepts of business, entrepreneurship and money.