Everyone Thinks it’s the Housing Mess
Article upon article today blame the housing mess for causing the financial hardships we’ve seen reported over the past week. Fannie Mae, Freddie Mac, Lehman Brothers, AIG, Merrill Lynch…when does the finger pointing stop?
The housing crisis is not the root of the troubles that we are facing today. A combined effort between greedy lenders and reckless buyers is what led to the housing mess we’re in. I don’t see any way to point the finger at anything more than greed. We in America have set aside all common sense and have extended ourselves way beyond what we know we can handle. Being in debt is being in prison. The more money you spend that you don’t have, the longer it will take to get out of where you’re at.
There is, in my opinion, a healthy way to become a home-owner. Spend less than you make, create a budget, and save. If you don’t agree with me, that’s okay, but I will lay out a quick and simple example of what I think a healthy distribution of your income could look like based on a $3000/month net income (after taxes.)
$-300.00. 10% giving back to the community in some way, shape or form, whether charitable contributions or to your church or through donating your time and resources.
$-300.00. 10% tucked away in a 401K or other savings plan.
$-1000.00 or 1/3 of your income to cover housing costs (rent/mortgage). This puts you in a home around the $120,000 mark if you plan to purchase.
$1400.00 Balance left over for the rest of your living expenses, auto, insurance, etc. Some of this is discretionary and some of this is not. Whatever you have left over, contribute towards a down payment fund and save, save, save, until you have enough to begin owning a home.
This model assumes you have no debt. If you have debt with interest rates that are higher than the investments you currently have, eliminate the debt and get on the right track, because even though you may think you’re saving, you’re actually losing money in the long run. Credit card debt is a cancer and will destroy your financial future.
I’m not a financial planner, but I do try do employ common sense when dealing with my income. Since I am in the sales industry, my income depends on each sale. If I don’t sell a home, I don’t eat. In this unique market where you, the buyer, hold the negotiating chips, with interest rates as low as they have been since before the housing crisis became a common topic, it’s time to buy and I can help you.
Please contact me today for more information about becoming a first time home buyer or about selling your current residence and moving to another location.