Category Archives: Spend

Rent vs Buying a Home The Pros and Cons

Often times you hear of home ownership referred to as the American dream but this isn’t always necessarily the case. There are numerous factors to consider when deciding whether to buy your first home or to continue renting. When living expenses consume a considerable portion of most people’s income, it is a good idea to put a lot of thought into the decision and where your money is ultimately going. Here are a few factors to consider before possibly making the leap into home ownership.

1. Low Credit Score

Generally speaking it is said that a score below a 620, will not be helpful to you in buying your first home. If you are below this number, it is probably best to spend the next year or so making a conscious effort to rebuild your score. Delaying the purchase of your first home to do so can end up saving you tens of thousands of dollars in the long term on interest alone.

2. Job Stability or Relocation

Being laid off is usually not something you can anticipate unless your employer is extremely transparent. If you don’t have an emergency fund accumulated in order to make at least the approximate payment of your anticipated mortgage, you probably are not ready to make the leap into home ownership. Most lenders require that you have at least three months of reserves for a reason.

Additionally, even if you have or plan to voluntarily leave your current employer you may have a difficult time securing a mortgage. Lenders like to see a history of employment, if not with the same company, than at least in the same industry. Other factors to consider is how mobile you are. If you are at high risk for being relocated or do not intend to stay in the house for a considerable amount of time, you could very well lose money in the case of a sale. A general rule of thumb is that your property needs to appreciate at least 10% in order to avoid losing money in a sale.

3. Maintenance fund

A home is a continuous project that requires time and money to upkeep. It is always a good idea to have a home inspected before closing on it, but even then, not all of the problems and potential problems are evident. In addition to an emergency fund, it is recommended to have a reserve fund of at least 5% of the purchase price of the home in order to cover maintenance and upkeep. Furthermore, not everyone wants or knows how to maintain a property. Many people prefer to rent in order to have the benefits of a house without the risk of ownership.

4. Cost

In some cities and states it costs significantly more to buy vs. rent in both the short and long term. It is a good idea to not only consider all of the above factors but to also do extensive research on the area you are looking to buy and do a cost comparison between the two for at least five years out.

Tax considerations are also important because of the deductions and depreciation savings that can come with owning your own home. Consulting a CPA may be a good idea if home ownership is on the horizon.

There are obviously many factors that go in to deciding where you live. Although owning a home is something to be proud of there is no fault in waiting to own until you are in a good place to do so. Preparation and planning are two things that cannot be stressed enough when any major financial decision is made and deciding on where you live is no exception.

How Much Should You Spend on an Engagement Ring?

When it comes time to pop the question, there are a slew of questions that race through your head. Of all of the questions, figuring out how much to spend is quite possibly the most difficult. After all, you want to get something that is made of quality yet you do not want to have to take out a loan to do so. There are several age old traditions, one of which is to spend three months of your salary. This idea however is based on no sound reasoning.

How much you end up spending on an engagement ring is entirely up to you with hopefully a little input from your significant other. It is important to consider that although your finances are separate now, they soon will be joint and placing that burden on your new marriage is hardly fair. Additionally, your new fiance will probably not want to end up paying off their own ring.

Generally speaking it is ideal to go into a marriage with your affairs in order, most important of all, your finances. The less debt you bring into a marriage, the less stress you will place on your new marriage and therefore you will be able to focus on saving for your future together.

Careful Selection

After all, an engagement ring is a symbol above all else. Choosing the right ring should be a thought out process that ends on a ring that is meaningful. More often than not, someone in your family has an heirloom ring that has been passed down through the generations. Nothing is more meaningful, or inexpensive, than that. If this isn’t an option, perhaps you can go the online route. There are plenty of reputable online sellers that sell rings at close to cost which saves you money. You can even buy a ring second-hand from someone online at usually steeply discounted prices. If you want to go the nontraditional route, a nice stone set in a custom band can also be an option. It really all depends on what your significant other will like, and if you don’t know the answer to that, perhaps you aren’t ready to pop the question after all.

At the age couples are getting married these days, it is unrealistic to still follow the age old theory of spending three months of your salary on a ring. Costs of living are higher than ever, student loan debt is prevalent, and unemployment is reaching all time highs. Not to mention most women are making more than men. There is already a long list of items that can cause stress on a marriage, so why add to the list by buying an engagement ring that you really can’t afford? Focus on what’s important and disregard what you think matters such as size, carats, etc. At the end of the day, your significant other will appreciate any ring that was picked out by you as it is a symbol of your love, and that is something that no amount of money can buy.