Getting Your Financial House in Order After Purchasing a Home
Mar10

Getting Your Financial House in Order After Purchasing a Home

Part four of our “First-Time Homebuyers Series” continues today with another post from John Foxworthy. So you’ve found the perfect home, got an accepted offer, and made it to closing.  Here are a few steps you can take to make sure your dream home doesn’t turn into a financial nightmare. Build your liquid cash reserves We usually recommend keeping three to six months of your salary as a cash reserve.  This reserve can be used to keep you afloat in the event that your income is interrupted.  If you should lose a job or need to take a medical leave, this fund will be there to pay your mortgage, auto and home insurance, and utilities.  It can also be used for emergencies like a car repair or an unexpected medical expense.   Set money aside for future home repairs This fund should be kept separate from your liquid cash reserve, which is designed for income replacement.  As the homeowner, you will be responsible for any expenses associated with the home so it makes sense to have a fund in place.  At some point, a major repair like a furnace, water heater, or a roof will be needed.  You should set up an automatic transfer every pay period to a separate “home repairs” account in order to start building up some cash.   Adjust your budget Purchasing a home is one of the biggest financial transitions that a person will make in their lives.  It goes without saying that you will probably need to make a significant adjustment to your budget.  If you did your homework to make sure you were purchasing a home that was within your means, you shouldn’t need to change your lifestyle too much.  However, it is a great time to look at your spending patterns and see where you can be more efficient and effective with your income and saving plans.  You can use a financial software program like Mint.com or Quicken to do it yourself, or it might make sense to talk to a financial professional who can help you with a more customized cash flow plan.  Stick with an independent firm that offers fee-based financial planning and coaching.   Do your protection planning Whether we like it or not, sometimes things don’t go as planned.  Accidents happen, people get hurt or sick and can’t work, and sometimes they even die prematurely.   Before owning a home, these risks were important, but they become more important now that you have a significant liability associated with your mortgage.  Fortunately, there are tools that allow us to mitigate the risk of premature death or disability.  Life insurance...

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