Financial planning is an ongoing process that an individual will go through to help them make good life decisions about money. As an individual we all have financial goals that will require some planning if we need to meet these goals. Goals such as buying a house, buying a car or retirement to name a few. The first step is to quantify these goals so that we can save towards meeting them, but when we start to save for these goals is a key factor. Here are a few reasons why you should start your financial planning early.
However, getting this down payment together isn’t as impossible at it may seem once you have the right information to guide you.
Here are a few actionable steps to help you achieve this milestone in your life:
Mortgage lending companies require a down payment on your mortgage. This required deposit is typically 10 – 20% of the value of the property. With this in mind, a simple calculation is required to find out what your savings target should be. Therefore, you want to find out the property prices for the type of you desire.
You will need to take a look at you budget to find out what you can afford to put aside monthly or yearly. You can re-structure your budget to include this new savings by eliminating unnecessary spending, reducing certain expenses or delaying gratification from expensive activities.
Next, you want to identify how long you it will take you to reach your goal. Divide the required down payment by the amount you can afford to save monthly. This tells you the number of months you need to save. It may turn out you have a very lengthy period to save up this amount but for most of us that’s the most realistic approach.
If you feel that timeframe is too long, you can consider ways to speed up the process. You may consider a secondary source of income to help you save a larger amount per month or year. Many persons have skills, untapped business opportunities, work bonuses and back-pay that could potentially bring in extra income. If you do, you can channel those streams of extra cash into this savings to give you the needed boost.
A good savings habit is separating financial accounts. You want to save towards this mortgage deposit in an account which is different from your accounts used to receive your salary, business proceeds and emergency funds.
Sandra and her husband have a combined income of $35,000. They are newly married and are working on their household budget which allows them to save $4000 towards the purchase of assets. They have also identified an area they would like to build a home. The estimated value of the land and building is $1,800,000. Sandra’s friend who works at a mortgage lending company advises her that she can get a mortgage if she has a deposit of 10% of the value of the property. With this information she decides to put pen to paper to get this goal realise.
$1,800,000 x 10% = $180,000
$180,000/$4,000 = 45 months (3 years 9 months)
Each sending from salary $2000 every month to this account which receives an annual Interest rate of 2.75%
Based on this strategy: Sandra and her husband would have $180,000 saved in less than 4 years. Fortunately, the value of their investment will be worth $189,815.50 having received interest on their savings for this period.
Guardian Asset Management will set you on the right path to home ownership with the My Dream Home Plan, call us at 226-2799 or visit http://home.myguardiangroup.com to find out more!