Sunday, August 23, 2015
Financial discipline is key to financial freedom. It’s not what you make, but rather what you do with what you bring home. Whether you're a parent with two kids or a recent college grad working your first job, our 20/30/50 guideline can help you assess your budget to work towards owning anything! It’s an easy approach to understand where your money is going and how to put a plan in place to own anything! Notice I didn’t say own everything, but rather put a plan in place to own anything you want.
My guideline breaks your budget down into three simple buckets. It’s designed to help you figure out how much you may want to allocate to each area every month, and can also help you determine the order in which your money can be allocated.
1. Pay Yourself 20% to achieve financial freedom!
At a minimum, pay yourself at least 20% of your take-home pay toward important payments or contributions that will help you secure your financial freedom. We believe there are three essential goals everyone should strive for first: paying down high interest credit card debt, having a six month emergency fund, and investing to achieve financial freedom and generating wealth through real estate. If you bring home $5k per month, then $1k per month should be investing in yourself to achieve financial freedom! Think about yourself first!
2. Flexible Spending - 30%
Consider budgeting no more than 30% of your take-home pay toward flexible spending. These are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas.
We include groceries in flexible spending because even though food is a necessity in your budget, how you spend on food can vary. Some weeks you might eat out more, while others you may buy more groceries to cook at home. It doesn’t really matter what you spend your money on each month in this category, as long as you're aware of your spending and not going over your total flex budget each month.
3. Fixed Costs - 50%
These are bills and expenses that don’t vary much from month to month, like rent or mortgage payments, utilities and car payments. We also include subscriptions, such as gym memberships and Netflix accounts, in fixed costs because you’re committed to paying them on a monthly basis.
When it comes to fixed costs, we suggest you aim to keep your monthly total no more than 50% of your take-home pay.
As you might have noticed, the 20/30/50 guideline applies only to take-home pay. Any contributions you make to retirement before your paycheck hits your bank account are not included. For that reason, you may actually be contributing more toward your financial goals than this breakdown would suggest. And you may find that it's a good thing to keep that retirement money out of sight, out of mind, especially if you have an employer match program with a 401k program.
If you ever have any questions, your Real Estate Concierge is here to help or give us a call at 855-REC-6700 or email@example.com. Here's to building your wealth!
When my wife and I bought our first home in 1994, our PITI (Principle, Interest, Taxes, and Insurance) was about 30% of our gross monthly income, well within the lending Debt-to-Income ratio. However, it’s important to understand not just what the maximum is you can afford and qualify for, but also making sure you enjoy your home and are not ‘house poor’. From my experience, a 25% PITI to gross monthly income is a good guideline to provide a comfortable mortgage payment with extra money each month for an average lifestyle. Either way, it’s important to understand your finances and maximum borrowing leverage available to you.
Especially in today’s Seller’s Market, getting pre-approved gives the buyer leverage over other buyers that do not have a pre-approved mortgage letter. The first step in the loan process is to make contact with a loan consultant and begin the application process. At this time the loan consultant will begin gathering all pertinent loan application information from you such as:
- Last 2 Years of Federal Tax Returns
- Last 2 months of bank statements and investments (mutual funds, brokerage)
- Last 30 days of paystubs
- Copy of Driver’s License for each person that will be on the loan
The consultant will let you know exactly what documents you will need to provide and address important questions during your initial meeting so they can design the proper loan scenario for you.
Loan consultants will guide you through the entire loan process at this time. Loan consultants are qualified to answer any questions you may have about loan process, so don’t hesitate to ask. After your initial meeting with the loan consultant, the following steps are taken to complete the application process:
- A credit report is pulled.
- An application is signed.
- Disclosures are signed.
- Explanation letters are written to explain specific situations that affect your financial ability to repay a mortgage loan.
- Supporting documentation is presented by you to the mortgage company to validate the information provided for the loan application
- An underwriting pre-approval is performed by an automated underwriting service or a manual underwriter.
- A commitment fee, application fee, or good faith deposit is paid by the homebuyer to the mortgage company.
- A pre-approval letter with conditions is presented to you. House hunting begins
There’s a season for everything — including real estate. When my wife and I sold our first home in 2000, we lucked out and decided to list our home in June. Our first child was 6 months old and we were ready for a bigger home, but had no idea that summer was one of the best seasons to sell due to summer vacation and parents looking to upgrade and relocate in between school years.
If you’re gearing up to list your home for sale, you should connect with your agent to discuss your home sale action plan. But there are also a number of calendar-based factors you should be just as thoughtful about as you put together your plan for selling.
Here are five calendars that should be on every home seller’s radar.
1. The academic calendar
Families with school-age children often find it less disruptive to house-hunt in late spring/early summer with the aim of moving in before school starts. Of course, we all know what they say about the best-laid plans, so by no means should you let this stop you from listing your home at another time of year.
Demand for homes with convenient proximity to strong schools can increase during the summer school break and around other times of year when kids are not in school. When my wife and I sold our first, home, we did not have school age children, but knew this was the best time to sell. Our son was only 18 months old, but we knew summer was a critical period for our family/child oriented neighborhood. We listed our home in May and closed in June, 2000.
2. The tax calendar
I cannot count the number of relatively unmotivated looky-loo buyers I’ve worked with over the years who became suddenly motivated from a massive, looming tax bill. For instance, many new professionals will seek to close escrow on homes between the time they graduate and the end of that same year, in an effort to deduct their closing costs and mortgage interest from their new large incomes and avoid a big tax bill the following April. Similarly, just after tax time in April, a flood of newly motivated buyers come into the market, advised by their CPAs that the mortgage interest deduction is their best bet for not having to write as big a check to the IRS next year.
Fortunately for sellers, more buyers and more motivation means more demand and can translate into a faster sale at a higher price than at other times of the year.
3. The weather calendar
Many sellers who live in cold-weather climates are aware that wintry conditions can dramatically cut down the numbers of buyers who are out viewing properties. This is why buyer searches for homes peak in January in warm-weather states like California, Hawaii, and Florida — and not until after the spring thaw in the Midwest, the South, the Northeast, and most of the West.
The combination of what’s happening with the weather and the specific features of your home can interact to impact your home’s prospects for sale — and its ultimate sale price. Behavioral economics researchers have found that homes with swimming pools (and water slides, perhaps?) sell for more in the summertime than they do in winter.
“When it is sweltering outside, a swimming pool just looks attractive. There’s an emotional connection because it reminds us of fun times we have in the summer,” says Jaren Pope, assistant professor of economics at Brigham Young University.
So if it’s summer and you’re selling a home with ski slope access, you might want to paint the picture of a cozy, fun-filled winter by staging the place with ski gear and other items that help prospective buyers visualize how much fun they’ll have when winter comes. And vice versa: If it’s winter and you’re selling a house with a pool, consider making sure it is steamy and heated, if it has those features. Stage it with lounges, towels, lights — anything that showcases the pool to offset a cold-weather buyer’s psychological tendency to discount the appeal of a pool in the winter.
4. The holiday calendar
During the holidays, many buyers simply prefer to spend their downtime celebrating with family and friends versus. house hunting, especially in locales where the winters are wet or cold. Nationwide, December is the slowest month of the year for home searches, and November is the second-slowest.
Does this mean the holidays are a bad time to have your house on the market? Not necessarily. Some homes show beautifully when all lit up and tastefully dressed up for the holidays. And the truth is that there is a hardy contingent of buyers motivated to close by year’s end for tax purposes, every year in every market. While buyers might be fewer in number, those who will brave rain, sleet, and snow and forgo holiday parties to house-hunt can be some of the most motivated buyers of all.
5. The Gregorian calendar
We’re talking about the regular old January-through-December calendar here.
Home buying tends to be a popular resolution among those with money on their minds at the beginning of the year — and also among people looking forward to career promotions, developing their love and family relationships, or relocating to a new hometown. Make sure your home is well-represented on sites like Trulia at the beginning of the year, when these life- and financial-change visionaries start searching for their next nests.If you’re ready to list your home or have any questions, give us a call at 855-REC-6700 or email us at firstname.lastname@example.org
You’ve made the decision: You’re going to sell your home. Now you’re probably wondering Where do I go from here? Start putting fresh paint on the walls? Panic?
Don’t stress: Your Real Estate Concierge is here to help. Unfortunately, when my wife and I sold our first home in 2000, we didn’t know where to start or how to prepare. There weren’t blogs or great content available online at the time. However, in addition to what you can research online, I wanted to share a few simple steps to think about as you get your home ready to sell and maximize your return on investment.
1. Be vigilant with your stuff
Make the adage “less is more” your mantra. The detritus of life tends to stack up in our living spaces, which may be fine for every day but isn’t great for selling. Now is the time to tackle those organization and cleaning projects. Make a Goodwill bag and get a receipt. Giving to charity is a great feeling and also a tax savings advantage.
Give items away, recycle them, or pack them away for your next house. And remember, packing items away doesn’t mean shoving them in the hallway closet. Buyers will likely open every cabinet and drawer (pretty much), so those spaces should be tidy too.
While making your home buyer-ready, get a head start on packing for your new home and rent a portable storage container. This way, you’ll have a place to store displaced items — but you won’t have to drive it across town or get rid of it. Score!
2. Define a timeline and plan with your agent
As you’re getting your house in order, establish your timeline and expectations with your agent. You’re not looking for just any agent; but a real estate coach to guide you through and beyond the transaction. Selling a home can seem overwhelming, but with a coordinated plan, timeline, and expectations with your Real Estate Concierge, you will have a higher chance of success.
3. Dig out all relevant paperwork
While you’re cleaning and scrubbing, keep an eye out for paperwork that’s been stashed in random places throughout the years. Warranties, installation invoices, mortgage paperwork — gather it together.
If you can’t find the documents, you can always select “I don’t know” on the seller’s disclosure notice. But this isn’t the best tactic. Buyers want an active, informed seller who is involved with the details of their home. Give the people what they want, and in turn you’ll have an easier time selling your home for top dollar.
4. Schedule a strategy session with your agent
Purging and cleaning were the warm-up act. Now you’re ready for the main event. After you’ve signed on the dotted line with your real estate professional, schedule a walk-through before listing.
Take their feedback seriously. They know what color to paint that old maroon accent wall, how to stage the living room so it looks 20% bigger, and how to deal with outdated kitchen cabinets.
They also know how to allocate your dollars to impress potential buyers.
5. Repair and remodel
Work your way through your agent’s list of recommended repair tasks. If they advise a couple of remodel projects, make these a priority so listing photos can be scheduled. Remember, your agent is plugged into the local market and has some insider knowledge.
If it’s a buyer’s market, consider scheduling a pre-listing inspection. Nothing gives buyers the warm fuzzies more than seeing a completed inspection with items already attended to and checked off.Take these five simple steps after deciding to sell your home and before you know it, you’ll be ready to step up to the closing table to sign your papers. If you need any help, give us a call at 855-REC-6700 or email us at email@example.com