People get into all kinds of financial problems when they are unable to assess accurately what their incomes will allow them to buy.
(PRWEB) November 29, 2012
Millions of people are considering whether selling their home is the smartest way to make financial ends meet during the current economic crisis. However, in her latest post money management blogger and Coolchecks.net founder Sherry Tingley approaches the problem from the other direction and says that people shouldn’t buy the wrong house in the first place.
“People get into all kinds of financial problems when they are unable to assess accurately what their incomes will allow them to buy,” writes Tingley. “Examples of this are plentiful when you read forums dealing with saving money and personal finance.”
In her blog, Tingley highlights the tale of a couple struggling to make financial ends meet after seven months of home ownership. They had a combined income of $130,000, of which $46,000 went to expenses, childcare expenses for two small children, and entertainment – leaving them a net of $84,000 for the year. That sounds like more than enough for a comfortable middle class couple, except that a whopping $50,400 a year (or $4,200 a month) was going to their mortgage, and the rest was going towards student loans ($55,000), or money they borrowed to put a down payment on their house. Add it all up, and the couple said they felt “poor.”
In assessing the situation in her blog post, Tingley points out the following key facts:
1. The couple’s mortgage payment is 60% of their net monthly income, which is far too high. It doesn’t matter that a lender was willing to loan them this much. They should have taken less, so they could pay less and owe less.
2. The couple felt wealthy because of their incomes, which was an error: wealth isn’t how much you make, it’s also how much you keep.
3. The couple missed the “biggest red flag” by not realizing how much they’d need to borrow for their down payment – an amount that should have clearly told them not to purchase.
4. The couple certainly should have consulted with a financial planner before purchasing their house, and mapped out what their anticipated monthly expenses would be.
5. As a result of the amount they owe, cutting back on spending likely won’t make a significant dent in their debt level; as such, selling is probably the only option.
“What makes one rich is creating a strategic long term plan and then following through with it,” writes Tingley. “Getting good financial advice about any purchase that will impact over the four years is a good idea. Financial education is a life-long process and luckily we can learn from our own mistakes and benefit from the wisdom of others.”
Tingley’s full blog post entitled “Should they Sell their Home?” is available at http://www.coolchecks.net/blog/personal-finance-home-ownership.html
For more information or media inquiries, contact Sherry Tingley at
sherry(at)coolchecks(dot)net or 801-599-0052.
Led by its Founder Sherry Tingley, Coolchecks.net offers a wide selection of business checks from several leading check printing companies. The company’s small business, personal finance and money management blog features a wide selection of practical articles, advice, insights and tools for small business owners and individuals. Learn more at http://www.coolchecks.net