Savings account
General rule is 6 to 9 months total costs of living put aside with easy access. Easy access is key because most ways to put away money COST you money! They make you pay to give them a loan and then pay you back with a tiny interest, little by little until you get old and you really need it to live. That’s kind of how a retirement account works or what might be called a 401K with your employer. You will need that when you get older because when you get old, you will not be able to WORK as much! Your body either breaks or it gets tired or maybe even sick. This makes it hard to work and your first thought will be, “I WISH I WORKED HARDER WHEN I WAS YOUNGER”. No one is going to take care of you. And if you are relying on that, you are wrong! Please get your mind right! Everyone has to take care of themselves. Try to save your money in a savings account for your rainy days and if you use it, put it back. This is how you will always have it. Replenish your savings every time you use it while you can. To recap, take your monthly budget and multiply by 9 (Best case scenario) and keep that amount in a savings account at all times. Because you have this account, you will not be tempted to dip into your 401K or any other investment funds. It is crucial that you do not do that because your future depends on this money. If you get a job and they do 401K matching, make sure you put in at least the percentage that they match. Most of the time it is around 3 percent. So, you would select 3 percent when saying how much you want to put toward your 401K and it will be taken out of your paycheck before taxes.
Investments and Earmarked Money
Save up the equivalent of 6-9 months expenses. Now what? What do you do with the money you have leftover? Cause now you have your budget for living every month, you have your savings, so what do you do with the amount you are able to save per month? Now you can invest MORE! First thing is to find the cheapest investment option! There are fees with every broker so cheapest option might just be your bank. You can feel nervous to talk to them but you are their customer and they are working for you because you have the money. Money is valuable. So, call them up or show up to your bank and ask them what options they have for your financial future. You are already paying them fees by using their services. They may not invest your money for free but it might be your best bet. Go ahead and ask them what they think they can do for you that other companies cannot. They might lie to you but it’s good to keep them on their toes anyway. Always ask questions when speaking to your financial representative and always check with at least two other companies. Interest rates and fees vary so much and they make a difference. And take notes! Do some research and see what the public has to say about them in open reviews online. Take every comment with a grain of salt though because some people are just bitter. 😂 People are sensitive or privileged, or liars or vindictive, you never know. I usually read multiple comments and try to read between the lines. That means make your own interpretation of what happened with this customer. There are three sides to every story—your side, my side and the truth. Later, once a few years go by and you know more about how your money is doing, you can transfer your money somewhere else to see if you can get a better deal if you need to. Make sure when transferring money, you avoid tax penalties. The IRS is watching your money. They have a better hold on it than you do. To avoid penalties, make sure you have the proper forms filled out and that you didn’t keep any of the money for yourself during the transfer. Remember this money is for you when you are old, not right now. Then you also need to figure out when you might want to access it. Please keep reading and learning more about your investment options.
Think about money you might want earmarked, or saved for something specific. This could be for a wedding, graduation party, a big move, buying a house, a car, or anything you can think of that you’re going to need. Calculate how much it will cost and when you need it by, such as in five or ten years down the line or when you are planning to retire. When you invest you need to speak with a broker. Remember we already established one, so speak to that person and tell him your plan. He will do the work for you. That’s what you pay him for and that’s how you also start taking risk. Money does not come without risk or reward. It’s likely that he will tell you about CD’s, mutual funds, stocks and bonds, IRA’s. Some of these options hold your money for whenever you need it and either gain or lose value here and there but after some years, it will be up in value due to the predicted market increase over time. If you look at the value every year, you would see that some years the stocks had lost value but some years they had increased in value. The idea is that you buy when the price is low and sell when the price is high. In addition, if you trust in the growing economy, you will not worry about it until you are closer to retirement age. Retirement funds are supposed to be higher in risk while you are younger, meaning more is invested in stocks with higher opportunity for growth and less is invested in bonds that are low risk and increase very little in value but you won’t lose anything. When you get closer to retirement age, more of your money is moved to bonds and less is invested in stocks. This is because you are going to need your money sooner and you can’t risk the market crashing and taking away a big percentage of your money. You wouldn’t have time to recover and you will have to work longer. Yeah, that would suck.
Okay so now you talked about a plan and you find one you want. It takes a long time to do this. At least 4 hours only counting as soon as you are having that conversation with that broker. It takes a long time because it’s important to get this agreement right. It sounds like a lot right now, but they walk you through all of it step by step.
Buying a house
Before you can buy a house, you need at least two years of employment in the same field, so if you changed jobs, they need to be relatable if it is not the same position. The bank is going to look at your debt to income ratio and your credit score before you are approved for a loan. A good time to buy is when the real estate market is down. You can watch or read the news to find out or you can find a real estate agent and tell them you would like them to contact you when it is a good time to buy. This is not exactly their job but if they are nice and they want your business, they will keep you in mind and most real estate agents are driven and pretty nice in my opinion. Find one that sticks up for you, that means they are negotiating on your behalf and checking contracts and forms to make sure they are correct. Actually, I know a good one in Central Texas. Hit me up if you want his name. Good people deserve more business. When the real estate market is down, you can get a home with a lower interest rate. The interest rate is the rate the bank is going to charge you for giving you a loan. If you can lock in a low rate at the time or right after getting a pre-approval from the bank, you should be in good shape. Do not get an adjustable rate that fluctuates with the market. These might start off low but usually they increase and your mortgage will go up. Getting a home loan is a complex process because of all the different requirements. You will need to be prepared with your paperwork and respond quickly when the loan officer needs something. Have a handle on your files such as W-2’s, income tax forms you have filed in the past two years, bank statements, leasing agreements, pay stubs, day care receipts, employer information, and possibly more. They look into everything on your credit report so if you have anything outstanding, they will want evidence it was paid. The home loan process is also complex because they rely on other people for information as well. And if you remember what I said, other people are not reliable. They have to get letters or verbal confirmation from previous employers or sometimes from the IRS or previous landlords. It’s a long process so you have to be patient but you also have to stay on the loan officer to do their job. Call or email them frequently to get a status update. The other thing is that there are many types of loans you can get. A family member of mine was just approved for a first-time home buyer assistance program. She used Hometrust Mortgage and they referred her to SETH Gold Star website. However, if you have to get a conventional loan, you might need at least ten percent the value of the loan you are asking for so if you are buying a 100K house, you need 10K to be able to put down and it does get more expensive with closing costs. Talk to your financial representative if your goal is to buy a home, they can help you with investment options based on your timeline and amount you can save. You will also have to shop for home insurance and that will be part of your mortgage also. I would call around for rates, you will need to know things about the house you are looking to buy, like the year it was built, what it’s made of, how old is the roof, etc. If the info is not online, ask your real estate agent. Then call around and get quotes. Check up on the company to see how they treat people when it’s time to file a claim. You do not want to have to fight for coverage if your roof caves in or something is flooded. I’m sorry if this is all over the place or if it is too much information. It is better you hear about it ahead of time so that you are not completely confused when the time comes that you are ready to buy.
When you make an offer on a home, a lot of times they will not accept a low-ball price but sometimes you can get away with it if they are really trying to sell. Study the area and be sure. If you really want the house, a low-ball offer could cause you to be denied but that’s up to you if you want to risk it. I have done that before and I was actually glad my offer was not accepted. Obviously, I didn’t think it was worth the amount they wanted. Think about HOA’s. Homeowner’s Associations. If the home you want is in one, drive around the neighborhood and see how they keep it up. Do the lawns look nice? Is there visible trash? How does the community park or sitting area look? Is there a pool? If you think it looks nice, it might be worth it. If you can’t make the trip, google maps street view please and thank you but you have to know when it was last updated. An HOA usually has a fee of 150 to 200 once a year. One last thing– Make sure you get an inspection on the home during the opt-out period. You make an offer and after it is accepted, you have 10 days to opt-out. Please verify this with your agent. During that time, get a home inspection and be there during the inspection to see every nook and cranny of the home. I have backed out of three homes for termite issues, possible flood damage or flooded areas. You do not want to find this out after you move in. Not in your new beautiful home, don’t do it. You can also use the inspection as leverage to negotiate a lower price or get them to amend the contract so that it states all the issues will be fixed before you move in. Again, this has to be done during the opt-out period because if they are not willing to negotiate, you can back out of the deal and find another house. Do a walk through before you move in to make sure everything was fixed.
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