How to Get Your Finances in Order

Eight Simple Steps to getting your finances in order.

Difficulty: Moderate

Instructions

1. Create a realistic budget. Instead of budgeting what you think you spend, use your real bills and receipts to create a budget for what you actually spent over the last six months. All those Starbucks runs, online subscriptions etc, they add up, even if you don’t notice $10 here and there. It also helps you factor in the unexpected like medical and car repair bills, not just the predictable rent and utility bills.

2. Pay down Credit Card debt. As a general rule, lenders look for a total debt load of no more than 36 percent of income. Since this number has to include your mortgage, which can range between 25 percent and 28 percent of the average income, you must get the rest of installment debt—car loans, student loans, balances on credit cards—down to between 8 percent and 10 percent of your total income.

3. Get a handle on expenses. You should keep a falcon eye on how much you pay out in rent and utilities, but little expenses add up. Keep track of everything you spend for one month this can help you discover some great ways to save.

4. Consider ways to increase your income. To qualify for the home you really want, you may want to consider taking on a part time or weekend job to bring your income level to where it needs to be.

5. Save enough for a down payment. It is possible to obtain a mortgage with a down payment of 5 per cent (even less in some cases) but it is likely you will get a better interest rate and lower monthly payments if you can manage more. Try to save the recommended 20%.

6. Create a house savings fund. Decide on a set amount that you can put aside every month to save towards your down payment. Build it into your monthly budget, just as you would your utility bills or car payment.

7. Try to maintain a steady job history. While most lenders make no rule that you have to have had to be in the same job forever to qualify, having a job for two years or less may mean you have to pay a higher interest rate.

8. Establish a better credit history. Apply for a credit or store card and make purchases on it that you can pay for by the due date. This is a great way to build your credit profile quickly.

Resources

• NYC Apartments
• First-Time Home Buyers Guide

[benpauley]

on 3/7/2009 Great article. Going in my favorites. *****