FINANCIAL PLANNING: a plan for your future

Aren't we all looking for some degree of financial securities today and for our future? Isn't that why we save and invest our money, buy insurance, and buy items of value? All of these measures are usually taken in an attempt to increase our wealth and give us security. However, most of us do not know exactly how much is necessary to meet our objectives and to give us security and we worry whether some twist of fate will cause us to lose much of what we have, or cause our families to suffer financially. The fact is, in many cases, failure to achieve some measure of financial security is basically a result of poor money management, which is something that is avoidable with sound financial and estate planning.
The process of financial planning involves prioritizing a series of choices with resulting consequences, and addressing opportunities and foregone opportunities on an individual level. A comprehensive, personalized financial plan will help take some of the guesswork out of your finances, put you in control and lead to the security we all long for. A financial plan will help you to make sense of a complicated market place; will make concise recommendations as per individual’s situation, and work with you to put you on track to gain control of your financial future. A financial planner's role is to advise you objectively in all areas of your financial needs and it is imperative that your have a trusting professional relationship with that person from the start.

What “Things” Should a Financial Plan Encompass?

Net Worth

Most planners start by reviewing your net worth (total asset minus total liability) and will make recommendations on how to improve your wealth through debt elimination, asset accumulation or asset allocation. Your net worth statement is an important starting point as it examines where you are now and can be used as a benchmark for your future performance and your planner's recommendations.

Cash Management

A planner can help you to develop a cash management plan by advising you on establishing a budget, a liquid emergency fund, a debt elimination plan, and a savings program for both RRSP and non-registered funds, in a tax-effective manner. RRSP is tax deferral product, not tax avoidance.

Retirement and/or Financial Independence

For most of us, our number one goal is likely to be financial independence, and a planner will work with you to fine tune your goals and determine what you need to do to attain them. Statistics show that lack of proper planning in this area has led many Canadians to a life below the poverty line after retirement. A planner can advise on how much you may need to save and invest in order to attain the standard of living you desire during retirement and make recommendations on how your assets can best be used to help you reach that goal and maintain it after you retire. Financial independence is as easy as a good financial plan and some discipline.

Investment Planning

Some planners specialize in investment planning and portfolio management and others will work with your investment advisors to ensure that your portfolio suits your financial planning objectives and your risk profile. A planner will be able to assess your situation and your general financial character, and make suitable suggestions for your investment planning that fit with your other goals and objectives. It is very important that your investments suit your profile and mesh with the rest of your financial plan otherwise the other areas of your plan may be adversely affected.

Other Areas

Many planners can also address other areas that are relevant to your situation, for example business planning and/or succession planning for your Business, Trusts, Education Savings plans, or other needs.

Estate Plan

A financial planner can also address contingency planning by preparing a detailed estate plan that examines the consequences of your death, its financial impact on your family, and the tax efficiency of your estate. Many of us do not like to contemplate our own mortality and this makes estate planning an area we most often neglect. However, the avoidance of this area of financial planning can lead to difficulties for those we would like to have benefit after our death. A planner can make recommendations with respect to Wills, efficient distribution of assets, minimizing income taxes and other estate settlement costs, providing funds to pay those taxes and charges that are unavoidable on death, providing for your family's income and capital needs after your death, and providing for the future of a family business.

Other Risk Management

A planner can also make recommendations on other areas of risk management, including Powers of Attorney, Living Wills, and insurance products which would protect you and your family, your home, and/or your business in cases of disability, critical illness and other areas where 'fate' may wreak havoc for your future security.
Your future is full of possibilities if you are financially free. Please, think how?? We work hard to have better future. Canada is a land of opportunity for investing in financial products. All financial companies and all financial products are good. It is strongly recommended to have a good professional relationship with an experienced full time financial advisors (3 plus years of practice earned) affiliated to the reputed companies, but not as a personal favor to that advisor.
You and your family work hard, so you deserve to have a secured financial future. So please take appropriate action.

WHAT IS FINANCIAL PLANNING

A process

Financial planning is a multi-faced process that involves the acquisition, retention, and disposal of assets throughout your lifetime. Here are the steps to follow:

Step 1. Prepare a Net worth statement: This is your starting point in building your financial future.

Step 2. Prepare a Monthly cash flow statement: This helps identify what resources you have to help build your financial security.

Step 3. Assess your Risk management program: Do you have sufficient financial protection (Life and Health insurance) against the loss of your property, income or life? Your advisor can help you make sure you have the coverage you want.

Step 4. Plan how you'll Accumulate future capital: Once your cash flow and risk management are on target, and you've carefully considered your goals and your tolerance for investment risk, you can plan your investment portfolio. Your advisor can help design a strategy to suit your own unique needs and objectives.

Step 5. Plan for your Retirement: It's important to consider the lifestyle you want, and plan for the income you'll need. Your advisor can help you with these plans.

Step 6. Plan for your heirs: Estate planning: it’s important - with a sound plan in place, you can help ensure that your assets will pass to your chosen heirs in a tax-effective manner and in accordance with your wishes.

Comprehensive

A comprehensive financial plan should take everything into account to provide you with a clear picture of where you are now and where you want to be in the future. It looks at short-term and long-term financial goals to help you prepare for the kind of retirement you deserve. By following the plan you establish, and monitoring and updating it on a regular basis, your retirement can be as financially secure as it is personally satisfying.

Individual needs

Not everyone has the same needs and wants in life. That's why a financial plan should fit your lifestyle. Only you know for sure where you would like to be financially - both now and in your retirement years. It's up to you to make the decisions and drive your plan, but advisors are certainly being here to help guide you along the way. Like individual, all advisors have own way of suggesting about financial planning. It is very hard to say which advisor is better than other, but education and experience of advisor really counts. Please, find out how long your advisor has Canadian experience as a financial advisor.

Financial success is a journey, not a destination. Are you taking the steps to get you on the road to financial independence and keep you there?

SIX SMART RULES FOR RETIRING SOONER

It’s my dream too as others- having best retirement life. The new retirement model has demands of its own. Here's how to make sure you can cut back sooner -- without being destitute by age 65
Nowadays, Retiring early isn't what it used to be. With bolder aspirations and more challenging financial situations, Inflation;a new generation faces different questions as baby boomers prepare to ditch the daily commute. So whether they want to spend their retirement years saving the world or simply traveling around it in their new motor yacht, boomers' financial savvy will spell the difference between success and failure in pursuing their dreams. There is no necessary that you have invest only in RRSP to have better retirement income. It is very important to understand tax implication at the time of retiring on your RRSP fund.

What's changed? Two things

The first change, not surprisingly, boils down to MONEY
Our parents had pension plans with defined benefits that were adjusted to keep pace with inflation -- they could just take their pensions and get up and go.
But over the last quarter-century, the vast majority of employers have shifted the burden for saving for retirement to their employees, dumping on them all the work and all the headaches involved in building, managing and distributing retirement nest eggs.

The second change is LIFESTYLE.
What kind of lifestyle you are looking for. The reality is that when baby boomers retire, we are going to be relatively young and healthier than any other generation has ever been at this age.
The bigger your retirement dreams are -- or the sooner you want to jump off the career ladder -- the more attention you need to devote to financial planning.

Following are six smart tips for retiring not just sooner, but smarter as well.

1. Start as early as possible

The best way to avoid financial traps is to begin planning and saving as early as possible. That boosts the odds that you'll be able to retire whenever the moment feels right, instead of hanging on until the last possible moment or trying to knit together a combination of part-time, post-retirement jobs to bridge the gap between inadequate savings and your financial needs.

2. Check your lifespan

It's prudent to base your financial calculations on very conservative assumptions. If your parents lived into their 80s, you'll want to make sure your assets will last at least until you turn 90, if not longer.

3. Get real

Retirees tend to make similar mistakes in their financial planning and one of the most common is the assumption that their income needs will fall 20% or so in the early years of retirement. That may make sense on paper, but not in reality. Just because the breadwinner isn't heading off to the office daily doesn't mean that suddenly a couple will be able to make do with only one car.

Usually, retirees are eager to enjoy their first few years of leisure by rewarding themselves -- especially those who haven't found tremendous satisfaction from their jobs or careers. Those "rewards" are usually costly, and can take the shape of everything from new tools or equipment for their favourite hobby to a round-the-world cruise.

4. Make your hobbies pay

we are very busy running our lives and careers and have no idea of what is happening to our retirement savings beyond the fact that they are adding something to it each year.

Everybody have different hobbies and believes about company and products. For example, if you like gadgets, good to invest in those companies which will pay you handsome return in future.

Thus, make habit of investing on your passion or hobbies regularly.

5. Set a target

The financial services industry has begun to address that problem by introducing an array of new products aimed specifically at baby boomers -- most notably, asset-allocation mutual funds that have become known as "target-date retirement" funds.

The marketing pitch runs as follows: Decide what year you hope to retire, then pick a fund with a date that corresponds most closely to that. So if a 50-year-old hopes to retire in 2018 or so, he or she can choose among four different funds with a 2020 target retirement date that have gotten four- or five-star ratings from the mutual fund analysts at Morningstar.

These products do make the process of asset allocation simpler, changing and adjusting the risk level over time and reducing the likelihood that investors will be either too aggressive or too conservative with their nest egg.

Thus, set a target NOW to retire and calculate how much you need at that point of time.

6. Taper, don't quit

In reality, few baby boomers are going to transition from work into retirement -- however they define it -- as seamlessly as their parents did. Whether out of desire or necessity, a majority will continue to work in different ways and possibly pursue different careers altogether.

Knowledge is powerful and one phone call can make big difference in your life.

RICHNESS

RICHNESS--- is just our state of mind, but Attitude.......

What is being RICH? Can anybody answer the question? No apologies, I know I might not agree with your answer because the definition varies according to the state of mind of different people.

“Rich? Yes well, rich is having a lot of money”

“How much, how less…when—question bugs you all the time”

“Is millions of dollar enough for you?”

“Almost!”

“OK! so money makes you rich?”

“Money is means to purchase anything your heart desires”

“Example?

“For some it’s a mean to buy expensive, luxuries car, for others a roof over their head, different people uses money for different things…….”

“So is it enough for you”

Now you are saying to me…“Man, you are pain in a neck”

“Well, I am not because I also do not know what RICHNESS is”

Money is the source of anxiety than any other thing on earth. Wars have been fought for it. People have been killed for it. Some steal it. Most people worries about it, me too. For most Money implies status, it determines where and what you can eat, what you can wear and where you can live etc.

Money inspires fear. We are always unsecured that we might lose it or may not have enough; due to numerous similar doubts we will never feel that we have achieved enough money. Money is a taboo subject to most of the people. Politics, education, beauty is fine, but when money issue comes in—we stand alone and say mind your business and back off. It does not matter how much money you have, if you are worried about it, you are not rich….That’s period.

I do not know who made this word “LIFE”. Take the middle part as IF of LIFE. Right smack in the middle of “LIFE” is “IF”. If you live, you will provide the money for food, clothing, education, and shelter for you and your family. In order to live and make living to your family, you must be rich. And the richness comes from Good Knowledge, Attitude, Skills, Respect to others. This personal richness can take you to financial richness. I think ATTITUDE is the best one which can make you rich and prosperous in life. The word Attitude is not enough. I know it is not easy to make good attitude all the time. But, we can try every day and make it happen to our life.

Every thing is possible, if you have great attitude towards Yourself, Family, Community and Nation. Thus, Richness is just a state of mind but ATTIDUDE is 100% and it is contagious.

Just close your eyes for a minute and make a new resolution to accrue new great attitude own self………..

Wishing you all Happy Holiday and New Year 2019!!!!!!!!!!

Knowledge is powerful and one phone call can make big difference in your life.

5 TIPS FOR FIRST-TIME BORROWERS

If you’re thinking about buying your first home, that probably means you’re also going to be taking out your first mortgage. Though the process can be confusing, here are a few key things you can focus on to successfully navigate the hazards.

1 - Don’t fixate on the interest rate

When people start shopping for a mortgage, the first thing they do is look for a low interest rate. Which makes sense, because the interest rate is a major factor in determining what the loan will cost you.

But it’s not the only factor. Inexperienced borrowers often end up getting a poor deal because they choose loans with low rates that have other features that raise the overall cost considerably. In fact, it’s not uncommon for such features to boost the cost of a loan by the equivalent of half a percentage point or more!

The most common way of hiding the true cost of a mortgage is through fees. Whenever you take out a mortgage, you have to pay a variety of fees for originating and processing a loan, which can vary greatly from lender to lender. These fees are usually rolled into the mortgage itself, meaning you’re starting out with a bigger loan balance – and perhaps higher monthly payments – than you would on another loan with lower fees.

2 - Pay attention to fees

As we mentioned above, mortgage fees vary from lender to lender. Different lenders may charge different amounts for the same fee, they may charge fees other lenders do not, and they may have different names for the same fees. This is where comparing mortgage offers can get really complicated.

You may have heard a lot about “junk fees” and how important it is to avoid them. Basically, junk fees are charges for routine things that you really shouldn’t be billed for – they’re either things that should be covered under billings for other services or don’t reflect any actual service performed. Some lenders include these as a way of padding their profits and a careful borrower can identify these and demand they be removed from the list of charges.

The good news, though, is that you don’t have to go through your list of lender charges with a fine-toothed comb to avoid getting taking advantage of by junk fees. The key thing is the total amount of fees the lender charges, along with the interest rate. If one lender’s total fees and interest rate produce a lower monthly payment than another lender’s (assuming you’re including the fees in the amount borrowed), that’s typically going to be your best deal.

3 - Understand discount points

Discount points are a special type of fee that’s commonly used to lower an interest rate. In essence, they allow you to buy a lower rate by prepaying a certain amount of interest. But lenders often use them to create an unusually low “teaser” rate for use in advertising that’s based on more points than you would be likely to buy.

The way they work is that each discount point cost 1 percent of your loan amount and lowers your rate by a certain amount – often by a quarter of a percentage point. So if you’re borrowing $250,000 and normally would pay a 4.5 percent rate, buying two points for $5,000 would get you down to a 4 percent rate.

When comparing mortgages from different lenders, it’s best to start out by comparing offers with no discount points included so you know you’re comparing apples to apples. If you like, you can then decide to buy one or more discount points if you think it would be advantageous to lower your rate.

Discount points can save you money if you’re planning to stay in the home long enough for the savings from the lower interest rate to offset the additional cost of buying discount points. But if you expect to move again within 5 years or so, or may refinance within that time, you’re probably better off without them.

4 - Shop around

A mortgage is the biggest financial commitment most people will make in their lives, but it’s amazing how many people simply grab the first or second advertised offer that looks good, or go straight to the bank where they have the rest of their accounts.

A mortgage is a lot of money. And small differences in the interest rate and other loan terms can really add up over the years. Do yourself a favor and spend a few weeks learning about mortgages and researching offers from different lenders.

Ideally, you want to look at offers from at least five or six different lenders to see how their rates and costs vary. Check into large and small lenders, credit unions and at least one broker or two to what they have to offer. A broker’s job is to sift through loan packages available from various lenders to find the best one for you, so they can simplify the task, but you don’t want to let them do your entire mortgage shopping for you – check into a few offers independently to see whether you can get a better offer.

The easiest way to compare loan offers from different lenders is to look at the Annual Percentage Rate (APR) , which is a way of expressing the total cost of a loan in terms of an interest rate. Generally speaking, the lower the rate the better, but to be absolutely certain, you should work through the details of individual loan offers using a mortgage calculator.

You don’t want to go different financial institution; you can look for good mortgage broker who will hard for you, not for bank or any other financial institutions. They will shop around for you.

5 - Use a mortgage calculator

A mortgage calculator is one of the most valuable tools you can have when shopping for a mortgage. It lets you enter all the important data, including loan amount, interest rate and fees, and calculate what your monthly mortgage payment would be. It makes it easy to see how different combinations of fees and interest rates play out in terms of what you actually end up paying.

Some mortgage calculators also let you display amortization schedules, which show how fast your mortgage balance would be paid down over time, along with your accumulated interest payments. These are useful for seeing the total cost of your loan, and can also be used to decide whether to pay for discount points, because you can see how much your savings in interest would be over time.

Lenders will provide you with their total fees and interest rate when they give you a quote, but they really aren’t committed to those until they provide you a Truth-in-Lending statement. Under federal law, lenders must provide you with a Truth-in-Lending statement, which lists all fees and the interest rate, when you apply for a mortgage. Double check this to make sure the numbers match the quote you were given. It’s also not a bad idea to apply with more than one lender just so you can compare Truth-in-Lending statements to get an accurate picture of all fees and charges before committing.

5 WAYS TO QUICKLY BOOST YOUR CREDIT

Building good credit is a slow process and recovering from bad credit takes time. However, there are certain situations where you can do things that will boost your credit score fairly quickly.

Don’t expect to be able to patch over a bankruptcy, foreclosure or a history of seriously late payments – if your CREDIT SCORE is floundering in the 500 range, it’s just going to take time to rebuild your credit. However, it’s sometimes possible to fix small dings and dents in your credit history enough to boost your credit score into a higher bracket, making it easier to qualify for a mortgage loan or obtain a lower interest rate.

Here are five possible ways to quickly boost your credit score, depending on your situation

Correct errors on your credit report

This is the first thing you want to do, and the most important. It is good to order copies of your credit report from each of these major credit reporting agencies – TransUnion, Equifax. By law, you’re entitled to a free copy of your report once a year from each one.

Go through them and check for any errors related to your payment history or credit limits – missed payments that were actually made on time, collection actions over billing disputes that were settled in your favor, credit limits listed as lower than they actually are. Be alert for terms such as “settled,” “charge-off” or “paid-derogatory” on accounts you’ve paid off – anything other than “current” indicates a black mark.

Any inaccurate items should be challenged. You do this by sending a letter to the credit agency letting them know you are disputing an item, along with copies (not originals!) of any supporting documents. They must then investigate the item – usually within 30 days – and report back to you. If they are unable to resolve it, your next step is to follow up with the creditor in question, again in writing and with copies of supporting documents.

Pay down large balances

Even if you’re not carrying a lot of debt, it can hurt you if you’re carrying too high of a balance on any one credit card. Ideally, you don’t want to be using more than 20-30 percent of your credit limit on any one card. If you have one card with a high balance and several others with little or no debt, try using the other cards more while you pay the big balance down. You can also use balance transfers to spread the debt around several cards, but you could find yourself paying a high interest rate to do so, either immediately or after a temporary low rate expires.

Divide debt among several credit cards

Even if you’re not carrying a lot of debt, it can hurt you if you’re carrying too high of a balance on any one credit card. Ideally, you don’t want to be using more than 20-30 percent of your credit limit on any one card. If you have one card with a high balance and several others with little or no debt, try using the other cards more while you pay the big balance down. You can also use balance transfers to spread the debt around several cards, but you could find yourself paying a high interest rate to do so, either immediately or after a temporary low rate expires.

Beg for mercy

You can actually do this. Creditors will sometimes agree to withdraw a negative item from your credit report, particularly if you’ve been a good customer otherwise and you ask them nicely. Called a “goodwill adjustment,” it’s sort of like getting a late fee waived the first time you’re a day or two late on a payment. However, this isn’t likely to work if you’ve had multiple incidents with the same creditor, or if it’s a really negative item. At the same time, you might be able to get two or three separate creditors to all withdraw individual minor items separately (maybe you were going through a bad period), which could give your credit score a pretty good boost.

One thing to note – you’re most likely to get a goodwill adjustment if you request it immediately after the event. It’s less likely to work if you’re asking them to withdraw a year-old late payment report.

Negotiate

If your credit score is getting slammed because you’re currently in a dispute with a creditor, or because the debt is in collection, you may be able to negotiate a non-report in return for settling the account. Creditors will often do this, because getting paid is more important to them than reporting the incident to credit bureaus. Just remember, you need to do this before you settle the debt – once it’s paid, you’ve lost all your leverage.

HOME EQUITY LOAN

Tips for getting the best home equity loan you can qualify for

If you’re a homeowner in need of money, and have accumulated equity in your property, you may be able to convert this equity into cash. People choose to draw on their home equity because loan rates are significantly lower than other types of borrowing, like personal loans or credit cards. There is also tax advantages associated with home equity loans, because the interest may be tax deductible within certain limitations and if it is applied for doing business. Another reason that home equity loans are appealing is that closing costs are relatively low.

Home equity loans are also known as second mortgages because they are subordinate to your primary mortgage. If you can’t afford to make your mortgage payments and subsequently default, the first mortgage gets paid off first from any proceeds of a sale. As a result, there is much more risk for lenders who give you a home equity loan.

Pay off debts before applying. This will raise your credit score. A higher score can get you a lower rate.

Don’t borrow more than you need, Teven if you qualify for more. The more you borrow on a home equity loan, the more interest you’ll pay.

Don’t say yes to the first offer. Even if you think the rate and terms are amazing, it pays to shop around with other lenders. You can also use your first offer as leverage to see if another bank will meet or even beat it.

Know what you’re getting into. Take the time to upgrade your mortgage vocabulary. You’ll be a lot better off if you understand terms like spread, term, amortization, floor, and ceiling when you talk to prospective lenders.

Get it in writing. Lenders may quote you rates over the phone, but unless it’s written down, it’s no guarantee. Once you submit your application, the lender will send you a quote that contains all the terms of your loan. Read it carefully, to confirm that it’s exactly what you applied for.

Understand the differences between a Home Equity Loan and other loan. For example, home equity loans are usually fixed-rate, while other loans are usually adjustable-rate loans. That can make a big difference when it comes time to start paying them back.

Avoid prepayment penalties. Paying down your mortgage ahead of schedule can save you money, as long as you don’t get hit with prepayment charges. Whenever possible, try to get a loan with no prepayment penalty so you won’t get hit with extra charges if you pay if off early.

Know your terms. Must know the term of loan. There is difference between term and amortization. Some bank allows paying only interest and paying off the principle at your connivance.

GREAT DILEMMA --- OWN A HOME OR RENT

Owning your own home: Many people consider it the Canadian dream, but no dream is one-size-fits all. What we say in Canada that you are not Canadian till you do not have mortgage. But it comes with price.

While owning a home can increase your net worth, there are potential downsides as well: additional labor, hassle, and cost, to name a few. So in many cases, renting makes sense.

It is well advised that before you buy home and deals with realtor, you must think about your quality of life and protection you have to provide to yourself and family members. Mortgage is sweet risk but protection is mandatory.

So how can you know which is best?

But he also knows before you can make a good decision, you need to consider both sides.

Now let’s spend more time on the pluses and minuses of home ownership

1. Time

The minuses

Owning a home is a huge time commitment. When you rent, maintenance is someone else’s problem and repairs are solved with a phone call. When you own, you’re the maintenance man and gardener. When something breaks – and it will – it’s on you to fix it or find someone who can. Once you buy home, it will be hard to mobile for at least 5 years.

Then there’s the lack of flexibility. As Stacy said in the video, home owners should plan to keep a house at least five years, because transaction costs – agent commissions and other sales expenses – are high. The sooner you sell, the harder they are to recoup.

The pluses

What you can do to make a rental property uniquely yours is severely limited.

One of the joys of home ownership is investing time to make it yours and make it worth more. What you can do to customize a home you own is limited only by your imagination, budget, and local zoning restrictions.

The bottom line: If you want to stay mobile, don’t enjoy home improvement projects, and don’t care that much about expressing yourself with your surroundings, rent. If you’re staying put and watch a lot of HGTV, buy.

2. Money

The minuses

If you rent a house you’ll pay the first month’s rent, a security deposit, and maybe a pet deposit. Buying means a down payment, closing costs, and other expenses far exceeding rent.

For example, I rented my house. Here’s the breakdown:

First month’s rent – $750

Security deposit – $750

Pet deposit – $150

Total: $1,650

In average, neighbour of $185000I i would have paid:

Down payment – $37,000 (20 percent)

Total: $43,822

Then there’s the additional monthly expense: The calculator says my monthly payment would be $990: $240 more than I pay now. And that doesn’t include insurance, property taxes, or maintenance.

In 2011 average annual homeowner’s insurance premium was $909 (or $75.75 a month). Property taxes vary widely depending on where you live, but run from hundreds a year to thousands.

The pluses

When you pay rent, you’re making your landlord richer. When you gain equity by gradually paying off your mortgage, you’re making yourself richer. You’ve got to live somewhere, and that’s going to cost money monthly. Using those monthly payments toward a mortgage means in 15 to 30 years, you’ll own your home free and clear. Other than property taxes and insurance, you’ll pay nothing. How much will renters be paying every month 15 to 30 years from now?

Then there’s appreciation. Granted, our nation is still recovering from a housing crash, but declining home prices are the rare exception, not the rule. If past is prologue – usually a good bet - a house offers inflation protection and the opportunity to own an appreciating asset.

The bottom line: If you don’t have the money and/or credit score necessary to buy a home, the question is moot. But if you can afford to own a home in a desirable area with an expanding population, you’ll probably be rewarded.

Buying? Don’t get in over your head

Leaning toward buying? To lower the risk of home ownership, buy what you need, not the max you qualify for. The average house in 1950 was less than 1,000 square feet. Today it’s more than twice that. Remember that whatever you buy, you’re going to have to furnish, heat, cool, insure, clean, and maintain it.

Don’t just be ready emotionally, be ready financially. If you have bad credit and only qualify for a high-interest mortgage, it will cost you tens of thousands of extra dollars over the life of your loan. And the more you put down, the less you borrow and the less risk you take. Build your credit and your savings before you build your house.

Finally, if you decide it’s time to buy, hope for appreciation, but don’t count on it. To increase your odds, buy in an area with rising employment. When the demand for housing (or anything else) outstrips the supply, prices rise. The single biggest factor influencing demand for homes is Jobs. If the community you’re living in has both expanding employment opportunity and population – easy factors to determine – prices are likely to rise over time. If you live in an area that’s shrinking, you’re probably better off renting.