STEP 1
CHECK YOUR BUDGET
Budgeting your money is the first step in preparing for home ownership. Most consumers interested is purchasing a home need to save money for their down payment, closing costs and other expenses associated with moving.
The following is a brief guide to developing a budget. To help you, we have included an Income and Expense Worksheet in the Resources & Forms section of the booklet.
Determine Your Income
Consider all sources of verifiable income available such as wages, public assistance, social security and child support. Do not take unpredictable or inconsistent income into consideration when setting up your budget.
List Your Expenses
Record the items you spend your money on and amount needed for each one. It may be helpful to review your check register or make an expense list to help prompt you to include all of the periodic and miscellaneous areas where money is spent. Some examples beyond rent, food, utilities are: auto maintenance, pet expanse, personal spending, eating out, videos, prescriptions and clothing. It is also essential to include a regular amount in your budget for savings.
Establish Financial Goals
Determine your financial goals and write them down. Estimate how much you need to save for each goal and the time frame you wish to do it in. Then break the “goal” amount down into how much you should save per month or pay period. List this amount as a monthly expense in your budget.
Compare and Adjust
Total both your monthly income and expenses. These numbers should be equal. When expenses exceed income, adjustments must be made to either decrease spending or increase income. Any money left over after expenses should be allocated towards additional savings.
Track Your Expenses
It is important to determine if your budget is accurate and workable. Track your spending for a period of one month. That means keeping a record of everything you spend including the money you carry in your wallet or pocket. This is a key part of the process even though it can be challenging.
Reality Versus Budget
Now compare your actual spending to the amounts budgeted for each item. You may find it necessary to do some adjusting to your budget. Additionally, it may be necessary to make some changes to your spending habits if you really want to reach your financial goals.
Monitor and Review
Once you finally have a working budget established, remember that you need to review it periodically. Every six months or once a year you should make sure it is up to date. Circumstances and financial goals change as our lives change. Maintaining your budget helps keep it an active tool in achieving your financial goals.
Remember, living within your means is the key to sound financial management. Your budget can help you establish a regular savings plan, determine what you can afford for a mortgage payment and help you maintain your home once you purchase it.
For more assistance in setting up a budget or dealing with credit issues, contact Consumer Credit Counseling Service on New Hampshire and Vermont (CCCS). CCCS is a non-profit community service organization that has been helping consumers for 30 years. A free confidential appointment at any of their eighteen locations can be made by calling (800) 327-6778 or visit their website at http://www.cccsnh-vt.org/.