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2 – Know Your Budget
Saturday, October 9, 2010
And so I have decided to buy a house. Now, do I have a budget for this? How would I know if my earnings are sufficient for my purchase?
It would be so easy if things would be settled in cash. However, if it would be applied into any financing scheme, capacity to pay would be investigated.
As a responsible buyer, it is a must to assess oneself. To put it simply, below is a helpful formula:
• Down Payment: Compare to your cash on hand, or savings
• Monthly Amortizations:
NET INCOME (Net of income deductions, example: taxes)
Less: Living Allowance (Portion allotted for life’s pleasures)
Current Monthly Expenses (Inevitable expenses, example: food)
Debts / Commitments (Current and Long-term Obligations)
________________________________________________
TOTAL CAPACITY
(Monthly amortization should not be more than 40% of your monthly Net Income)
Try to explore more on your daily budget as there may be other things that you could consider for your own.
Now do your homework and finalize your purchasing budget in mind. :-)
It would be so easy if things would be settled in cash. However, if it would be applied into any financing scheme, capacity to pay would be investigated.
As a responsible buyer, it is a must to assess oneself. To put it simply, below is a helpful formula:
• Down Payment: Compare to your cash on hand, or savings
• Monthly Amortizations:
NET INCOME (Net of income deductions, example: taxes)
Less: Living Allowance (Portion allotted for life’s pleasures)
Current Monthly Expenses (Inevitable expenses, example: food)
Debts / Commitments (Current and Long-term Obligations)
________________________________________________
TOTAL CAPACITY
(Monthly amortization should not be more than 40% of your monthly Net Income)
Try to explore more on your daily budget as there may be other things that you could consider for your own.
Now do your homework and finalize your purchasing budget in mind. :-)
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