Financial Advice: Part 4: Major Purchases

part 1: creating a budget
part 2: living with a budget
part 3: fine tuning a budget

Major Purchases
==

House
==

* Everyt time you write a rent check it's like throwing money away. Only if you can afford the house
* If you can't squeeze a mortgage payment into your financial plans without overloading yourself with debt or taking funds away from other important areaas, it's not time for you to own a house yet.
* Average mortgage spans up to 30 years
* ask yourself these questions

1. Is your job secure enough to take on a mortgage?
2. How long do you plan to stay in the area?
3. What is the economy like in the area in which you want to buy?
4. What is the cost of living in that area?

* New house

+ not forced to live w/ decorating decisions of previous owner
+ no bad smells
+ decide how to decorate, where stairs will go
+ cost, most end up spending more than they intended
+ overseeing the project requires time and mental effort

* Used house

+ don't have to worry about additional construction
+ get more for your money in terms of extras - appliances, curtains, curtain rods, towel racks, treated lawn
+ wear and tear the place has gone through already
+ before purchase, do a a thorough check of heating and A/C units, the roof, hot water heater, kitchen appliances, and bathroom fixtures

* Fixer upper

+ relatively cheap
+ can make a nice profit if you are skilled in fixing it yourself
+ insecurity and inconvenience
+ requires additional budgeting for repairs
+ check house thorougly, foundation, plumbing, wiring

* Condo

+ don't have to worry about yard work
+ additional fees to mortgage, common area maintenance, club, and other fees from private communities

* Mobile

+ better housing than otherwise
+ depreciation

* Big oops

+ buying too much house too soon
1. don't apply for a mortgage until you can afford to make a 20% down payment
2. Make sure your monthly houseing costs take up no more than 38% of your net spending income.

Car
==

* is it really necessary for you at this point in your life
* mass transit?
* a car is a purchase, not an investment
* save the money ahead of time
* pay cash if possible
* if financing, find lowest interest rate, be sure to get simple interest
* put as much as you can down for the down payment
* buying new

* pros
+ full warranty
+ you don't have to worry about previous owner
+ banks offer slightly lower interest rate
*cons
+ loses 25% of value after leaving dealership
1. investigate all the different options and packages available for the car
2. find the one that best suits your needs and your budget
3. choose the color you prefer
4. wait a year or so unti you can buy the car used.

* leasing

+ if a salesman tries to talk you into something, it's probably not in your best interest
+ if you drive over a certain number of miles, you will pay an extra charge
+ charged a penatly for ending contract

* buying used

+ 10-15k miles is likely not to be a lemon
+ 5 years old, 60k miles, can still be fine as long as the owner took care of it
+ where to look?

- friends, family, church
- pre-driven vehicles, traded in, late-model, leased, or repossessed
- classified

+ from used lot

- find out how much the car is worth
- if it's worth 8k, and they ask 10k, offer 6k. if they refuse, walk away. they will phone you asking 9k. tell them your final is 8k.

+ asking individuals

- is there rist? where?
- how many miles?
- what's the gas mileage?
- how many previous owners?
- what repairs have you had to make? how recently were thye done? how expensive were they what still needs to be done?
- how are the tires? the brakes? the window glass?
- has it been in any accidents that you know of?
- make an appointment to see the car
- bring a friend who knows about cars