Buying a House
Buying a house is a serious financial change from renting or living with your parents. To buy a house implies taking on a long-term responsibility, and there are no shortages of financial responsibilities that go along with home ownership. The money required to purchase a property is the first of several major responsibilities that you have to take on if you really want to be a homeowner. After that, the maintenance required for your home is going to be a small but constant need. In the end, owning a home can be a great wealth-builder. But you have to have a strong base first.
This base begins by saving up at least enough for a 20% down payment in your intended price range and a few months’ worth of payments.
You also need to make sure to have an inspection done on your potential home, so you know what kinds of maintenance issues are likely to crop up over the next few years. Knowing that the heating system is likely to fail soon or that there is termite damage means you are less likely to be hit at the worst possible time by a nasty surprise.
Paying for College
College is a dream that more and more people are able to achieve. But in many cases, scholarships and grants do not cover all of what you need to graduate. In a lot of cases, there’s a gap that savings and student loans must fill. There are a lot of ways to do this, and this is a good thing because the ultimate amount of money you will need could be very large. On top of that, the costs associated with education continue to rise every year more quickly than other prices—even healthcare!
Planning to pay for college is like planning to pay for any large expense. The earlier you begin, the better you are likely to do. If you can make a small sacrifice, such as downgrading your cable or going out to eat one less time per week, you can rapidly begin to see the type of progress that will make saving for college an activity you can accomplish in only a few years. If you start saving for your children’s college tuition when they’re very young, you can do wonders to both save and teach them how powerful saving actually is.
Retirement is the holy grail of human experience. Achieving a level of wealth that allows you to be comfortable, to do all that you spent years dreaming of doing and no longer have to suffer through the constraints of the corporate world is an amazing experience that is worth a great deal of effort and planning. The big question with retirement planning is, “How much will I need in order to retire?”
There are many ways to estimate this number. One common way is based on the “4% rule.” To start with, consider how much money you will need to have in an account if you want to spend 4% of it on an annual basis to finance your lifestyle. Now add 20-30% onto that amount and you’ll have a solid base.
This is a lot of money, and starting earlier and avoiding a lot of foolish mistakes will help you tremendously. Every year of compound interest that works for you will make the last few years of major compounding that much more powerful. Avoiding credit card debt by paying cash for purchases such as vacations and saving on a regular basis with assets that include risk and income will also be powerful engines to drive you toward a solid retirement. The road is long, but the end result is worth spending the time to develop a plan and stick with it through tough times.