Owning a home is something that most Americans wish to do but feel it’s unattainable because they struggle to feel comfortable financially. High amounts of debt and stagnant wages have made saving money almost impossible for many Americans. In order to potentially save more money, pay off debt and be able to put money toward a down payment on a home.
Short Term Goals
Short-term financial goals can be taken care of in a few months to years. One of the biggest short-term goals is paying down credit card debt. It is important to pay your credit card statement balance every month and avoid just paying the minimum. Paying the minimum payment allows interest to rack up and costs more money in the end.
Another short-term goal is to get rent and utilities to be 30% or less of your income each month. If you are paying more than 30% of your income to rent or utility bills, you may be putting yourself in a position to never get out of the check-to-check cycle.
Putting money back for emergencies can seem daunting. If you are barely paying your bills, saving money seems easy to skip. However, financial planners encourage everyone to have three to six months’ worth of living expenses put aside in case of a layoff, car repair or other costly events. Try putting money into an interest-earning account to see your money do more for you.
Most people have a car loan to pay off. Paying a car loan off can take an average of six years and is one of the most expansive things a person owns. Putting this as a priority can get rid of a fairly large monthly payment sooner.
Long Term Goals
Paying off student loans is usually one of the most mentioned long-term financial goals. Depending how much your loan payment is, it can take a large chunk of your income each month. Most loans can take ten or more years to pay off which allows interest to accrue. If possible, making an additional payment, even as low as $20 a month, could shorten the life of the loan and overall cost less to pay off.
Saving for retirement seems like a problem for the future but it’s often hard for millennials to know when to start contributing to their 401k. Millennials are often encouraged to have a cash savings first and then to start saving for retirement after that “rainy day fund” is built up. After taking care of short-term expenses, saving for retirement can move up on the list.
Home buying is one of the main purposes in financial goals and planning. After paying down credit card debt and car loans, credit scores are generally higher and can allow approval and interest rates for home loans to be better than without those things being paid off. When buying a home, there is not only the cost of the down payment but making sure that the monthly payments involved are not too high for your income.
After planning short-term and long-term goals, finances can seem less intimidating. By creating and following a budget, reaching your financial goals becomes an easier task. If you are waiting to buy a home until your finances feel less overwhelming, contact one of our loan officers to see what they advise for you to get approved for the best mortgage rates.