Setting a Budget in 4 Easy Steps
Buying your first home is an exciting time! For some, purchasing a first home can mean a step toward independence. For others, it means transitioning from paying rent to someone else, and instead making an investment in ownership. Whatever the excitement and motivation, first time home buying can also be very overwhelming! If you are like I was as a first time home buyer, you may be wondering where to begin.
One of my first steps was setting a budget. Before determining what home price range I should be looking at, I spent some time considering what I could afford. To keep things simple, I used a straight-forward, four-step process recommended by Liberty Financial.
STEP 1 – Write down all monthly expenses
Break them out into categories to keep it organized. Categories can include things like transportation and savings. If you are unsure of costs for some areas, such as utilities, use your best guess. Calling local utility companies for estimates may be helpful.
STEP 2 – Total each category
By totaling each category individually, you will later be able to quickly identify areas that may need adjustment or reconsideration. For example, your food budget may seem excessive when you see it compared to other categories, and you may decide to cut back by eating at home more.
STEP 3 – Total all categories
This figure should tell you the grand total of what you will need to spend each month on basic necessities and the lifestyle you want.
STEP 4 – Compare the expenses to your income to determine your budget
This final step will show you want you can afford for your first time home buyer budget.
Remember that the key to success in setting a budget using these steps is honesty! I remember wanting to idealize some of the expenses in the personal expense category, but by forcing myself to be realistic, I was able to come up with a budget that I can now comfortably afford.
Make the budget process easy by downloading the FREE Liberty Financial First Time Home Buyers Guide. This helpful guide has an easy-to-use budget form that includes expenses you may not have thought of, and lets you organize your information in an easy, understandable way.