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How To Avoid Going House-Poor When Buying A Home

photo via: Pixabay

Owning a home is a quintessential part of the American Dream. Many people believe that once you own a home and property, you have it set. Unfortunately for many of these people, they are unprepared for what awaits them. They end up sinking so much money into their house that they have to sacrifice in other areas of their life. They essentially live lower-class lives, even though they may have a beautiful house to come home to. This is what is known as being “house-poor”. So how can homeowners prevent overspending on their homes and avoid this problem? Here’s how to avoid going house-poor when buying a home.

Do Your Research
One of the main reasons people go house-poor is they are unaware of all of the costs associated with owning a home. Many people are aware of the down payment, but sometimes they forget to factor in things like interest payments, homeowner’s insurance, and property taxes. Although these are all fundamental costs of owning a home, many people often overlook or ignore these costs in their rush to own a home. As a result, they take on this huge financial obligation without fully understanding the scope of what they’re getting themselves into. Tools like a mortgage estimator or interest rate calculators can be a big help in allowing you to fully grasp the cost of your new home. If you want to avoid going house-poor after you close on a home, then you should make sure that you do your research and are aware of all of the costs associated with owning a home.

Save Lots of Money
One way to avoid going house-poor when purchasing a home is ensuring that you have enough money saved up before making the big purchase. There are two ways that you can use your savings to help with the home buying process. First, you can use it to make a larger down payment on your house. This will reduce the amount of money that you’ll have to take out with your mortgage, and will eventually reduce the amount that you’ll pay in interest payments. The other way it could help you is you could use your savings as an emergency fund. This fund will allow you to purchase your home and make interest payments without sacrificing any quality of life. If you ever find yourself struggling to pay bills or meet expenses, simply dip into this money to help you out.

Budget Your Funds
Another area where people get into trouble when buying a home is failing to properly budget their expenses. Making a down payment and then following it up with mortgage payments can be a huge hit to your disposable income. Unfortunately, many people fail to adjust their lifestyles and spending habits to fit their new reality. They splurge and spend their money frequently, money that they really don’t have the luxury of spending freely. They'll quickly go into debt and will become house-poor. However, properly budgeting your funds and allocating them to areas of importance will ensure that all of your necessities are taken care of and will give you much more financial freedom down the road.

Find Supplementary Income
This tactic is more of a reactionary one then a preventative one, and should only be reserved for when you already feel yourself slipping into a state of being house-poor. If bills are beginning to pile up and you struggle to make ends meet with your new house, then finding another source of income until you get yourself on your feet may be the best option. The safest and most secure way to do this is to find a second job, but this can be an unattractive option for many people. Many people that own a home are already working a full-time job, so adding even more hours of work can be exhausting. There are other forms of supplementary income like investing in the stock market, but these are risky and could actually make you lose money, thus having the opposite effect as what you intended. If you really need to pull yourself out of a bad financial situation, then finding some sort of supplemental income may be your best bet if you have the time and energy to pull it off. Now might be a good time to start that side hustle you've always dreamed about.
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