Are You Living Beyond Your Means? Are You Thinking of Buying a Home? Five Ways to Assess Your Finances

By
Real Estate Agent with RE/MAX Around Atlanta GA RE License #296541

Are you living beyond your means? Now is the time to clean up your act!credit card

All the talk on the news lately focuses on the economic downturn and the soft real estate market. It seems as though these things have become a self-fulfilling prophecy -- the more they're talked about, the more they come true.

Whether or not we are headed for a recession, now is not the time to be living beyond your means. Now is the time to clean up your financial act and tighten your purse strings a bit, if for no other reason than to develop healthy financial discipline!

In an article this morning on Yahoo! Finance, Glenn Curtis discusses "Five Signs That You're Living Beyond Your Means".

  1. Your credit score is below 600
  2. You're saving less than 5%
  3. Your credit card balances are rising
  4. More than 28% of your income goes to your house
  5. Your bills are spiraling out of control

If your any one or more of the above sounds like you, it may be time to reassess your budget to make sure things don't get worse.

Homeowners: if #4 sounds like you, it may be time to really sit up and pay attention. To figure it out, calculate what percentage of your monthly income goes toward your mortgage, property taxes and insurance. If it's more than 28% of your gross income, then you are likely in over your head.

"Why is 28% the magic number? Historically, conservative lenders have used the 28% threshold because their experience has told them that this is the rate at which the average person can get by, make their mortgage payments and still enjoy a reasonable standard of living. Certainly, some homeowners can get by spending a higher percentage on their homes, particularly if they cut back elsewhere, but it's a dangerous line to walk," according to Curtis.

If you're thinking of buying a home in the near furture and you're not sure what you can afford, discuss your financial situation with your REALTOR® and a reputable lender. While divulging this kind of information can be uncomfortable, it's absolutely vital to make sure that you can afford the house you want to buy and that you can afford the mortgage product you are stepping into. With the help of your homebuying team -- your REALTOR® and your lender -- you can make smart decisions that can make homeownership a reality, even in a tough economic and real estate market!

TAKE HEART: "As a nation, we are digging ourselves ever deeper into debt. To avoid becoming part of the gloomy bankruptcy and foreclosure statistics, it's important to measure your financial health regularly. The five signs presented here are not a death sentence; instead, they should be seen as symptoms that allow you to diagnose a problem before it gets worse."

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Maura Gebhardt, ABR®
The Gebhardt Group
RE/MAX Greater Atlanta
10220 Medlock Bridge Road
Johns Creek, GA 30097

direct: (770) 751-5895
main: (770) 291-0100
email: info@GebhardtGroup.com
website: http://www.GebhardtGroup.com/
blog: http://www.GebhardtGroupBlog.com/

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Rainmaker
671,900
Jim & Maria Hart
Brand Name Real Estate - Charleston, SC
Charleston, SC Real Estate

Hey, Maura. What an awesome post. I think you hit the nail on the head with this one. Thanks for sharing, Jim

Jul 16, 2008 03:16 AM #1
Rainer
96,191
Maura Neill
RE/MAX Around Atlanta - Alpharetta, GA
North Metro Atlanta Real Estate

Hi, Jim! Thanks for reading! I hope it's helpful!

~Maura Gebhardt

Jul 16, 2008 05:00 AM #2
Rainer
44,199
Kevin McGourty
Realty ONE Group - Phoenix, AZ

Thanks for the info. I didn't know 28% is the threshold.

Aug 05, 2008 05:15 AM #3
Rainer
96,191
Maura Neill
RE/MAX Around Atlanta - Alpharetta, GA
North Metro Atlanta Real Estate

Hi, Kevin! I definitely don't think 28% is the absolute threshhold - of course it's different for all people and households and what they are comfortable with. I think this article mostly provides a baseline for conservative living within your means and provides a standard for those who are perhaps working to get out of debt.

~Maura Gebhardt

Aug 08, 2008 07:50 AM #4
Rainmaker
138,471
Kelly Turbeville
Keller Williams - Lake Forest, CA
Turning Real Estate Dreams into Reality

Good info!

 

Aug 11, 2008 03:21 AM #5
Rainer
25,794
Pamela Bless
RE/MAX Tri County - Hamilton, NJ

Thanks for the list...as a Realtor you would think that my own grown children would be pretty mortgage-savvy, but they don't want to listen to mom!  I will refer them to your post!

Aug 11, 2008 04:17 AM #6
Rainer
96,191
Maura Neill
RE/MAX Around Atlanta - Alpharetta, GA
North Metro Atlanta Real Estate

Hi, Kelly! Thanks for reading!

Hi, Pamela! Please, refer away! I hope they'll (perhaps) listen to a stranger, although that sounds weird, doesn't it? =)

~Maura Neill
(formerly Maura Gebhardt)

Oct 07, 2008 10:43 AM #7
Rainer
132,369
Jon Wnoroski
America's 1st Choice RH Realty Co., Inc. - Green, OH
Summit County Realtor

Great post.  You offer some good information.  I enjoyed reading your points.

Oct 07, 2008 10:44 AM #8
Rainer
96,191
Maura Neill
RE/MAX Around Atlanta - Alpharetta, GA
North Metro Atlanta Real Estate

Hi, Jon! Thank you - I appreciate your kind words!

~Maura Neill
(formerly Maura Gebhardt)

Oct 07, 2008 10:50 AM #9
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Maura Neill

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