Things to consider about financial goals and decisions
If you're gearing up to hit larger financial goals, these tips help gauge your readiness.
You're employed, you're paying bills and putting away some of those earnings — you're covering all the basics. So if you're gearing up to hit some larger financial milestones, here are tips to help you determine if you're ready to make these first-time financial decisions.
Buying a house
First things first: Do you have enough money saved for a down payment? You don't have to put down 20%, but you should aim for 20% or more of average housing costs in your area to avoid paying for private mortgage insurance. If you've set that amount aside and have been preapproved for a mortgage loan, then you're on the right track.
But before falling in love with your dream home, it's important to understand what you can — and can't — afford. In addition to a mortgage payment, your monthly expenses may include property taxes and insurance, which vary by location.
These can add up to more than you might think: The yearly premium on homeowners insurance is on average $1,784, per analysis done by Nerd Wallet. On top of that, you'll want to factor in maintenance costs and desired upgrades.
Buying a car
Buying a car also requires more than being able to cover monthly payments. If you've saved up for additional costs, including fuel, insurance premiums, routine maintenance, and repairs, you're almost ready for car ownership.
Next step: Do your research. First, find a car that's financially reasonable — the monthly total of all of your household's car payments shouldn't exceed 20% of your household's take-home pay. Then research your desired car's estimated depreciation.
Purchasing life insurance
A life insurance policy can help support your loved ones financially when you're gone. It isn't just for married couples with children, either: If you have dependents of any kind, you may be ready to consider life insurance. Before committing to a policy, decide whether term or whole life insurance is best for you.
Building an emergency fund
When building an emergency fund it’s best to start out determining how much you need to save. Using a savings calculator can be helpful in determining how much that should be. Setting a monthly budget will allow you to see just how much money is coming in, going out and how much you can put toward your emergency fund. Then commit to saving that amount every month. And if possible, have the amount automatically transferred to the account — out of sight, out of mind.
Saving for retirement
The sooner you put retirement strategies to work, the better you’ll feel about saving for retirement. If possible, it’s a good idea to start saving for retirement as soon as you get your first job. If not, know that the most important thing is to start today (or as soon as you can). You can put extra money to work: raises, gifts, bonuses and tax refunds are another way to help build your savings for retirement.
