Here I share about budgets in general in addition to the positive impact that homeownership can make to help many save more and invest more. Sometimes renting is a better fit, but it's important to look at the facts to be sure before renting, even if homeownership seems impossible. No matter how much or how little your income is, your financial growth, even your giving potential, will be forever limited if you don't first limit yourself with a budget. The ability to invest is catapulted by good budgeting. Without good budgeting, it's easy for years, especially younger years, to pass by without nearly the assets built up that one would be more intentional about if they were to do it again looking back.
"Low income is not always to blame for financial hardship. Only 1 in 5 people (20%) facing financial hardship fall below the poverty line and make less than $40,000 per year." https://www.debt.com/statistics/
The biggest issue with budgeting is that most people don't budget, and if they plan out a budget, they don't stick to it. Besides that, some of the biggest budgeting issues that people typically don't save or invest enough, while they overspend on the major average expenses, like housing (especially renters) & transportation (especially those that buy vehicles new &/or with financing & those that lease). Many people I talk to are car poor or house poor. The average American also carries a balance on his credit cards. Bad credit can also have a very negative impact on budgeting, increasing insurance costs & interest rates on housing, transportation (if not buying in cash), & otherwise. Besides those 2 things, many people commonly overspend on their food, clothes, & certain items that are not necessary. For those that smoke, drink alcohol, or do drugs, many also spend quite a bit on those items as well, not to mention the higher health costs for those that smoke, do drugs, & drink a lot. A low amount of red wine can have a positive impact on health but overdrinking & smoking are part of what made me never know my grandfather.
Transportation: In our experience buying older, low mileage, reliably rated vehicles (such as Nissan, Toyota, & Honda w individual reliable ratings as well for the specific vehicle) with high MPG that are relatively cheap without too many fancy amenities in cash, then taking them to honest repair shops including but not limited to for all the inspections, is the way to go. Honest auto shops seem to be the minority these days but include Champs in Poquoson, Garrett Motors which do not do state inspections in Hampton, & Cliffs on 17 in Yorktown.
How can someone that I've been talking to for months at the time of this writing with an income of less than $750/month, who wants a house instead of the never-ending rent cycle, be in a position to buy a house? They budget decently & don't take on too much debt. Also, government grants and programs like the USDA direct loan with 1% interest are very helpful. Even with an interest rate closer to normal, they could still get a house. At the time of this addition, they have purchased a house & are paying significantly less in their monthly mortgage today than what they used to pay in rent. They also no longer have to deal with a landlord who didn't like to fix anything.
Forbes came out with some statistics about a safe savings/investing rate dependent on the age that you start saving, from ages 15-50. You can find the graphs here.
Mint Bills is a great app for budgeting. I suggest not linking your savings account to it so that it's even easier to see your checking account versus what you owe in credit cards.
It's common for someone under 35 to be saving/investing only 5% or less of their income rather than the percentages suggested by Forbes. See what that does to someone with an income of $30,000 below, as compared to merely 2% reduction in expenditures via one credit card like the Citi Double Cash card that gets 2% cashback on all purchases:
This example demonstrates how a tiny percentage of savings (less than 2%) with minimal effort can do more in a year than 5% of your income that same year can grow with a moderately aggressive investing plan. By exerting more effort, using other methods of saving, and good budgeting, everyone not currently budgeting well can live on smaller percentages of their income, allowing them to fulfill more of their dreams. For some, like myself, this includes being able to support a family well, be more involved in non-profits, and give more to charity in the long run.
The savings of home ownership are an excellent way to fund savings and investments, and are better than any other way that I know of that are lawful and culturally acceptable despite my extensive knowledge on savings. At the same time, you’re investing into a property. The longer you keep the house, the bigger the investment will be.
This graph doesn't even factor in the savings of various programs possibly, like the VHDA 3% down payment assistance (that did not need to be paid back and which did not affect the interest rate) and the VHDA Mortgage Credit Certificate (Which gives 20% of the interest back in tax breaks at the end of the year in addition to the other 80% of the interest still being eligible for the usual tax write-off - offering over $1,000 per year in this example starting off & going each year through the life of the loan) available at the time of this writing.
Free classes &/or personalized budgeting assistance:
The closest offices for many are in Chesapeake & Newport News
Call (757) 484-0703 to schedule a budget counseling session
4. For those looking to purchase a home in less than a year with credit scores of 650 or more on https://www.creditscorecard.com/ who would like to use me as their Realtor (where I have not previously declined the offer to be their Realtor or requested to no longer be their Realtor), I offer free budgeting sessions as well. An important matter to note is that while I offer these as well, each of the options above include people who help people with budgeting much more often than I do.
Note: The content on this site is not provided by a bank or issuer. Opinions expressed here are author's alone, not those of a bank or issuer, and have not been reviewed, approved or otherwise endorsed by a bank or issuer.