Buying or renting a property comes at a great cost. It is best advised to have a financial strategy in place and to formulate a financial strategy, you need to ask a few pertinent questions. Read on below to find out what those questions area and how you can formulate your own 5 step strategy to ensure that your financials are not in a mess.
According to experts, whenever you buy your house, you need to consider the following questions:
- How long do I intend to live in this place?
- Where do I see myself in the next 10-15 years?
- Do I have to make house improvements?
- Do I want to make another investment or keep cash in hand?
- Can I take a financial risk?
- Do I want to be debt free?
Once you have answered these questions, they will give you a good idea as to how you want to go about developing your financial strategy. It is highly advised that you do a bit of research before continuing from this point. Figure out what options are available in the market that best fit your objectives.
Once the research is done, you can formulate the strategy that fits your requirements. A general checklist or method to formulate a strategy would be as follows.
Pay the debts
The first step is to clean your plate. In other words, the idea is to pay of any existing debts or credit cards that you have. This is so that your income isn’t stretched too thin and you can manage the payments easily.
Create a spending plan
Often times we tend to go above the budget we have planned. In order to avoid this situation, you can create a spending plan. Sit down and separate your needs and wants. If you still have debts, then you must put a stop to your wants. This way you end up stopping your impulse spending.
The next step is to identify your potential sources of finance. This could be your savings or this could be a loan. Either way, these need to be finalized before you jump into this. Most people look at their savings, provident fund, 401K and so on.
Budgeting is the way
The next step is to regularize your spending. The best way to go about it is to follow the 50-30-20 rule for budgeting. Simply put, 50% of your budget should go to living essentials, 30% should cater to your personal spending and 20% should be your savings. This way you can prioritize your spending and savings, resulting in little to no financial strain later in life.
Prepare for the big haul
Next up is to align everything that you need. This means that you need to find an agent, get out there and research the market, shortlist the properties you are interested in and make the final offer. To be able to do that, your paperwork needs to be in place too. This is crucial because preparing the right documentation takes a decent chunk of your time. It is better to be thorough with such things rather than regret at the eleventh hour.
So, these were some of the ways in which you could go about building your own financial strategy. Would you consider these factors when making up your own strategy? What are some of the other factors that you include in your list? Talk to us in the comments section below.