Financial Planning for young couples serious about their future together

Family with box moving into new home smilingBy Dane O’Leary

Special to the Financial Independence Hub

 When it comes to making huge decisions that amount to starting a new chapter in your life, financial planning is an essential precursor to such significant changes. In fact, it’s pretty irresponsible to, for example, buy a house before you’ve prepared yourself financially. Not only is it irresponsible, but in biting off more than you can chew you’re likely to choke; foreclosure isn’t just an empty threat your lender makes so you pay your bills on time.

In addition to buying a home, starting a family is another stage in your life that requires a thorough financial plan beforehand. Young adults who are ready to buy homes and start families are at an advantage because, by starting early, they have plenty of time to get their finances in order so huge life changes don’t lead to financial ruin.

However, many young adults don’t begin their preparation as early as they could despite experts who say it’s never too soon to get prepared. With that in mind, here are financial planning tips that will make buying a home and starting a family two of the best chapters in your life story.

Save, Save, Save

Unless you’re a particularly lucky gambler, it goes without saying that to have extra money for large purchases and expenses, you’ll have to be good at budgeting and saving money when and where you can. Saving is a great habit to get into whether you’re planning on big life changes or not — you never know when something unexpected will happen that ends up costing you a pile of cash. However, buying a home and starting a family entail a lot of up-front expenses such as the downpayment on a home and prenatal care during pregnancy.

Another component of saving is minimizing expenses wherever you can. This could be as simple as buying household essentials in bulk or when they’re on sale rather than paying full price, but it could also mean shopping around for the products and services you need.

Internet and television service is a prime example since most of us have several providers from which they can choose; when you have options, compare prices to ensure that you’re not spending any extra money that could be better spent elsewhere or even saved.

Budgeting Within and Beyond Your Control

Once you have a decent amount saved, it’s time to sit down and crunch numbers. The goal with budgeting is to understand your expenses now and project what your expenses will be after you’ve bought your home or started a family. Take your time and make sure your numbers are accurate; buying a home is one of the largest expenses a person will take on in their entire life, which is why it’s important to know exactly what you can afford to spend and how your expenses affect your budget.

As you plan your budget, you’ll notice there are two types of expenses: those that are within your control and those that are beyond your control. Expenses you can control are things like groceries and internet services; these are expenses you could potentially reduce or eliminate if absolutely necessary. Expenses outside your control are things like the cost of the home you’ll buy and mortgage rates, which you’ll usually have to approximate by expecting that these uncontrollable expenses will cost at least X and as much as Y. Consulting with a lender can help you plan your buyer’s budget and create a one-year plan.

Be Realistic and Maintain Perspective

When you’re shopping for a home, do yourself a favor and cross those that are over budget off the list. Even though going over budget may give you the home you’ve always dreamt of, it’s a bad idea to take on a mortgage that’s more than you can afford based on your calculations and number-crunching. Especially for first-time homeowners, it’s better to be under budget than over budget. Remember additional and add-on expenses like the cost of moving, how much you’ll spend on decorating and furnishing your new abode, and the possibility of repairs and renovations.

Additionally, having a child is expensive. It’s also an expense that sticks with you for at least eighteen years. There are also a lot of unexpected “surprise” expenses that come with being a parent; children will outgrow their clothes faster than you thought possible, and get sick at the worst possible times. Then there are accidents and injuries with visits to the emergency room that will ding your wallet on a regular basis. The ability to cover large, unexpected expenses will be your greatest asset throughout your life, especially where homeownership and parenting are involved.

DaneDane O’Leary is a full-time freelance writer and design blogger for Based in Virginia, he has degrees in psychology and anthropology with additional studies in journalism, graphic design, and public relations. Dane is working on his first novel.



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