PAY FOR YOUR HOME MORTAGE IN FIVE YEARS OR LESS! : PAY FOR YOUR HOME MORTAGE IN FIVE YEARS OR LESS! By: Beth Oliver
What is happening right now: : What is happening right now: The economic recession has made almost anyone in the world today homeless.
The fast rising inflation rates and the slow increase in salary made it difficult for all of us to save for a home of our own.
But….
The Good News: : The Good News: There are still ways to save money, and hit big time!
That the price of real estate continues to drop due to economic hardship nowadays. This is the perfect time to acquire real estate.
So, how are we save money????
Face the truth on ourselves: : Face the truth on ourselves: Most of our daily expenses are WANTS and unnecessary to daily survival.
We fail to keep track to our income & expenses as closely as we should.
We invest our money in “assets” that really don’t increase value.
What Should we do? : What Should we do? Assess your Monthly Income & Expenditures in writing.
Write down your financial goals in five years.
Save at least twenty (20%) of your income.
See how you can save more to beat inflation.
Check all investment options available in your area.
Ready for Installment?!
Moving further…
#1: Assess Your Monthly Income & Expenditures. : #1: Assess Your Monthly Income & Expenditures. Write down all sources of income & all details of you monthly expenses like this:
Make a Daily Expenses Report to see where you can save. : Make a Daily Expenses Report to see where you can save. June 2, 2007
Groceries $100.95
McDonald’s 50.00
Chocolate bar 5.00
DVD 25.99
Transport 10.00
total $ 195.64
Note: Be honest in writing everything. Remember, being honest to ourselves is the way to change our lives. What are the things you bought that we can really do without?
#2 Write Down Your Financial Goals. : #2 Write Down Your Financial Goals. What do I want to achieve in five years? I want a fully paid for home I can call my own five years from now. How can do this? Lets begin…
#3: Save 20% of your Income : #3: Save 20% of your Income Income – Expenses = SAVINGS X Income –SAVINGS=Expenses WHY?: Because that will make you save more if you pay yourself first rather than saving what is left by your savings.
#4: See how can you beat the inflation : #4: See how can you beat the inflation INFLATION is a rise in the general level of prices of goods and services over a period of time. Meaning: How expensive or cheap is to live in your area today in relation to your monthly income. For starters lets say that prices increase at 5% average in five years. We are just making sure that your savings had not devaluated by the time you buy a house which price increases every year.
The Magic of Compound Interest: : The Magic of Compound Interest: Compound interest is calculated on both the principal and the accrued interest. To beat inflation , your bank have to offer 5% interest p.a. or higher. So if you save around $700.00 monthly at 10% that will make $9,240 a year or $51,461.62 in five years COMPOUNDED INTEREST CALCULATOR
#5: See Other investment Options… : #5: See Other investment Options… Treasury Bills, or T-bills, are sold in terms ranging from a few days to 52 weeks. Bills are typically sold at a discount from the par amount (also called face value). For instance, you might pay $990 for a $1,000 bill. When the bill matures, you would be paid $1,000. The difference between the purchase price and face value is interest. It is possible for a bill auction to result in a price equal to par, which means that Treasury will issue and redeem the securities at par value.
Slide 13 : Treasury Notes, sometimes called T-Notes, earn a fixed rate of interest every six months until maturity. Notes are issued in terms of 2, 3, 5, 7, and 10 years.
Saving Bonds or Trust Funds, are a low-risk savings product that earn interest while protecting you from inflation. Sold at face value.
Dollar investments. USD investments always increase in value. Check your local bank for it.
Research for other investment options from you local bank. So if you would want to save for a house in five years, how much do you need to save ? Save on any legal investment that grows 5% or more annually.
Slide 14 : For example, you dream house costs $500,000.00 in cash. This is how a payment plan may look like:
Down payment 20% $100,000.00
Monthly Amortization (20 years) 2,500.00 It means that you have to save total $100,000.00 in five years from
saving on things you really don’t need.
having a second job or sideline aside from your regular income, which income is only dedicated to savings
Have a partner (spouse, sibling or children) to save with you.
#6 Ready for Installment?! : #6 Ready for Installment?! It also means you & your partner have to tuck away around $700.00 a month for five years that’s enough for you to pay for your house installment basis
Slide 16 : Installment Option : $105,675.11
1. Down payment (20%) $100,000.00
Cash at hand 5,675.11
2. Reinvest Cash @ 10% p.a. Continue to save $2,000/monthly for 1 more year = $32,642.62 or
$2,720.22/ monthly enough to cover MA $2,500.00
You’ll still have $220.00 cash to reinvest. 3. If you continue to save $2,000/monthly you’ll going to earn a little more $200 a year in interest than to pay for MA in cash.
Slide 17 : If you had been saving for more than two years, chances are saving has become a habit for you & your partner. #7 Moving ahead… The above calculations is a scenario wherein you started with nothing in the bank to start. Interest income will be higher if you already had a principal amount prior to your investment plan. This means that you will have $11,366.67/ month which interest income alone is enough to pay the MA.
To Summarize… : To Summarize… It is always best to monitor your financial standing every year.
Look for the best possible ways to save & invest money. Always check all payment & investment options in your area.
Check for the legality of investment plans. Many of those TOO GOOD TO BE TRUE are SCAMS! Always be careful before putting your money in.
Take care of yourself. Yourself is your the greatest asset. Savings will be nothing if you get sick or dead.