Many people feel that buying a house might put a damper on their financial life and the lifestyle that they have already created for themselves.
It is true that a house is a huge financial responsibility, but if you know how to handle your money after subtracting the monthly mortgage payment, you will be able to live the dream without feeling like you don’t have anything left at the end of the month.
Here are 7 important steps to financial freedom for homeowners:
#1 – Start an emergency fund
The best way to ensure that you have enough money for those rainy days is to build an emergency fund.
A homeowner has to be prepared for anything especially when dealing with insurance that might not always pay out as it should.
Experts note that a R10,000 is a good starting point for an emergency fund. You can always build on this as time goes on.
#2 – Get rid of what you owe
The second step is to pay off debt: make a list of the debt that you have and arrange them from smallest to highest.
The debt with the highest interest rate should be paid off first as those are the most expensive to maintain.
#3 – Prepare for the future
Preparation is always the key to ensuring that life’s surprises don’t catch you off guard.
Property moguls suggest that you should start a separate savings fund for your household goods and consumables that covers it for the next 3 to 6 months.
This way you will always have enough to survive and you can stay out of unnecessary debt.
#4 – Save for your golden age
This is important and it should be done even before you buy a home: invest in your retirement.
Seeing as you have already paid off your debt, you can use that extra money and put it in an additional retirement annuity.
Ideally, 15% of your household income should go towards saving for retirement, but there are a lot of retirement plans available so that you can choose the one best suited for you.
#5 – Think of your (future) children
If you are planning on having children, it would be an excellent idea to start an education fund way before they even get to the schooling age.
Setting aside money for your kids’ university education will prevent you from taking out a too big loan thus creating more debt.
#6 – Reduce your bond early
This is what most people don’t encourage you to do and that is to pay off your bond early.
A simple R500 a month extra can knock at least 3 years off of your bond repayment which is a saving of over R200,000. By paying just this little bit more, you can reduce the interest payments significantly.
#7 – Have fun
Build wealth and give.
This is the final step for you to enjoy financial freedom.
It is important for you to work with your money in a responsible way, but don’t get so wrapped up in the commitment that you forget about spending the salary that you work so hard for.
Financial freedom for a homeowner is much easier to obtain through careful planning and it can be achieved quicker than you might realize!
