Читать книгу Home Buying Kit For Dummies - Eric Tyson - Страница 40

Wanting to have the financial resources to retire someday is hardly the only reason to save. Most people have several competing reasons to squirrel away money. Here are some other typical financial objectives or goals that motivate people (or should be motivating them) to save money. We tell you how to fit each goal into your home-purchasing desires and your overall personal financial situation:

 Emergency reserve: You simply can’t predict when and exactly what impact a job loss, death in the family, accident, or unexpectedly large expense may have on you and your family. That’s why it’s a good idea to have an easily accessible and safe reservoir of money that you can tap should the need arise. Make sure you have access to at least three months’ worth of expenses (perhaps even six months’ worth if you have a highly unstable job and volatile income). Ideally, you should keep this money in a money market fund because such funds offer you both high yields and liquidity. The major mutual fund companies (such as Vanguard, Fidelity, and T. Rowe Price) offer money funds with competitive yields, check-writing privileges, and access to other good investments. (See Chapter 3 to find out more about these funds and how you can use them for investing your down-payment money.) Alternatively, a bank savings account can work, but it will likely offer a lower yield. Should you have benevolent relatives who are willing to zap you some dough in a flash, they may serve as your emergency reserve as well.

 Educational expenses: If you have little cherubs at home, you want the best for them, and that typically includes a good college education. So when the first cash gifts start rolling in from Grandma and Grandpa, many a new parent establishes an investment account in the child’s name. Your best intentions can come back to haunt you, however, when Junior applies to enter college. All things being equal, the more you have available in your nonretirement accounts and in your child’s name, the less financial aid your child will qualify for. (By financial aid, we mean all types of assistance, including grants and loans that aren’t based on need.) Unless you’re wealthy or are sure that you can afford to pay for the full cost of a college education for your kids, think long and hard before putting money in your child’s name. Although it may sound selfish, you actually do yourself and your child a financial favor by taking full advantage of opportunities to fund your retirement accounts. Remember, too, that one of the advantages of being a homeowner is that you can borrow against your home’s equity to help pay for your child’s college expenses.

 Startup business expenses: Another reason to save money is if you hope to start or purchase a business someday. When you have sufficient equity in your home, you can borrow against that equity to fund the business. But you may desire to accumulate a separate investment pool to fund your business.

No matter what your personal and financial goals are, you’re likely going to need to save a decent amount of money to achieve them. Consider what your goals are and how much you need to save to accomplish those goals, especially for retirement. Get your finances in order before you decide how much you can really afford to spend on a home. Otherwise, you may end up being a financial prisoner to your home.