It is a fact that throughout an average person’s lifetime, a range of key purchases needs to be made. These often require a large financial commitment to afford them; as such, they are markedly different from the daily purchases of essential items such as shopping and clothing. Key purchases will often involve managing personal finances more effectively to plan for them. This may involve saving for an extended period or seeking a loan from an external finance provider. In this article, two of the top financial commitments that occur at various stages of adult life will be discussed in detail. In addition, there will be a range of tips and tricks that will allow you to plan for these events more effectively and make the best financial decisions based on your circumstances.
Buying a Home
In most people’s lifetimes, the most expensive purchase they encounter is when buying a home. Whether it is a starter home for first-time buyers or a larger property when moving up the housing market, it is important to consider a range of options. The average price of a new home in America is over $428,000. In recent years average house prices have increased significantly, making it extremely difficult to budget effectively. Thankfully, there are many circumstances to consider based on your financial situation. If you have a significant income level and considerable personal savings, it can be highly beneficial to consider 15 year mortgage rates. A shorter-term mortgage such as this will involve larger monthly payments to account for the lower timeframe but will typically benefit from lower interest rates. The shorter term of repayments will make an immense difference to the total cost of credit and can save homeowners tens of thousands of dollars as a result. Typically, longer-term mortgages will feature lower monthly repayments but will accrue greater charges for credit over the timeframe.
Buying a new car is often the second most expensive purchase in a lifetime. It can be easy to opt for personal finance for such a purchase, but car loans often involve high APR interest levels. It is worth considering that the value of a new car can depreciate dramatically over a few years. When you come to sell this car, it will often be worth a fraction of its initial purchase price. As a rule, it is financially beneficial to save for the purchase of a new car instead of taking on expensive credit. Consider also that your total transportation costs should form no more than 10% of your total financial budget. Whilst owning a new car can be a status symbol for many, recognize that it can also be a significant monthly expense. In short, buy the car that you can comfortably afford and consider buying a nearly new car that is in perfect condition but benefits from a much reduced total cost.
To sum up
Purchasing a new home is one of life’s greatest financial commitments and requires a clear recognition of your financial position to get the right mortgage. Car purchases can result in a significant monthly expense from your overall income. It is best to buy a vehicle that allows you to enjoy a comfortable living standard without taking on high levels of debt.