If you are currently renting, and you want to know if you could really afford to buy a house, one thing you can do is “play house”. In other words, pretend you already bought one and see if you can manage financially.
All you need to do is set up a separate savings account and consider it your “house account”. Every time you get paid, put money into this house account just as if you were paying for a mortgage. Be sure to also take into account the additional costs of owning a home such as property taxes, utilities, etc.
After a few months of paying your imaginary mortgage, taxes, and utilities, if you haven’t felt any pinch, you know that you are ready to buy a home. And the good news is that all that money you had put aside into your house account can be used towards your down payment, etc.
If, on the other hand, you discover that you really do feel the pinch and that by putting money into the house account you are just barely scraping by, then you know that you are not yet ready to buy a home. Keep on savings and working towards it, and then try this experiment again in a few months.
By playing house rather than going out and buying a home you cannot afford, you are setting yourself up for success. If you did struggle while playing house, at least you know that you didn’t actually buy one yet, and you can make the decision to wait for a while. This is way better than buying the house first and then realizing that you really shouldn’t have. Nobody wants to be house poor.
You can do this experiment for any big purchase you are considering such as buying a boat, RV, etc. Before taking the plunge, make sure it is affordable and within your means.
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