Achieving your homeownership goals
If you want to buy a home during 2017, you will need to take your financial position into account and make adjustments where necessary to achieve your goal.
Most people are reliant on banks to purchase a home, and it is no secret that financial institutions have stringent lending criteria when it comes to bond approval. Prospective buyers have to keep their financial affairs in order and show the required affordability levels before they are approved for a bond.
Taking a step back to assess your financial standing will provide you with the opportunity to measure the progress you are making towards meeting objectives and see what needs to be changed if necessary.
When reviewing finances, revisit the foundation of your financial plan by looking at your resources, goals and priorities. During this time re-evaluate your situation and include any major life changes that may have happened in the last year, such as a marriage, birth of a child, death or starting a new business feature. All of these factors will play an important part in how the financial plan is adjusted to meet the end goal.
A major life change will change your needs and possibly the projected time frame to meet financial goals. A growing family who is living in a home that no longer meets their needs will want to make a change sooner rather than later. This would mean that more money would need to be set aside for the deposit and other costs associated with buying a home. A professional financial planner would be a valuable asset when it comes to developing strategies to meet time-sensitive goals.
If you got married over the last year, you should also consult with a tax professional to determine how this may have impacted your tax status. SARS requires consumers to inform them of their marital status as the disposal of assets has capital gains tax implications in the joint estate of spouses married in community of property. Reviewing finances and having everything in order will make it easier for you to submit your annual tax return. It will also provide valuable information about your spending habits. A financial review will assist in determining whether you are getting value for money on expenses such as insurance, flexible spending accounts, cell phone plans and even investment fees.
Pay down debt
If the goal is to show the necessary affordability ratios for bond approval, then no financial review is complete without a plan to pay off existing debt as quickly as possible. Eradicating or reducing debt levels are a vital part of any financial plan. Even a small additional payment can make a big difference in reducing debt levels and showing steady progress. Having an emergency savings fund can also help you to stay out of debt while preparing for a rainy day. A set amount should automatically be transferred to savings each month.
To remain motivated, monitor and benchmark your financial plan and investments. There are several ways to measure an investment portfolio, but perhaps the most important is whether it is working towards your personal goals. If you require the investment to grow by a specific percentage annually, the performance of the portfolio should be measured against this benchmark and be adjusted to meet this requirement where possible.
The sooner you assess your financial position and make the required changes - the better. Putting it off will just mean that it will take longer to achieve. With the correct planning, nothing is impossible.