Aug 29 2007
Living within your means is truly living
Steve Adams-Mortgage Broker
I remember as a child running weekend errands with my father. Some days with time to kill, we would take the long way home, cruising through neighborhoods from Old Louisville to St. Matthews. I was amazed by all of the “mansions” in this city! As beautiful Victorian homes lined Eastern Parkway, stone three stories filled the Cherokee Park area. I always enjoyed taking these weekend tours. It allowed me to see how the rich live; or so I thought. You see, as a child, I associated wealth with big homes, and big cars. My thought process was this: you get a job that pays lots of money, buy a big house, and big car, and live happily ever after! Now that’s living!
Well unfortunately, for most of us, that’s simply credit. We all know what credit is, right? Remember the old saying, “paying your bills on time keeps your credit in line?” I wish it was that easy for consumers. Our society has become so focused on status, they will do anything to obtain it! Most simply don’t care what it cost, but how much is it a month. And creditors are in the business of accommodating those requests. From long term vehicle leases, to interest only mortgages, to minimum credit card payments, living large is made easy; for a while.
I recently had the opportunity of sitting down with a gentleman that was referred to me from a previous client. Although I knew the reason for his call beforehand, I had no idea what was in store for me! From the moment he entered my office, he began to explain his financial situation to me. He was sixty two, $50,000 in credit card debt, $300,000 in mortgage debt, and had personal loans that totaled an additional $32,000. And he needed help. Needless to say, there was nothing I could do. But I was curious. I ask him, “how did this happen?” He explained to me how he and his wife always had to portray that certain lifestyle because of the “circles” they ran in.
Contrary to what you may have been taught in the past, this is not living! Nor is this how it is supposed to be. Although you may feel this is an isolated incident, it’s not. In fact, it is very common in today’s society. I hope you are not in the same situation as the above mentioned. Here are a few tips to avoid falling into this financial TRAP:
*Avoid credit card debt-Although a major credit card may be beneficial for emergencies, random purchases should be avoided.
*Too much house will be too much headache –When searching for a home, BE REASONABLE. Take the time to sit down and assess your income vs. debt load. Keep in mind, things do break, and there are additional costs in owning a home. Being “house poor” is not fun! *Stay with a fixed rate mortgage-niche products such as interest only mortgages keep your payment down only for a short period of time. Fixed rates are too low not to take advantage!
*In need of a new vehicle? Do your homework! A two to three year vehicle may fit your budget better then a new one. Most banks or credit unions will still finance 100% of a three year car or truck.
*Contribute to your company’s 401K Plan-taking advantage of your company’s plan will allow you a little more financial freedom later in life. If your company doesn’t have this benefit, consult with a local financial planner to implement a plan.
There is nothing more burdensome than financial issues. By living within your means, you will not only avoid unnecessary stress, but have the ability to plan for the future!
Steve Adams is a Senior Loan Officer with 1st Independence Mortgage. He can be reached at 502-897-5880 x249 or at sadams@1stindependence.com