Preparatory Financial Planning

To be a home owner is a dream come true for all of us, and we owe it to ourselves to plan ahead. Here are some pointers:

• Control your expenses: You see attractive things around and there is always that impulse to buy and enjoy things today and plan for the future tomorrow. Pre-requisite for home buying is accumulating sizable fund for down payment and other expenses. So cost control is the first step in becoming a homeowner in the future.

• Start saving early: Go by the motto that a rupee saved is a rupee earned. Taking a home loan is a significant financial outlay. Early saving habit will stand you in good stead when it is time to buy your dream home. Always plan to save more than 15% of your take home salary and keep apart a portion of it for your mortgage kitty (and see it grow). This will greatly ease your financial burden when it is time for down payment and other commitments.

• Set yearly financial goal: Set yearly financial goals and fulfill it even though it may cause short term financial inconvenience. The goal may be as simple as cutting monthly expense by five percent or postponing the purchase of big ticket item for another three years. Think about this as baby steps towards building financial strength.

• Manage debt: In this era of easy consumer finance it is a piece of cake to get credit cards and feel artificially empowered. For many the additional expenditure from debt becomes ruinous over time. After a point, high interest burden and limited income reduces a person's ability to get out of debt. Understand that your capacity to borrow depends crucially on your debt burden, so manage your debt properly. We advise you to avoid high balance on your credit cards and pay off other debts (e.g. car loan) in a timely manner. This will also help you to establish a credit history (which is essential for getting a home loan) as lenders check your past payment behavior to judge your ability to repay the loan.