Buying a house is a significant financial decision. And an emotional one too. A house is not only an asset but also a place where you will foster hundreds of memories with your family. Perhaps this is why you went ahead with the purchase despite knowing it would consume a major chunk of your savings.
However, once you have settled into your new house and are done with the initial expenses, it is now the time to plan for your future. This is crucial to recover from the financial setbacks that this purchase would have caused. Here is how you can get back on the track.
Rebuild your emergency fund
Not having a contingency fund is like stepping into a thunderstorm unprepared. Do not worry if you had to use your contingency fund to support your down payment for the house. All you need is a little focus on building it again. It may be difficult to contribute large amounts in the beginning but the important thing is to get started. Emergencies can strike anytime and mostly will come when you are least prepared for them. Knowing that you have an emergency fund in your bank account will give you the mental strength to focus on the real issues during such times. Experts say you need to have at least three to six months worth your salary in your emergency fund. It may seem high right now but you will get there in time.
Live on a budget
This is one financial advice that you may have heard for a good part of your life but never paid heed to. Well, now may be the right time to start budgeting your expenses. With money being tight, it may be a good idea to track where every penny is going. Budgeting will keep your unnecessary expenses in check and you may even end up with more money at the end of the month. You can use it to repay your mortgage and reduce your long-term obligations. There are several apps out there that you can install on your phone to stay within your intended budget. On the other hand, if you were already living on a budget, you may want to revisit it and make necessary changes.
Save for home expenses
Buying a home is just one item off the list. It is a huge responsibility that may land certain unexpected expenses in your kitty. For instance, breaking down of the heating system or roof repairs. Most house-related repairs and maintenance issues like these are expensive. It is advisable to have a separate fund to account for them. You may even consider investing in a home warranty. It may seem unnecessary at this point but it can save you hundreds in case something was to go wrong. Most insurance companies will allow you to customize your plan and you may even cover your appliances under the scheme.
Save for your retirement
Several people put their retirement fund on the back-burner and decide to take it as it comes. While this may seem interesting in theory, it rarely ever translates into a happy life. After all, you wouldn’t want to depend on anyone or compromise on your lifestyle in your ripe years. Right? You can avoid such situations by building a robust retirement fund. To get started, you may try utilizing your company-sponsored 401(k) to the maximum and may even consider Roth IRA. It is understandable if you want to take a short break after purchasing your house. However, it is a good idea to start as soon as everything falls back into place.
Reduce your debt
If you are grappling with too much debt, it may be the right time to make your strategies to live a debt-free life. For instance, credit card debt can land you in big trouble. The interest rates are high and it may blow to exorbitant levels if you miss paying your dues on time. To avoid piling further credit card debt, you may consider using cash for a while. If you have more than one debt, you may try paying off the one with the highest interest rate first. Interest rates make up for a chunk of your liabilities. Lastly, you may consider taking up a side hustle to earn some extra money.