Before committing to buying a home, it’s a good idea to understand your income and spending habits. Understanding your spending habits can help you identify problem areas, plan a realistic budget, and make the buying process much easier. Here are some basic tips for tracking.
Track your spending for several consecutive months. A few weeks is usually not enough time to see the larger patterns in your spending. Recording your spending for at least three consecutive months will show the larger trends in your spending habits, and give you a good baseline.
Write everything down, even little things like soda and fast food. It’s important to know exactly where your money goes. Small purchases can add up quickly, and have a major impact on your budget.
Once you’ve tracked your spending, examine it carefully. There may be some places in which you can cut back or eliminate spending on luxuries. Small impulse purchases can become a significant portion of your spending, and are one of the easiest items to reduce or cut from your spending. Trimming down your spending can help create a larger budget for buying a house.
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