For most people, five categories of expenses will chew up the majority of their take-home pay over their lifetimes: home, car, education, kids, and healthcare. In this section you’ll find resources to help you think about the first three of those items. Only you will know exactly how much “home, car or education” is right for your situation and your family. So the point of these resources is not to put limits on you but rather to help you understand the consequences of the choices you make so you can choose the combination that maximizes your money and your goals.
Home / Online Calculator
Should you rent or should you buy? For years people felt that renting is throwing money down the drain. That’s outdated advice in a world where people change jobs and move around so much more than people did in generations past. (When you lived in the same house for 30 years, paid off the entire mortgage, and then retired in it… then it makes sense that it was your biggest asset and great use of money from an investment standpoint; times are different). Also, the answer to the question of rent vs. buy also depends upon the current price levels in your local market. That’s why I love this free online “Rent Vs. Buy” calculator from The New York Times which can help you answer this question for your situation.
Home / Article
If you’ve decided to buy, how much home can you comfortably afford? If you think it’s the amount that a lender is willing to loan you… you’d be very, very wrong. Lenders know people will go to extreme ends not to lose their homes. So they are happy to take you all the way to the edge when it comes to your ability to handle debt. Before you head out with a realtor to start house hunting – or even poking around on Zillow – read this wonderful article from Consumer Reports called Here’s How Much Mortgage You Can Actually Afford. Following the guidelines in this piece will ensure you are able to both enjoy your new home and keep your finances on track.
Car / Article
It’s incredibly easy to buy more car than you can comfortably afford. First, we’re bombarded with media images of people who appear to be in financial or career situations similar to ours, driving cars that mathematically don’t fit with the real life incomes that those jobs would generate. Stir that up with easy access to car loans (which are where car dealerships make most of their profit these days), and you’ve got a toxic recipe for your pocket book. So before you get that next car check out this article from NPR about “5 Tips for Buying a Car the Smart Way.” I agree with every one of these tips and EXTRA love tip #5!
Education / Book
Hands down the #1 book you should read before paying for higher education is The Price You Pay for College: An Entirely New Roadmap for the Biggest Financial Decision Your Family Will Ever Make by Ron Lieber. Thirty years ago getting a college or graduate degree was a financial no-brainer. Relative to the (tiny!) amount of debt you might graduate with, your earnings potential was boosted so much that the math made clear sense. Today… not so much. Today, students are graduating with amounts of student loan debt that approach the size of home mortgages. This level of debt so early on in their working years kicks off a cascade of financial headwinds that for many are nearly impossible to recover from. So what are we to do? Read Ron’s book. His advice is spot on.
Education / Website
Confused about how 529 plans work? When to fill out FASFA forms? How to seek out alternative sources of financial aid such as grants and private scholarships? Then a visit to SavingForCollege.com is going to make you very happy. I consider this website to be the highest quality aggregator of information about the nitty-gritty details of actually saving and paying for college. With all sorts of helpful articles and student loan calculators, you’ll definitely want to bookmark this website while figuring out how to pay for your higher education goals.