Just because you've bought a new home doesn't mean that other expenses disappear into thin air like smoke. You still have to eat, pay utilities, medical bills, taxes, insurance, keep up your car, and buy clothing.
Budgeting is the key to staying afloat financially. A budget enables you to see on paper the money you need to set aside for fixed expenses such as the mortgage, and variable expenses such as utilities. It also lets you see where that money will come from, such as your salary, bonuses, and savings. It will also tell you if you have money left over each month to invest or make home improvements.
Here's how to run the numbers: Subtract your fixed and variable expenses from your total income. If your income is less than your expenses, you need to do some cutting. If your income exceeds expenses, sock away some money for retirement, emergencies, college tuition, vacations, or for future home maintenance or improvement projects.
Homeownership doesn't usually cause you to go into bankruptcy. It's the other things you buy that can get you into trouble.
Mortgage lenders are required to use strict debt-to-income ratios when qualifying borrowers for home loans. If you get approved for your mortgage, that means your finances matched the lender's formula. You just may not be able to move in and immediately buy furniture, paint, wallpaper, and landscaping all in the first month.
To avoid becoming house poor, ask whether you can make some temporary sacrifices. Can you live without a dining room table for a while, eat out less often, do your own hair, put off a fitness club membership?
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