Money Coach Carrie Friedberg Shares Her Tips for Budgeting for a New Home
We all come to a financial crossroads at some point in our lives: That moment when we realize it’s time to make some lifestyle changes to achieve a new goal.
Maybe that means trading in a used car for new or going on a two-week European vacation. Or maybe it means turning the dream of homeownership into reality. But how? If you haven’t been stocking money away for the last several years, the idea of starting now might be a bit overwhelming. But it doesn’t have to be.
SF Money Coach Carrie Friedberg has spent almost a decade as a financial coach helping people all over the U.S. learn how to align their spending, savings and earnings with their values in order to achieve their goals. We sat down with her to find out what steps you should take to prepare your finances before buying a house, how soon you should start to save (hint: ASAP) and how to keep a clear head throughout the process.
Bungalo: How far in advance before buying a house do you recommend people start actively saving and preparing their finances?
Freiberg: I suggest people start by going to open houses. You’re not spending money, you’re not engaging a realtor (though you could be casually interviewing realtors that you encounter at various open houses); but you’re exploring neighborhoods, you’re inside the homes. And you’re educating yourself, really understanding what you get for what dollar amount. From there, you can set a budget.
Where should someone begin when it comes to budgeting to buy a house?
A good first step is to get super organized and know exactly where you are spending your money so that you can identify and stop any leaks. You should do both monthly cash flow and spending plans, as well as annual spending plans, in order to look at the big numbers. If you have debt of any kind—personal loans, student loans, credit card debt—ensure that you have a strategic repayment plan you can afford. I often recommend that people pay just minimums for a while in order to free up cash for other pots where they need money.
What do most people overlook when budgeting?
While most people think about their basic monthly budget, it’s those non-monthly expenses, which are periodic, that can temporarily wipe people out. One of the biggest game-changing tools that I teach people is to anticipate and plan for all periodic expenses (both potential and scheduled). Map them out according to the month, what you’re anticipating when, and include the variables like out-of-pocket medical expenses, vet bills, car repairs, as well as the more concrete ones like children’s birthdays, summer camp or holiday vacations. Proactively put aside this money into a separate periodic expenses savings account. You can then use these additional funds every month to pay for any periodic expense that pops up.
I believe in it so much, I give tools away on my website. There’s a blank periodic expenses calendar that people can print out, or make their own version on an Excel spreadsheet.
Preparing your finances can be an overwhelming process. What other advice do you have for prospective buyers?
As long as you feel like you can truly afford it, because you’ve done the inner work of reflecting on what’s important to you, as well as the outer work of really looking at the numbers honestly—you’ll be on your way!