HOMEProgram Homeowner Management Education www.aces.edu Alabama A&M and Auburn Universities HE-792
Welcome HOME! You are about to buy your own home! That is a wonderful thing. Owning your own home is a great way to save money. That s right. When you make your house payment each month, you are paying for something that will one day be all yours. That doesn t happen when you pay rent. When you make a house payment, you own part of what your house is worth. When it s all paid for, whatever your house is worth is all yours. That s why buying your own home is a great way to save money. When you buy a home, it s very important that you make every house payment in full and on time. This will save you even more money. This little book was made just for new homeowners. It can help you see how to use your money each month so that you can make your payments. When you use this book, you will see how to plan your spending each month. You will also see how to keep up with where your money goes and even find out how to build up your savings! This little book will also tell you how to take care of your home. It s your home. It s your money. This book can help you take care of both. Your county Extension agent or other HOME Program guide can show you how to use this book. Talk to them about what they can do to help you. My Extension agent s name is Phone Number My HOME Program guide s name is Phone Number
Money and Goals Owning a home is a big goal. Big goals can look like mountains that are hard to climb all at once. $3,000 Down Payment Small goals are like hills; so break big goals into smaller ones you can do over time. Big Goal I can t do that! Home Sweet Home! Small Goal Steps in Goal Plan Budget Save $300 Save More $1,000 Earn More $2,200 GOAL SAVINGS $3,600 Budget Today 6 Months 12 Months 2 years 3 years Savings 3
Money In Henry gets paid every Friday. Money Tips Make payments on time. Late fees are expensive. Save money now for future expenses. Use cash, not credit! Paying a little extra, like $10, on each month s credit payment can cut years off a loan. Money and You When you get paid and tax is taken out, you are paying for Social Security, Medicare, and Unemployment Insurance. Cash jobs don t. Call the IRS at 1-800-TAX-1040 to find out about the Earned Income Tax Credit (EITC). If your annual taxable income is around $12,000 and you claim at least one child on your tax return, you could get about $2,400 when you file. The IRS can also tell you how to get FREE help with your tax return and how to get a quick refund at no cost! Mary wanted a new TV. 4
Money Out Every Monday Henry wishes every month had more FRIDAYS! Money Tips Plan your food expense on what it costs to feed each person, not on how much the food costs. Don t shop when you are hungry. Shop using a grocery list, shop for specials, and use coupons. Money Made and Money Spent If you make $12,000 each year and you work for the next 30 years, you will have made $360,000! Manage your income to get the things you need like a house or a car, food, clothes, medicine, savings, a retirement plan, and home utilities. Manage your income to get the things you want too, but be careful. When we earn more, we want more! Mary planned to save her money and pay cash for the new TV. 5
Money Goals Henry wants to buy a house. His goal is to save $3,000. Money Tips Tires last a lot longer if you keep the air pressure right and rotate them. Always compare prices on cars, car loans, and insurance. Have a mechanic check a car before you buy it. Set Your Goals Your goals are your reasons for working, planning your spending, and saving for the future. To reach a goal, decide when you want it, what you will have to do to get it, and make a plan for reaching it. A goal is not a wish! Big money goals are reached in years by reaching little money goals every day. If your goal is to retire in 30 years with $100,000 in the bank, then you need to save about $3 each day. Mary used her Family Spending Planner to plan her expenses every month. 6
First Things First Decisions. Decisions. Money Tips Ask your doctor for free drug samples. Buy generic drugs and save money. Get regular checkups and take care of your teeth. Mary used her Monthly Spending Tracker to see where her money was going each month. First Things First You decide what to do with your money. What are the most important things you want to do with your money? Make a list. On your list are things you need and want. If you don t have enough money for everything on your list, make sure the needs come first. Don t forget your goals and future expenses. Keep these on your list and put money in savings for them. 7
So Many Choices! Henry has enough money for things he needs, but not enough for everything he wants. Money Tips Buy things you will need when they are on sale. Don t wait until you run out of it and have to go buy it. Seasonal clothes cost less at the end of the season. Store brands are usually as good as name brands and cost less. Mary used her Monthly Spending Tracker and found where she could save $10 each week. Wants and Needs Deciding how you spend your money is what a spending plan is all about. How you spend each dollar is up to you. There are wants and needs. You may need a car to get to work. You may want a brand new car. A good used car might meet the need. A new car might mean you can t save for future expenses or goals. Plan spending to meet your needs for today and your wants and goals for tomorrow. Needs can t wait. Wants can. 8
Pay Yourself First Money goals are like dreams on a lay-away plan. Henry pays for his each month by adding to his savings account. Money Tips Ask about on-the-job training where you work. The more skills you learn, the more you can earn. Eat a snack before you go out to see a movie. Movie popcorn can cost more than the movie ticket! Pay Yourself First First Home Savings Bank Make your savings a fixed expense, and pay it first. Don t put yourself last and just hope there is some money left over for you. You need savings for future expenses, emergencies, hard times and home improvements. You also need savings for future goals like retirement. A little saved each month can really build up over the years. Mary also saved an extra 25 cents each day in her cookie jar. 9
Spending Money Henry makes a list of what he will spend his money on so nothing gets skipped. Money Tips Plant a tree or two at your house. Shade trees are cool! Change your home air filter every month. Paying a little extra, like $25 on each month s house payment can cut years off your loan. Reaching the Goal A house payment is not the only house expense. There are utilities to pay too. And don t forget the cost of keeping your home in good shape. Regular maintenance of your house costs a lot less than repairs on your house. The other things to add to the housing expense are home taxes and insurance. You might be paying for these as part of your house payment. If not, you need to save money each month to make these payments when the time comes. By tracking her spending and saving change in her cookie jar, Mary was able to save $50 each month! 10
A Change of Plans Things happen. Spending plans can change. Henry saves a little extra money each week for emergencies. Money Tips Save money where it will be safe and earn interest. Make a list of future expenses. When you get a raise, put most of it in savings and you won t miss it. Pay yourself first. Follow Your Plan Big goals are built on little goals. Keep your small goals on track. Track your spending to find where your money is going. If you buy a drink and snack at work, you will spend about $1.50. If you do that every day, you will spend almost $40 a month! Do not wait until the end of the month and hope to save whatever money might be left over. That s not a plan. You find a way to pay everybody else. Find a way to pay yourself. After 4 months of using her spending plan, tracking her expenses, and saving her change every day, Mary saved $200. 11
Henry s New Home Henry followed his plan and reached his goal! Money Tips Save money where it will be safe and earn interest. The Spending Plan Time is money. It takes time to earn money. Take your time spending it. Some expenses are the same every month. These are called fixed expenses. You know what they are, how much they are, and when they are due. Plan on them. Some expenses change every month. These are called flexible expenses. Since you don t know exactly what they are or how much they will be or even when they will happen, plan on them even more! Mary found a $300 TV on sale for $200. She paid cash for it with the savings she had from tracking her spending, following her budget, and saving her change in her cookie jar! 12
Planned Spending Use the Family Spending Planner on the next page. It can help you pay bills on time and save money! Here s how it works. In the Family Spending Planner, the income and expenses are listed on the left side of the page. In the middle of the page there is a section called Three Months Record. This is where you can write in how much money you plan to spend on these expenses. You can write these for each month where it says Planned $. Don t plan to spend more than you plan to earn. When the month is over, you can write in how much money you really spent on each expense. Do this where it says Actual $. This may be more or less than you planned. That s ok. That s what you want to try to change next month. When you plan your spending for the next month, plan to spend less on some things if you can. The money you don t spend on some things can be spent on other expenses if needed. When the month is over, write in the actual expenses. Then do it all one more time for the third month. Get some help with this if it seems hard at first. You will be glad you did! 13
THE FAMILY SPENDING PLANNER MONTHLY INCOME & EXPENSES THREE MONTHS RECORD INCOME (Monthly Take-Home Pay) HOUSING Rent or Mortgage Payment Maintenance (cleaning products, repairs) Utilities (electricity, gas, water, phone) Taxes/Insurance CREDIT PAYMENTS (Except Auto & House) Month 1 Month 2 Month 3 Planned $ Actual $ Planned $ Actual $ Planned $ Actual $ FOOD (Monthly Food Expenses) Food at Home Food Away From Home TRANSPORTATION Car Payment Maintenance (gas, oil, repair) Insurance Public Transportation HEALTH CARE CLOTHING/PERSONAL EDUCATION/RECREATION CONTRIBUTIONS & GIFTS SAVINGS OTHER 14
Track Down Your Savings Things don t always go the way we plan. Your spending plan won t always work right either. That s ok. If you don t start with a plan, how would you know when things go wrong? The reason we plan expenses is simple. The plan has savings in it. That is the money you get to keep for future expenses. We plan our spending so we can be sure we save money. When things end up costing more than we plan, we might end up saving less. How will you know when things cost more than you plan? How do you know when to stir a pot of soup or spray for bugs? You keep an eye on it! That s what you do with your spending too. Keep an eye on it. When you spend money on something, write down how much you spent and when you spent it. Do this all month long and you will know where your money goes. page you can write in how much money you planned to spend for each expense. This is the same money you put in the Family Spending Planner. If you take the spending you did for a week away from what you planned to spend for the month, you can see how much money is left for each expense in your plan. You might be spending more than you planned on some things, but less on others. If so, you can change your plan. If you can see that you don t have enough money for something like food, you might plan on spending less money on something like clothes. This way you will know when something is not going the way you plan. That s how you track your spending. That s how you keep an eye on your savings! The Family Monthly Spending Tracker on the next page can help you keep an eye on your spending. On the left side of the page are the days of the month. Across the top of the page are expenses. When you spend money on something, write how much you spent for that expense on the line for that day. This is how you track your spending. The Family Monthly Spending Tracker is split up in weeks. If you add up the spending for each expense for each week, you will know how much you spent. At the bottom of the 15
Family Monthly Spending Tracker Date Housing Credit Food Transportation Health Care Clothing/ Education/ Contributions/ Savings Other Payments Personal Recreation Gifts 1 2 3 4 5 6 7 Week Total 8 9 10 11 12 13 14 Week Total 15 16 17 18 19 20 21 Week Total 22 23 24 25 26 27 28 29 30 31 Month Total Planned Total Over/Under Budget
New Home, New Goal Now that Henry has a new home, his new goal is keeping it. Protecting Your Goal Once you reach your goal of home ownership, protect it. Home insurance is needed for the cost of repairing or replacing your home and its contents. A home can be the biggest investment you ever make. Insure your investment and your goal. Too much credit can mean too much debt and not enough money for other things. Let s say you can get $1,500 of new furniture on credit with a low monthly payment of just $25. If the interest rate is 19% it will take 16 years to pay it off! The interest cost will be almost $3,000. That s twice the cost of the furniture! Mary continued using her spending plan, tracking her expenses, and saving her change every day. She can now pay for cable connection and plans on paying cash for a VCR! 17
Home Maintenance Buying your own home is a very big investment. You will be making monthly payments on something that will one day belong to you. You will be making those payments every month for a lot of years. After all those years, the home loan will be paid off and the house will be yours. That s why it is an investment. It s not like rent. When you pay rent, you are just paying for a place to live. It won t be yours someday no matter how long you live there. Of course, if you decide you want to move, you can always go somewhere else. That s not how it works when you buy a home. When you have a home loan, the loan is in your name. If you want to move out, you can sell the house. When the house is sold, the loan gets paid off. That s why it is very important that you take care of your home. If you don t keep the house in good shape, people might not want to buy it. If someone did buy it, they might not be willing to pay as much as you owe on the loan. Then you have a problem. You plan your expenses to avoid money problems. You can maintain your home to avoid money problems too. In fact, if you take good care of your home, it might be worth more in the future than it is right now. Home maintenance costs a lot less than home repair. Keeping your house clean and in good shape can also increase the value of your home. When you agree to make your home payments, you also agree to take good care of the property. You are buying your home, but you don t own it until it is paid for. Things that come with your home must stay with the home. Things like the stove or dishwasher or air conditioner cannot be taken out or sold. They are part of the home loan. When you clean your home or work in your yard, check for things that might damage your home. Inside, watch for insects, water leaks, loose screws, chipped paint, and slow drains. Outside, look for broken windows, plants too close to the walls or roof, leaf build up in gutters or on the roof, cracks in concrete, and animals digging under the house. The two things that can cause the most damage to your home are fire and weather. To prevent fire damage, be sure you have fire and smoke alarms that work. There should be one in the kitchen and one by the bedrooms. It s a good idea to put new batteries in your smoke alarms every year. The start of a new year is a great time to do it. You can also prevent fire damage by making sure things like gasoline are never kept in the house. Don t plug too many things into electrical outlets, and be sure you only run one thing at a time on an extension cord. Be sure that lighters, matches, and candles are kept where kids can t find them. 18
Weather damage can be prevented too. Wrap outside pipes in the winter so they won t freeze. Keep gutters and down spouts clean so the water will drain away from the house. If trees and bushes are too close to the house, limbs can blow in the wind and break things. Keep plants pruned back so this can t happen. Use the heating and cooling system in your house to keep the moisture under control. If you open windows and doors, the outside air can be too damp. That can cause mold and mildew in the house. This can damage paint, carpets, and wood. Your county Extension agent or HOME Program guide can tell you more about taking care of your home. Call them if you have questions. The better care you take of your home, the better you will enjoy it. Be sure to include maintenance expenses in your spending plan so you can take care of it and prevent costly repairs. Enjoy your new home! Water in the house can cause a lot of damage. When you mop the floor, use just enough water to damp mop. Too much water can soak into the flooring. If pipes start leaking or drains back up, water can get on wood or in the walls. This will make things rot, and then you will have the expense of fixing the damage. If leaks start, fix them right away. If the drains don t work, call a plumber. Strong chemicals and coat hanger wires can hurt pipes if you use them to unclog drains. Be sure to keep the screens in your sinks and tub to prevent clogs. Don t pour grease down your sink. 19
Home Records Family Information Name of Husband Social Security Number Accounts and Policies Account and Policy Numbers Date of Birth Place of Birth Name of Wife Social Security Number Date of Birth Place of Birth Date of Marriage Where Recorded Name of Child Social Security Number Date of Birth Place of Birth Name of Child Social Security Number Date of Birth Place of Birth Name of Child Social Security Number Date of Birth Place of Birth Name of Child Social Security Number Date of Birth Place of Birth Name of Child Social Security Number Date of Birth Place of Birth Item Serial Number Value HE-792 Contact person: Martha R. Johnson, Extension State Program Leader, Family Programs. Author: Bob White, former Extension Specialist, Family Programs, Auburn University. For more information, call your county Extension office. Look in your telephone directory under your county s name to find the number. Issued in furtherance of Cooperative Extension work in agriculture and home economics, Acts of May 8 and June 30, 1914, and other related acts, in cooperation with the U.S. Department of Agriculture. The Alabama Cooperative Extension System (Alabama A&M University and Auburn University) offers educational programs, materials, and equal opportunity employment to all people without regard to race, color, national origin, religion, sex, age, veteran status, or disability. UPS, 8M38, New Oct 2002, HE-792 2002 by Alabama Cooperative Extension System. All rights reserved.