| There's little doubt that we're borrowing | | | | -- coffee, candy or whatever. Instead, you |
| more and there's also little doubt that | | | | set the money aside in an account that pays 6 |
| credit is one of the great conveniences of | | | | percent interest. The result? After 30 years |
| modern life. That said, like Goldilocks you | | | | there's almost $77,000 in your account.There |
| want to borrow the amount that's just right | | | | are any number of strategies to save money, |
| -- and no more.So what's the right level of | | | | but let me suggest a practical approach. Look |
| debt?The loan qualification standards used by | | | | at your debts. Pick the one with the lowest |
| mortgage lenders are an important guideline. | | | | balance, say a small credit card that |
| You can typically get that old standby -- the | | | | requires monthly payments of $25. Save and |
| fixed-rate, 30 year mortgage -- if no more | | | | pay it off. Then identify the next remaining |
| than 28 percent of your gross monthly income | | | | debt with the smallest balance. You now have |
| goes for mortgage principal and interest, | | | | $25 a month extra that can be applied to the |
| property taxes and property insurance (PITI). | | | | second obligation. Save and pay off the |
| In addition, as much as 36 percent of your | | | | second debt. Maybe with the second obligation |
| gross monthly income can go to regular | | | | you can save $50 a month. After the second |
| monthly costs -- PITI plus car payments, | | | | debt is repaid, you have an additional $75 a |
| credit card debt, school costs, etc. In | | | | month to attack the third debt.During this |
| addition, because they have more liberal | | | | process there are other steps to take. Bring |
| qualification standards, you can often borrow | | | | lunch to work. Have one car (hard in some |
| more with other loan programs such as FHA, VA | | | | areas, but not impossible). Collect change at |
| and adjustable-rate financing.But no matter | | | | the end of the day and deposit rolls of coins |
| what type of mortgage financing you consider, | | | | every month or so. Eat out -- but not often. |
| the real question should be not how much can | | | | Stay away from credit cards. Avoid late fees |
| you borrow, but rather how much can you | | | | and maintain good credit by paying bills in |
| borrow comfortably. In other words, financial | | | | full and on time.As this process continues |
| sanity counts.Unfortunately the term | | | | you'll notice several interesting |
| "financial sanity" is an expression without a | | | | results.First, borrowing for real estate |
| definition. The economics that work for the | | | | becomes easy as debts decline and |
| Webbers plainly may not work for the | | | | qualification scores rise.Second, better |
| Johnsons. We each have different incomes as | | | | credit results in reduced interest rates that |
| well as different interests, expenses and | | | | can save you big money. Save a half percent |
| preferences. Given this background one might | | | | as a result of good credit on a $300,000 |
| ask: What makes financial sense for me?The | | | | mortgage and you'll cut costs in the first |
| answer looks like this: If you're living from | | | | year of the loan by nearly $1,500.Third, |
| paycheck to paycheck, if monthly costs are a | | | | there's no tax on "savings."If you have |
| burden, if savings are small or non-existent, | | | | $1,000 in credit card debt and auto costs |
| if you do not have health insurance then it's | | | | each month, that money is available only |
| time to re-think debt burdens.The richest | | | | after taxes are paid. To get that $1,000 in |
| person I ever met, someone who started with | | | | cash you may have to earn $1,300 or $1,400, |
| nothing and created jobs for more than 50,000 | | | | depending on your tax bracket and location. |
| people, once offered this advice: "The key to | | | | If you pay off your bills and don't have to |
| financial success is saving, and nothing is | | | | pay that $1,000 a month, Uncle Sam does not |
| harder than saving that first $10,000. After | | | | raise your taxes and you gain the equivalent |
| that, it's easy."In other words, it's | | | | of a huge raise.When you speak with lenders |
| entirely possible to have a substantial | | | | about your ability to borrow, consider that |
| salary and to fail the financial sanity test. | | | | with good credit you likely can borrow as |
| The waiting rooms in every bankruptcy court | | | | much as you need if not more. But also |
| are filled with people who once had big | | | | consider that as a matter of financial sanity |
| incomes and bigger debts. One day the numbers | | | | you have a personal obligation to save. If |
| didn't work and away went the trophy houses | | | | you can buy a home, pay general expenses and |
| and the big cars.So how do you begin the | | | | still save 5 or 10 percent of your gross |
| savings process?The first step, literally, is | | | | monthly income, the odds are overwhelming |
| to open a savings account. The very nice | | | | that borrowing will not be an undue burden |
| people who provide checking accounts and | | | | now or in the |
| credit cards will also be happy to hold your | | | | future.-------------------------------------- |
| savings.The second step is to go after every | | | | ------------------------------------------Pet |
| nickel and dime you can find.The economics of | | | | er G. Miller is a syndicated real estate and |
| savings resemble gravity: Little pieces | | | | personal finance columnist who appears 70 |
| brought together in one place produce big | | | | newspapers.Search local mortgage lenders |
| results. Here's an example: Imagine that you | | | | now!Go here for online refinancing and second |
| usually spend $2.50 per day on little things | | | | mortgage loans. |