Determining Money Values
Your values play a big role in determining the way you spend money. If you don’t understand how your values and emotions influence your money decisions, you’ll never be able to gain control and make better money decisions. Take the money personality assessment to understand your money values.
Steps for Decision Making
Making financial decisions is a huge process. Decisions to buy big tickets items such as homes or cars should not be taken lightly. Here are a few questions to ask yourself or discuss with your family:
- What is the money issue or decision you need to make?
- What are the possible options or choices for making the decision?
- What are the possible results (pros and cons) for each option or choice?
- What is your decision? When will you look at the decision again?
- Additionally, using a decision satellite map may be helpful.
Can You Afford a Home?
When buying a house, it’s important to stick to a price range that meets your needs and will be affordable with your current income. Keeping this price range in mind, you can have confidence during the application process. Consider the following:
- Overall Cost: If you have good credit, a steady income and a reasonable amount of preexisting debt, it may be safe to estimate that you can afford—and will qualify for a mortgage on—a home that costs 2.5 -3 times your gross annual income (the amount of your paycheck before deductions). You’ll also want to factor in steady income from other sources, such as retirement, disability, child support, social security or alimony. For all income, you must be able to show a history of at least two years, and a likelihood that the income source will continue.
- Mortgage Payments: Before approving your mortgage loan, a lender will examine two different ratios:
- Housing ratio = the maximum percentage of a borrower’s gross monthly income that can be used to make the monthly mortgage payment, including principal, interest, taxes and insurance (or PITI). This percentage will be pre-set based on the type of loan that you are applying for, and is typically between 28 and 33 percent.
- Debt-to-income ratio = the maximum percentage of a borrower’s gross monthly income that can be used for the house payment, plus all other debts. These debts can be from credit cards, vehicles, student loans, etc. The debt-to-income ratio is predetermined based on loan type and ranges from 36 to 41 percent. It’s important to know how much outstanding debt you have before applying for a mortgage. If you find you have a lot of debt, you might need to pay some of it off before applying for a mortgage.
Communicating About Money
Are you a good listener? The I-Message is a helpful tool for couples and families because it helps you express your feelings in a calm way. For example, if you were discussing paying bills with your spouse, you may say, “I feel nervous when I notice that the phone bill is not paid because I worry about bad information on our credit report.” Additionally, these steps may help you communicate better about money:
- Find the real problem
- Talk only about the problem itself
- Face the problem
- Brainstorm and talk about options
- Agree on a plan
- Support the plan
- And keep talking!
Setting S.M.A.R.T. Goals
Do you have financial goals that you wish to reach, but it seem like you never do? Maybe you’re not being detailed enough or writing your financial goals down. It’s time to get SMART about your financial goals! SMART is an acronym that stands for Specific, Measurable, Attainable, Realistic and Timely.
MSU Extension Educator Wanda Roberts explains SMART goals in the video above. Use our SMART goals worksheet and work toward your SMART goals today!
April 1, 2020 - April 8, 2020 Kent County MI Works 121 Franklin St, SE (DHHS Building) Conference Room B Grand Rapids, MI 49507
This three session series covers making money decisions, creating and managing a spending plan, the importance of saving and investing and credit and debt management.
April 6, 2020 - April 13, 2020 Kent County MSU Extension 775 Ball Ave. NE Grand Rapids, MI 49503
This homeownership education series from MSU Extension will provide you with valuable information about the home buying process.
April 7, 2020 12:00PM - 1:00PM 12 pm - 1 pm EST Zoom Webinar
Do you have questions about credit? Are you trying to improve your credit score?
April 7, 2020 6:00PM - 7:00PM 6 pm - 7 pm EST
These short one hour interactive webinars will give youth a basic foundation on credit and resources to learn more.
April 8, 2020 1:00PM - 2:00PM 1 pm - 2 pm EST Online via Zoom
This one hour webinar will provide you with tips to protect your identity and how to avoid scammers, especially during the novel coronavirus pandemic.
April 9, 2020 10:00AM - 11:30AM 10 - 11:30 am EST Online via Zoom
Dealing with sudden income loss is very stressful, like many are experiencing during the COVID-19 epidemic. Learn tools to help you manage your finances and debts.
April 13, 2020 1:00PM - 3:00PM 1 pm - 3 pm EST Online
Increase your awareness of retirement needs and decisions. This program will provide knowledge and resources to increase confidence/assist with planning.
Published on March 5, 2020
Will my kid’s schoolwork be affected? Life goes on even during foreclosure. You and your children can get and keep organized to make a smooth transition to new housing.