Get updates delivered to you daily. Free and customizable.
GOBankingRates
Dave Ramsey: Don’t Go Broke After Buying a House
By Catherine Collins,
2 days ago
12875116 / iStock.com
Saving up to buy a home is a significant financial endeavor. Not only do you have to qualify for a mortgage , but you also have to save a downpayment and pay closing costs. For this reason, many homeowners don’t have a lot of cash savings left over to purchase items after buying a house.
On an episode of The Ramsey Show , Dave Ramsey advised a caller named Amy, who asked how she could afford appliances and furniture after buying a home. After asking a few questions about her debt, current savings and income, Dave gave several key insights for her (and homeowners in general) to consider after buying a home.
Here are some of the main tips mentioned in this video. Keep in mind that the team at Ramsey Solutions teaches the Baby Steps, which are seven steps to help people get out of debt and reach financial peace. The team strongly opposes credit cards and encourages their listeners to get out of debt as quickly as possible .
Owning a home is a momentous milestone. However, houses are also expensive to maintain. After Amy revealed that she had $20,000 in cash savings, Dave told her to keep $15,000 of her $20,000 savings as an emergency fund.
He suggested she use the remaining $5,000 to purchase a bed, mattress and refrigerator after Amy mentioned that the house did not come with appliances and that she didn’t own any furniture.
On average, financial experts recommend saving 1 to 2% of your housing purchase price in an emergency fund to cover annual maintenance costs. Expensive, unexpected repairs — like buying a new hot water heater or fixing a basement after water damage — can cost thousands of dollars on top of that.
If you don’t have an emergency fund, paying for home repairs on a credit card might be tempting, which can create a debt cycle. Since the Ramsey team teaches people to avoid debt at all costs, Dave emphasized the importance of having an emergency fund as a homeowner.
Dave Ramsey also advised Amy to gradually furnish her home. Although many people might purchase brand new furniture immediately for their home, Ramsey suggested purchasing only the essentials.
Amy explained on the call that she is currently renting a room in a fully furnished home, so she does not have any furniture that belongs to her. Ramsey suggested buying furniture secondhand and getting it for less.
Gradually buying furniture over time allows homeowners to cash flow purchases and not go into debt just to have the basics. Homeowners might feel pressure to fully furnish every room, especially if they want to entertain friends and families. However, it’s not worth it if purchasing those items puts you into debt.
Use Your Income To Cover Purchases
Once Amy buys essentials, like a bed and a refrigerator, Dave encouraged her to use her income to cover other purchases over time. He explained that she could use her paychecks to buy one item for her new home each month until it’s complete.
He even advised her to go to the laundromat until she could save up to pay for a washer and dryer in cash. Ultimately, the message was that using income to cash flow home purchases allows you to slowly make your house a home without getting into financial trouble.
Stick To a Detailed Budget
Of course, both Dave Ramsey and his co-host encouraged Amy to keep a detailed budget during this new phase of her life. A budget will enable her to be very clear about where her money goes each month and can show her how much money she can allocate to decorating her home, saving and also investing in the future.
A budget will also allow her to see her expenses in one place, set goals and prepare for unexpected expenses that come with homeownership.
Don’t Go ‘House Poor’
Overall, Dave used the call to remind his listeners that when you buy a home, it’s important to be financially prepared for maintenance and emergencies. He cautioned listeners against becoming “house poor,” which is when you own a home but don’t have much money left over after paying the mortgage.
The best way to enjoy your home is to be able to afford it, have a savings account and to not get caught up in the idea of having your home look picture-perfect right after moving in.
Essentially, his advice is to enjoy the process of buying furnishings for your home, but don’t let home purchases derail your budget or cause you to go into credit card debt.
Get updates delivered to you daily. Free and customizable.
It’s essential to note our commitment to transparency:
Our Terms of Use acknowledge that our services may not always be error-free, and our Community Standards emphasize our discretion in enforcing policies. As a platform hosting over 100,000 pieces of content published daily, we cannot pre-vet content, but we strive to foster a dynamic environment for free expression and robust discourse through safety guardrails of human and AI moderation.
Comments / 0