Would you rather lose half your money or double your money?
It seems like an obvious answer, but many people are unknowingly making the wrong choice.
According to Motor Trend and IntelliChoice, the average vehicle will retain 47.6% of its original value.
On the other hand, the value of a home doubles every ten years (according to long studies, on average across the U.S.)
This brings us to Rule #1: Buy the house before the vehicle.
Not only is getting your share of real estate wealth an important priority, but if you incur a new automobile payment, that can put your debt-to-income ratio out of qualifying for the home you want.
The debt raio for getting a mortgage is strictly adhered to; whereas, the auto finance companies have little to no regard for your debt ratio. And that brings us to the next important rule.
Rule #2: Your auto loan should be no more than 5% to 7% of your income.
You will need to be conscientious and set that auto loan perameter for yourself, because the dealerships could not care less if you go over-your-head in debt. They want to make a sale, and that’s all they care about. If you don’t pay, they’re happy to repossess your car or truck.
On the other hand, mortgage companies do not like to go through the lengthy and complicated, and expensive progress of a foreclosure. They would much rather you make payments as agreed. But if you don’t, they will foreclose. No one gets a free house by ignoring their mortgage payment.
Be smart with your money and follow these two simple rules. Teach them to your teens and adult children. When we are smart with our money, we increase our wealth and financial security.
