This is post #2 in the First Hundred Days series designed to answer the question “Should I Buy a House Now?”.  We often go to professionals to help us make decisions, but whether or not you should buy a house now, isn’t one of them.

By the time you walk into a real estate office or speak with a lender, you should already know whether or not you should buy a house now.  A lender tells you whether or not you CAN buy a house, not whether or not you SHOULD buy a house.  An agent helps you select which house, and guides you through the process of buying a house.  Only YOU can answer the question of whether or not you SHOULD buy a house, and this series is designed to assist you and give you confidence in your decision.

Step 1 – Calculating Your Gross Income for Home Buying Purposes was addressed yesterday. 

Step 2 – Account for how you have spent that Gross Income, using hindsight.

It’s pencil and paper time…yes, you have to move away from the computer for this step 🙂  Take out all of your bills from the last 12 months.  You are not making a budget in this step.  You are accounting for every dime of your gross income for the last 12 months.  Get three different notebooks and mark one of them WANTS, one of them NEEDS and the other one WASTED.  Everyone has that dream where they go to sleep, and every dime they’ve ever wasted shows up in their bank balance the next day.  So let’s not pretend we haven’t wasted any money over the last 12 months.

You are not finished until the total dollars in the three notebooks equal your total gross income from Step 1.

You, and no one else, can determine your needs.  I NEED a cell phone…it’s not optional for me, for others it may be optional.  I don’t NEED a landline (though I have two) so I guess that goes in my WASTED notebook.  Don’t Google sample budgets for this.  Make your own choices.  Picture yourself without that item when determining which notebook it should go in.  I WANT to see my children and grandchild X times a year (anyone who thinks seeing their children isn’t a big expense is a lot younger than I am, LOL)

Everyone’s wants and needs are different, and what you view as a need could appear to be wasted money from someone else’s perspective.  That is why this is a very personal part of the decision process that no one else can answer for you.  You may have children with expensive sports activities.  You may feel getting that Starbucks Coffee everyday is not optional.  It is your right and obligation to determine your own personal wants and needs.  No real estate agent or lender can tell you what you have “left over” from your gross income to spend on a housing payment.

I know this step is a lot of work, but it’s almost year end and a very good time to pull those receipts anyway.  If you don’t have receipts, you’ll have to fudge a bit, BUT starting today keep more receipts than you have in the past.  Put a big envelope in your car for this purpose.  If you use three envelopes marked NEED, WANT and WASTED, all the better.  You may find you waste less money if you force yourself to put the receipt in the money WASTED envelope on a daily basis.

Even if you decide not to buy a house at the end of these First Hundred Days, the process should be of value to you, by forcing you to account for every dime of your Gross Monthly Income.   Better to START the process with accountability, then to be forced into facing a hard reality AFTER you buy a house.