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Investments & Purchasing & Selling Your Home The Right Way

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Purchasing & Selling your home the right way and investments are closely related. If you purchase and/or sell your home the right wayyou will have money left over to do investing outside of your retirement accounts.

As mentioned throughout this siteprior to purchasing your homeyou should have a six month emergency fund or other “compensating factors” at workthat will have you in a strong financial position.

Be sure that you are fully covered INSURANCE wisethat means life, home, auto, umbrella liability, health, disability and long-term carehave all been addressedat or beforethe time of your home purchase.

Your INVESTMENTS outside of RETIREMENT prior to purchasing your home is not critical at the time of purchasehowever, you should have a solid amount of discretionary income left over after the purchase of your home.

However, it is critical that you know your TAX situationand improve upon itprior to purchasing your homeif at all possible.

That means that you should be taking home most of your potential tax refund on a monthly basis by adjusting your withholdingso that you get a smaller refund (that will also protect you against tax fraud where someone uses your information and gets the refund that was owed to youand therefore delays your tax refund) on your Federal and State Income Taxesif that applies to you.

If you have kid’s and/or you anticipate having EDUCATIONAL expenses in the futurefor you, your spouseor your kid'sit is important that you take a look at saving for the expenses, however, it may not be critical that you have a plan in placeprior to purchasing your home.

It would really depend on the time horizon and the expected cost of the educational expenses in the futureas well as in-state versus out-of-state tuition and a host of other specific factors unique to your situation.

Let’s assume that you are currently age 29 and your spouse is age 27and you have two kids age 5 and 7and you are saving 20% annually with a 5% match on your 401k. 

You are also saving $10,000 per year on ROTH IRA’S to further fund your retirement—one for you and one for your spouseand you currently have a balance of $110,000 in total in all of your retirement accounts.

As for your ESTATE PLANNING & WILLS you should analyze and update them on an annual basisif neededas life changes can have a positive or negative effecton your ESTATE PLANNING & WILLS.

If your NET WORTH or INCOME is not at a high levelyou may not need ESTATE PLANNING at this time!  However, you and your spouseshould still have a separate WILL that spells out your intentions and wishesshould one—or both of youtransition unexpectedly.

Investor Success Tips

At this time we are making the assumption that you have properly” assessed your financial situation” and have a six to twelve month emergency fund, you are adequately insured, your tax situation is at a level that benefits you the most, you have an educational savings plan in placeor anticipate starting oneand you and your spouse have updated your will.

You are now ready to invest outside of your RETIREMENT accountsyou save 20% annually with a 5% match on your 401k and $10,000 (maximum contribution allowed—2012 TAX YEAR) per year on ROTH IRA’Sfor you and your spouse.

You are currently renting a home at $1,500 per month. You and your spouse have saved $60,000 for the down payment on your home and still have a 12 month emergency fund ($24,000)based on your current monthly bills.

Your income is $80,000 per yearand your spouse’s income is $40,000. You have no outstanding credit card or revolving debtnor do you have any outstanding car loans or installment debt.

At this time you are now “Ready, Willing And Able” To Invest

We will now look at the more common investment vehicles that are available to you when investing outside of your retirement accounts.

Savings: CD’s, Money Market Mutual Funds & Money Market Accounts

Checking Accounts: Various Types—Debit Card usually tied to this account

Bonds: Tax—Tax Free—Corporate—Municipal

Stocks: Various Sectors

Mutual Funds: Various Sectors

Exchange Traded Funds: Various Sectors

REIT’S: Real Estate Investment Trust

Real Estate

You decide that your first investment outside of retirement and excluding the emergency fundwill be in the form of a home for you and your family.

Because you have everything in place to make your home purchase enjoyableyou should be in a great position for home ownership!

Many financial planners do not see your personal home as an investment, however if you do it rightit can be an investment.

By purchasing a property where you can live at your means—or preferably—below your means you will have MORE money left over to invest outside of retirement—or invest MORE toward your retirement.

Therefore—from my perspectiveproperly purchasing your home is an investmentin you, your future and your family’s futureand I have successfully recommended this strategy with many of my past client’s.

In addition, the potential is there for the property to appreciate at a level higher than that of inflationand at the time you decide to sellyou could possibly see a large “tax free” gainif you make the proper purchaseand subsequent sell within certain parameters.

Furthermore you have to live somewhere anyway!

The key is to purchase in a neighborhood that you are comfortable in and has strong schools, purchase at a price that will leave you with high discretionary income and gives you the best chance to enjoy life, and save inand outside of your retirement accounts.

Once you have the retirement projections that you and your spouse feel are adequate for your retirement yearsyou would then be ready to invest outside of your retirement accounts.

By having your future retirement accounts in placeand targeted amounts that you will need in the future relatively certain—investing outside of your retirement accounts ( whether it be real estate or any of the financial vehicles listed above) will be less stressful—in fact, you should feel comfortable and good about doing it!

By being in such strong financial investing positionyour mindset(s) should be:

If we lost everything "outside of our retirement accounts and emergency fund"we would still have a great lifeand our retirement years would be enjoyableand our kids educationaland other expenses "still" would be taken care of.

In addition, you would be enjoying life along the wayas you can meet all of your living expenses quite easily—and you have discretionary income available—that allows you to live at a level that is comfortable for you and your family—and in line with the lifestyle that you desire.

The theory behind this type of strategy is that you should be able to lose all that you invest outside of your retirement and emergency fundand still be set financially(reach your target) in your retirement yearsand also have your and your families future educational and other goals met—on a consistent basis.

If you like to purchase a car every several years or sothese expenses should also be met with your discretionary income that you have on a monthlyor annual basis.

In actual practice we know that the odds that you would lose all that you invest outside of retirement would be very low (unless you were to choose highly speculative investment vehicles)—however if you didyou would still be in a great positionbecause you have your financial house “in order.”

If you decide to invest conservatively outside of retirement with money market accounts or CD’sthat would be appropriateif that is what you were comfortable with.

As long as the amounts invested outside of retirement does not affect your monthly living conditions or emergency fundit would be appropriate for you to invest a certain amount each month outside of retirement.

If you are conservative in your investment philosophyyou could also choose to invest in riskier or more exotic type investmentsif you chose to do so.

By having your financial house “in order”you would be in position to do thatand a loss would not "materially" affect your living conditionsand that of your family's.

Other Key Investment Points:

In the above illustration the couple makes $120,000 annually with 25% ($30,000) going towards taxes and health insuranceand 20% ($24,000 ) going towards their retirement.

Assuming they both worked until age 60they would have over 30 years of investment earnings within their retirement accounts (retirement contributions alone would be over a million dollars—and with earnings they could have a "nest egg" of several million dollars to enjoy during their retirement years).

They have $66,000 left over (after payment of taxes, health insurance and retirement contributions) to live off of in a 12 month period or $5,500 per month.

By purchasing a home with a total monthly payment of $1,500 (just over 27% of their monthly income)—after taxes, health insurance and retirement contributions—they would be in a "winning lifetime position" by purchasing a home well below their means.

They have $5,500 left over (disposable income)on a monthly basis for their mortgage, electric, gas, food, maintenance and other common monthly expenses.   Assuming their monthly expenses total $3,500that would leave them with $2,000 in discretionary incomethat they could spendor save (INVEST)any way that they liked.

The above situation is a great position for them to be in. They are in position to do a number of positive financial maneuvers.

They could accumulate rapid savings rather quickly to increase their emergency fund, invest risky if they so chose to, take the kinds of vacations that they want to takeand not be limited in their choices due to finances, purchase an investment property—or reach many other goals that they may have for their family.

What It All Means

The point of this discussion is that the home purchaser's and investors listed above are in total control of there financial lives. They are not floating along being pulled in different directions by "MURPHY."

They know that they have a bright and prosperous futureand it will show in their daily behavior and the manner in which they approach life. They have an inner peace withinand it is largely due to the "choices" that they made.

They know that by using "written goal setting" they see their future in clear terms
—and their focus is magnified—and their dreams are actually "brought to life."

Contrast the above scenario of a family in the same scenariobut they purchase a property with a payment of $3,000 per monthand they are carrying revolving and installment debt.

Although on the surface it may appear that they are doing exceedingly welllife could possibly be miserable for them.

Basically, Proper Purchasing and Proper Investing IS highly correlatedand the success or failure in your financial lifecould depend on the choices that you make prior to, whileand after your home purchase.

This cannot be “overstated”as I have seen many who try to enjoy life by putting the horse before the cart(making financial decisions in the wrong order)fall victim to unfortunate financial conditionsthat could have easily been avoidedhad they made the proper choiceat the proper time.

What You Can Do Now

Whether youand your spouse earn six figuresor just enough to get by onyou can start on a path to achieve the success that you desirejust as the couple above did.  You must start where you are atand not procrastinate!

If you earn $40,000 per year and your spouse earns $20,000 per yearjust apply the same general conceptsand you will be on your way to successat the level that you desire.

Likewiseif you earn even moresay $160,000 per year and your spouse earns $80,000 per yearyou would again apply the same general conceptsand you will be on your way to successat the level that you desire.

Why Action Is All That Really Matters

If you apply what you have just learned at your highest leveland in a sincere manneryou will have no reason or excusefor not reaching your and your family's future goals.

You must take action todayby doing soa brighter future can definitelybe on the way!

You no longer have an excuseif you take action nownavigating this site effectivelywill show you how!

It is imperative that you have the mental working knowledgeto make good decisions and good choiceswhen it comes to your credit and finances.  By properly navigating this siteat this timeyou will put yourself in positionto do just that!

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About This Article:


The above article was written by Thomas (TJ) UnderwoodThomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia. 

He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and  Managing & Improving Your Credit & Finances for this MILLENNIUM.

In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.

He is the creator of where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. 

He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind"  and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.

You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.  You can also get highly relevant tips on "living your life more abundantly" and link to and possibly earn revenue by logging on to

He is also an IRS registered tax planning professional with over 30 years of tax experience and can be reached at:



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