Mark Reyes
speaker
76 appearances
1 recordings
1 series
first heard Dec 2024
last heard Dec 2024
Mark Reyes’s voice in public audio — every appearance, attributed to the second.
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WSJ Your Money Briefing · Money Moves for the New Year: Saving Up for a Big Purchase · 26 Dec 2024
podcast
Well, with any major expense or project, you'll want to make sure, first of all, that you're financially healthy to take it on.
For example, if you have a lot of high interest credit card debt charging 30% APR, you'll want to tackle that debt before taking on new renovations.
And same goes on with an emergency fund, which I recommend having at least three to six months worth of expenses saved up separate than the house project.
Without a solid emergency fund, you put yourself at risk into falling into debt.
And once you understand the price of the renovation and maybe find some financing for it, you want to make sure that you have enough free cash flow in your budget to make those monthly payments on top of your normal expenses.
What you wouldn't want to do is use a lot of your monthly budget to finance the renovation and then have to put your essentials like groceries, insurance, and all living expenses on credit cards, which you may accumulate credit card debt.
Typically with budgets, I recommend the 50-20-30 budget where 50% of your income is dedicated towards essential spending like groceries, insurance, housing payments, 30%.
be dedicated towards everything else but 20 would go towards saving and investing so if you can regularly afford to save 20 of your net income per month that's a good sign that you're financially healthy enough to save towards a larger project maybe chip away 750 bucks or a thousand dollars per month with a one-year timeline to save towards this larger project so about one year out you recommend people start saving
At least, at least.
And that depends on the type of project you're taking on and how much runway you can actually have for this project.
So the longer you have to save for this project, the better.
It depends on your priorities as well.
If this home renovation needs to happen in the next six months, you might have to look at financing options.
But if you can delay it, that just gives you more runway to save and build up those funds for the project.
First of all, I would recommend saving in a high-yield savings account if they're looking to pull the trigger in 2025.
The rates right now are around 4% to 5%, depending on which high-yield savings accounts you go towards.
That way, you're earning a little bit of interest on your savings, and you're still having a secure funding source to park your savings there.
Another rule of thumb that's been helpful for home renovations and home ownership in general is reserving 3% to 5% of your home's fair market value at all times in a high-yield savings account.
This prevents you from relying on financing for other projects, and you have this home base of a solid fund, typically in a high-yield savings account, that's just dedicated towards repairs or home renos.
Weddings, car purchases, business investments.
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