Faye's Blog

By Faye Miran
Guest columnist - Ventura County Star- Article featured Sunday, June 19, 2011

Planning is one of, if not the most, important aspect of achieving financial freedom. It defines where you are, where you want to be and what steps need to be taken to get there. Having a thorough plan with a well defined goal and ultimately executing it will bring you to your desired financial destination.

In my long residential lending career, I have talked with thousands of families, all with varied financial backgrounds. They all practiced different savings and spending habits. The single most important realization I have reached is that, “it is not about how much you make but more importantly is how you manage what you make”.

I have discussed loans with families with a yearly income in excess of $450,000 who were on the verge of bankruptcy. I have also met with families, earning minimum wage who have been able to purchase their first house. These families developed a plan, had a clear goal, and worked together making some sacrifices to achieve their goal of investing in their first home.

Effective planning leads to increased savings which can result in investing. This formula of Planning + Saving + Investing, I believe, is the foundation of financial freedom for average Americans.

In today’s market, the affordability index is very high for home buyers. The ability for first time homebuyers to invest in their first home is very positive. Purchasing a first home can result in one of the most solid investments and long term will result in financial freedom.

To further illustrate how to “manage what you make”, consider the example of a family paying $1500 each month in rent in today’s market. With 5% inflation for adjusted growth, they would pay a total of $6176 in monthly rent 30 years from now. If this same family were to pay that amount monthly toward their mortgage payment for the same 30 year period which is the average life of a mortgage, they would have no mortgage payments 30 years from now. The only payment they would have would be for property taxes and home insurance. Consider now with an original purchase price of $300,000, 30 years from now the property tax would be approximately $554 and insurance would be about $200-$300 a month. As you can see, through careful planning, this family will be $5,322 ahead per month having purchased a home vs continuing to rent. This savings will be available for their retirement which is generally a time when additional resources are needed.

This is just one example of why I am so passionate about young couples following the financial freedom formula: Planning + Saving + Investing leading them to the purchase of their first home and ultimately to Financial Freedom.