Whether you are saving up to buy a house or another expensive purchase, you want to be sure that your purchase is either fully funded or that you are on track to fund it on time. Consider the following when planning for major purchases:
1. Savings: Are you putting enough money away for this goal?
2. Investment strategy: Is the money invested appropriately for the time frame involved? (for example, prioritize stability over return for periods less than 3-5 years)
A note on houses: Most articles focus on mortgage payment as a percentage of your income. But there are many other costs associated with home ownership. Author Thomas Stanley's studies on the affluent suggest that your home should cost no more than 3x your annual income, and your initial mortgage amount should be no more than 2x your annual income.
Question: Are your major purchases on track to being fully funded?