Fun Math Rules for Homeownership

Posted on Aug 14, 2019 in Home Ownership, Newsletter Article

There are some easy ways to remember how to handle your money so that you can become a homeowner, prosper as a homeowner, and ultimately, sell your home at a profit.

The 50/20/30 rule. Your spending can be divided into three categories – Needs, Wants, and Savings. Allocate 50% of your after-tax income for needs such as food, rent, etc. Wants are things you can live without that make life easier or more enjoyable but should be no more than 30% of your budget. Twenty percent should go into savings and investments like IRAs or 401Ks.

The Rule of 72. This formula offers insight into how long any investment will take to double its return. If your home appreciates at 3% annually, it should double in value in 24 years. If you purchased at $400K and paid off your mortgage, you’ll have $800K in equity, enough to retire comfortably just from owning a home.

The Pareto Principle. Roughly 80% of outcomes are due to 20% of causes. To improve your budget, reduce the 20% of costs that are eating up 80% of your outgo, such as eating out.

The Law of Probability. Probability is guessing the number of ways en event can occur by dividing the total number of all possible event occurrences into the event. Event A is buying a home with the options of occupying, selling or leasing your home to others as options. What’s the probability you’ll remain in your home? The answer is 30%.

From Chuck Barry’s August 2019 Issue of the Berkshire Hathaway HomeServices Monthly Newsletter.

© 2019 BHH Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.® Information not verified or guaranteed. If your property is currently listed with a Broker, this is not intended as a solicitation. Equal Housing Opportunity.

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