Tuesday, May 19, 2009

Personal Finance... YEA!

Alright, let's get this started with a concept I was stumbling with for a bit. I could not, for the life of me, understand why the formula for the feasible financial capital percentage one should consider when purchasing a home. For your information, the absolute maximum feasible percentage of one's income that should go towards their home is 32%. Here's a couple things to remember.

It's called the GDSR, and it's composed of a number of things. You've got your Monthly Mortgage Payment, your Monthly Property Tax Payment, your Monthly Heating Bill, and half of your Condo/Strata Fees. Now you lump that all together into one great big chunk and you divide it by your Monthly Income. The number that is generated will be a decimal, in theory. Technically, if you were using this formula on a house WAY out of your range, you'd get a whole number. Or, over 100% of your monthly income would be going to your house. 
That's right! The decimal you receive is a percentage! And that is the percentage of your income that is going to your house. You want that to be under 32. The formula looks like this:

Perhaps you are thinking, "That's all well and good, but what if I'm missing a variable, smart-guy!? Maybe I don't know my monthly mortgage payment, JERK!" Well fear not my fine, feathered friend. If you find 32% of your income, and subtract from it what you DO know, your answer will be what remains of your 32% income, or, what you have at your disposal for whatever variables you are missing. For example:

If I have $1000 a month for housing, my feasible income percentage will be $320. Let's say it's a house, BOO-YEA, no condo/strata fees. Heating is %40 a month, property taxes are $60. BEAR WITH ME.... $40+$60 is $100, Therefor... $320 - $100 = $220. I have $220 to spend on housing per month.

The other thing we covered today was the pros and cons of home ownership. For more information contact your local "Personal Finance" tagged slide... uh..(s)... Slides.


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