Bernadette Joy, self-made millionaire and trusted financial coach puts it best when she says, “The best decisions in homeownership are the informed ones.” Joy, the author of Crush Your Money Goals, has developed a refreshing philosophy toward budgeting and home buying. Her techniques intentionally perpetuate financial security and uplift wealth accumulation. Her observations are the result of her many years of experience seeing first-hand the financial disaster so many homeowners find themselves in today.
Joy’s methodology includes a 50-25-25 budgeting framework, where 50% of an individual’s income should be allocated for living expenses, 25% for wealth growth, and the remaining 25% for discretionary spending. This four-part, step-by-step process empowers consumers to feel confident about their home-buying choices and their overall financial future.
The Risks of Homeownership
In her practice, Joy warns against the mythologizing tendency to believe that home ownership is always a good thing. She notes that homeownership never should be an end in itself. And Joy never forgets to remind buyers that they need to look at their full financial picture before taking on such large obligations.
“What I see happen to a lot of my clients is, they buy the home and things are good until something breaks,” she notes. This can result in unexpected costs that catch them off guard and throw their entire financial plan out of balance.
When homeowners encounter maintenance issues or emergency repairs, they may resort to credit card debt or cut back on necessities. “Then they get into credit card debt, or they are having to significantly sacrifice other places in their lifestyle in order to accommodate those things,” Joy explains. She wants to remind people that we can’t allow the homeownership dream to compromise people’s financial stability.
Choosing the Right Mortgage
Joy recommends a 15-year mortgage as opposed to the more typical 30-year. She said this decision allows these home owners to accrue equity at an accelerated rate. In doing so, they provide themselves with more financial flexibility in the future.
If you’re going to buy a home, buy it on a 15-year mortgage because at least you’ll build equity much faster that way, she asserts. This move is in keeping with her general theme that people need to evaluate their personal finances with practical eyes.
Joy provides a practical example using a median home price of $435,300, as reported by the National Association of Realtors. With a 30-year mortgage at that purchase price, the monthly payment would be around $2,500. She warns that it might take 10 years to start yielding significant equity accumulation with this option.
If you can’t afford a 15-year mortgage, then you don’t actually afford the home, Joy emphasizes. She advises her art collectors on whether they can afford their next mortgage payment without eating into money for groceries.
Budgeting for Homeownership
Beyond mortgage budget Joy stresses the need to budget for all the added costs that come with homeowning. Unsurprisingly, homeowners incur an average of $8,808 annually in maintenance costs. If they fail to properly budget these costs, their bottom line can suffer.
Joy suggests making sure to account for potentially much longer commutes when looking at homes in outer suburban or exurban communities. This added cost of doing business can add to the strain on a budget that is often stretched thin.
“How likely is it that you’ll see the [30-year] mortgage through to the bitter end, without selling or refinancing (and starting the clock all over again)?” she questions potential homebuyers. Joy pushes back, daring them to say that they really are ready for the new financial obligations of owning a home.
What I really love to do is just call people’s bluff and say, ‘Okay, show me your amortization table. She adds. This simple exercise can reveal how much equity has actually been built over time and whether the homeowner’s financial strategy is working as intended.