Before purchasing anything with the intention of making payments, whether a zero interest loan for a limited time period or a bank interest loan, determine if you will be comfortable with the monthly payment. Don't find out months later you cannot afford a monthly payment you committed yourself. For example, don't purchase or rent the car or home of your dreams only to discover months later that the monthly payments exceed your comfort level. You will then become disillusioned and depressed about managing that burden causing you to sell that burden at a loss to get yourself out of debt.

     A good rule of thumb is not to purchase a car whose loan value exceeds about 40% of your yearly income. Do not lease a car whose monthly payments exceed about 10% of your monthly income. Also, expenses for a home, including mortgage, insurance, maintenance, and taxes, should not exceed about 2 times your yearly income for a 15-year mortgage and about 2.5 times your yearly income for a 30 year mortgage.

     The rules are guides allowing you to have money left over for activities you enjoy instead of strictly paying bills. Only you can decide what is more important, paying large bills or having enough money to enjoy life. Although, be prepared if you decide that paying large bills is no longer a priority, you will have financial difficulties unless your income is increased to compensate. The final answer depends on your source of income, the amount of existing debt, and the size of the down payment.

     Utilize similar considerations for any other item(s) you might be interested in purchasing. If you want the higher priced item, then find a way to lower the loan amount. Use the ideas included in this book to achieve your goals.


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