Home Finance Tips & Different Types of Capital Assets for Home


The job of managing your home finance can be as complex as the finance manager’s role in a company.Home Finance Tips & Different Types of Capital Assets for Home

You need to prepare a budget based on the present cash-flow statements of your income and expenditures, while keeping in mind future goals and expected as well as unexpected outgoing expenses.

As far as expenditures on miscellaneous smaller heads are concerned, you can always prepare priority list and allocate funds for them. If any emergency requirement arises, you can always strike out the head with least priority and divert the funds allocated for that particular head to the new requirement.

Next comes your challenging task when you are planning to buy capital assets like home or automobile or purchase of any high value item costing many times more than your monthly income.

One most popular way is to go for financing through debt. Here you will be paying for the capital asset say your home in installment basis in the form of EMI. The amount you will pay every month constitutes of principle repayment and interest accrued on the same.

The repayment period will be calculated based on the funds you can allocate to finance your home. Thus in fact, at the end of the repayment period, you will end up paying more than the actual cost of the property as you will also pay the interest. At the same time you will be saving on rentals as you can move into your own home purchased on installments.

Now analyze this deal in the way a financial analyzer of a company does. Take present value of your home, add interest you will be paying till last EMI, subtract your savings on rent for a home in same locality for that period, again add any taxes you will pay on your property and you arrive at the future cost of the property you are going to own.

Compare this with the future expected inflated price at the end of the period and you will know whether your deal is profitable or not.

Similar strategy can be applied to purchase of an automobile. Here you will have to consider besides above factors, depreciation on your asset also as the value of a used automobile reduces with time.

You will also have to consider unforeseen accidental damages to your vehicle. You will find that buying a home on debt financing will be more profitable than buying an automobile in the same way.

Home Finance Tips & Different Types of Capital Assets for Home personal-finance

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