Just Bought A House? Here Are Some Important Financial Precautions To Take

When we are young we have very few responsibilities and there is very little that we need to worry about. As children of course our parents take care of anything and we are free to do as we wish, but then even once we have left home we still will only really need to worry about ourselves and paying rent for somewhere to sleep. Things are straightforward at that age and it’s one of the great perks of being young.

But as we get older we generally start to ‘settle down’. Essentially this means finding a home to live in, meeting a partner and then moving in together. Suddenly there are more ties on your life and more responsibilities: you can’t just go off for days on end on random holidays because you’ll be wasting the money that you’re saving towards that home and you’ll leave your partner on their own for too long. Likewise you can’t risk blowing all your money on nights out anymore – now the consequences might be too great and you might end up having your home repossessed or falling into debt.

When you buy a house then, life changes and your priorities change. Suddenly you will have other people dependent on you and much more to lose and while this is very gratifying and rewarding, it’s also rather scary at first. To deal with this situation there are a number of financial precautions you should take, so let’s have a look at what those are.

Life Insurance

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There are a couple of major life events that might lead you to take out life insurance. One of these is of course having children at which point you will have real dependents that completely rely on you to provide support and shelter and food. Without you they will have no income and no means of raising any and this could leave them in a very precarious position.

Before that though is the first time you buy a house, which is also a point at which you suddenly find yourself with a lot more responsibility. Owning a house gives you a lot to lose and it also puts you in a lot of debt. You will probably have bought the property with a partner, and so if you don’t think about life insurance then you may leave them to try and afford the repayments on their own – which most people won’t be able to do.

A good solution at this point then is ‘decreasing term life insurance’. This is a form of life insurance that decreases in value every month, and what you can do is to take out the insurance so that the value always matches the precise amount you have left to pay on your home. That way, should anything happen to you the home loan will be paid off and your partner will automatically own the property 100% meaning they at least won’t lose their house but that you’ll never pay more than necessary.

Home Insurance

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Of course you should also insure the actual property that you’ve bought, and after you’ve spent that much money it’s very important to ensure that you’re protected against sudden floods or high winds that might rip the lid right off of your new pride and joy.

Contents Insurance

Home insurance only covers the actual brick and mortar of your home though and doesn’t apply to the things you keep in it such as furniture. Seeing as one of the first things you’ll do when you buy a new home is to fill it with nice new things, it’s a good idea and an important step to take out contents insurance so that you can be sure all those things are protected too.

Loan Insurance

Loan insurance is a type of insurance that ensures you will always be able to pay off your loans which includes your home loan. This will essentially do the same thing as your decreasing term life insurance policy, but doesn’t require that you die first. In case you lose your job or are unable to work, this policy will help you to pay back your loan. Health insurance is also a good idea.

Savings

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Finally it’s important to have a pot of general savings kept back for a rainy day. Sometimes life throws things at you that you just can’t predict, and more often than not those things are expensive. Make sure you have some finances to pay for them when they happen.

Tim Esterdahl

Tim Esterdahl is the editor of IFCS blog. He is a married father of three and enjoys golf in his spare time.

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