SAVING FOR A HOME | Small Dog Realty

Pam McCutcheon


This is a great article:

With home affordability at the highest rate seen in decades, now is prime time to make a purchase.

Many renters are wanting to turn over a new leaf by investing in a starter home. Current homeowners are wanting to take advantage of low prices and buy the home of their dreams.

The key to buying in today's market is having the funds and financial stability needed. How can you go about saving to buy a home?

Financial wiz Suze Orman tells her readers and viewers all the time about the benefits of homeownership, but also the importance of being financially ready for this move. She writes, "Never buy a home or piece of real estate if you do not have at least 10% to 20% to put down. While buying a home is a great investment, if you do not have at least 10% to 20% of the purchase price to put down, then you can't afford the home and are buying before you have demonstrated the ability to save, which is a bad idea in the current market."

How do you get to that point? The first and most important step is to commit to the goal of homeownership. This requires a change in habits. Many households today spend every penny that they make each month. Instead of saving 10, 20, or 30 percent of their monthly income like they should, they strategically make minimum payments. Still others spend further beyond their means and slip further into debt with each purchase.

Both of these habits are incredibly risky in an economy that sees a near 9 percent unemployment rate and slowed growth in most cities. In order to change old habits you must replace them with new habits.

Start by working out a budget. It can be very sobering to see the real numbers on your spending. Keep track of your spending for a month. See how much you are truly spending on dining out, entertainment, household spending, clothes, and all those little extras that add up. This goes double for cash purchases. Be sure to keep every single receipt.

Now that you have the facts, it's time to come up with a new budget. Set aside money for all of the necessities first (rent, mortgage, car payment, food, medical, etc).

Cut out the unnecessary items. Do you have to have cable? Perhaps you can change over to a smaller package that costs less each month. Do you need to go out to dinner multiple times a week? Instead choose to cook at home as a family.

Now that you've cut out the unnecessary and refocused your spending (or not spending) towards buying a home, it's time to funnel those extra funds into a savings account. Some people new to the savings game find it easiest to set up an automatic savings transfer each month that transfers a set amount. This keeps you obligated to your goal.

You'll have some wants that will be part of this budget. Some people like to dine out, shop for clothes, see movies, or go to concerts. This is fine if you can afford it, but in a real down and dirty savings game, you might want to consider alternatives.

Rent movies instead of taking the whole family out for new releases. Plan staycations in your own city instead of paying traveling and hotel costs. Finally, pack that daily lunch instead of dining out.

When you go shopping, including the grocery store, always go armed with a list. This will help reduce impulse shopping. Only buy items that are truly needed, not that simply catch your eye. Give bigger purchases some time and thought. Do you need that new TV? Wait a week or two and do comparison shopping and decide on what you really can afford.

Ultimately, learning to save is about learning to follow your own instincts. Our gut tells us when we're making an impulsive buy or spending more than we should. It tells us when we could easily bring lunch from home instead of going out to eat. It just takes listening.

Written by Carla Hill

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