The Painless Way To Save For A Home Purchase

This morning, I stumbled across an article that one of my Linked In connections, Anna Terry, posted on "Five Places To Keep Your Down Payment When Saving To Buy A Home", which, as the title suggests, went into the best places to stash your money (i.e. not in a mason jar buried in your back yard). Actually, it had some wonderful suggestions that could definitely benefit your buyers.

What it didn't go into though and what I think might actually be the more important question to answer for most people is not where to put the money, but rather, HOW to save the money!

As a fairly recent article in Forbes Magazine pointed out by quoting a study of 7,000 Americans (the study was by an organization called GoBanking), less than 7 in 10 American's have more than $1,000 in their savings account. To take it a step further, 34% of Americans have ZERO (nadda, nutin, only a wish) in their savings account and 84% of American's have less than $10,000.00 saved.

The study didn't take into consideration retirement savings, or equity in real estate, but even considering these assets, it's still a sad state of affairs and one that ends up hurting YOUR bottom line because lack of a downpayment is the second most sited reason for not buying a home.

Now, as a real estate agent, you could simply accept these facts as being something that you can't really do anything about or you could look for the silver lining (which just about every situation has one of) and figure out how you can turn this negative into a money making opportunity.

"Well Mr. Smarty Pants, How would you suggest that I go about doing this?"

The answer being by teaching people, particularly young people, to save!

And the good news being that there are indeed a number of ways that people can free up a bit of their capital to stash away for buying a home (and simply because it's a good idea!)

The Process Starts With Identifying Everything That You Spend Money On.

The easiest way to do this is to look at your most recent 12 months worth of checking account statements and listing out everything that you spent money on during that period of time. You don't have to make any changes yet, you only have to identify where you are spending your money at currently. Here is a link to a budget worksheet published by Consumer.gov

The first thing that I can predict for your buyer is that they will be surprised at where a good amount of their income is going. When I did this several years ago, I figured out that I had spent over $1,000 on Super Big Gulps during the previous year!

I also saw where I an old gym that I had belonged to had started hitting my account again even though I had cancelled my membership!

Anyway, once you have filled out the form and have identified where your money is going, you can then see what items can immediately be trimmed out of your budget. Things like my Super Big Gulps and phantom gym memberships are a good place to start!

The Next Step Is To Look At The Things That You Have Been Spending Money On and Then Determine Whether or Not You Really Need Those Things.

Where I'm bad at is in buying clothes. When my wife insisted that I go through my closet to free up some room (for her crap), I found a couple of shirts that had been in my closet for years that I had never even worn! To make matters worse, about a week after I had thinned my closet out (having taken several large bags of clothes to Dorcas Ministies Trift Shop, I found myself at the outlet mall in Smithfield looking at....you guessed it, shirts! (I'm starting to think that I have a fetish).

The point here is that, be it clothes or Super Big Gulps, a good way to free up some captial is by being more precise in what I purchase; to curtail my casual purchases.

Make A List of What You Need and Wait For 30 Days Before You Buy It.

Having a list of what you're shopping for and sticking to it can help you stop yourself from making those casual, on the fly, purchases and if you wait for 30 days to buy an item that you think that you need, you might find out that you really don't need it!

Set Up A Payroll Deduction To Be Direct Deposited Into A Savings Account In a Different City - No ATM Cards Allowed!

This works particularly well if you're getting a raise. By setting up the payroll deduction before you get used to seeing the increase in your paycheck, you won't miss the money!

If there isn't a pay raise, then start small, but be consistent! Even a relatively small amount like $20 or $30 dollars per pay period will add up pretty quick.

Ask Your Friends And Relatives To Forgo Buying You Gifts And Instead Have Them Deposit What They Would Have Spent Into Your Home Purchase Account

I mean, wouldn't you really have that $20.00 go towards your home purchase, than towards an ugly tie?

Prepare Your Own Meals

This one will not only save you money, you might even lose some weight!

Cut Back On Your Bad Habits

You know what they are....

Fill Up A Zip Lock Baggie With Water, Throw Your Charge Cards Into The Water, and Toss Them Into Your Freezer!

If I offered you a 100% risk free investment that yielded between 9% and 29%, would you be interested in investing in it? Good! Now pay off your charge cards!

Don't Buy A New Car.

According to Edmunds.com, an average midsized sedan loses almost 27% of it's value after just 1 year on the road! With transferable warranties, and the fact that they are making cars more durable and reliable than they have in the past, do you really have to have that new car smell?

Buy A Home

I know that I'm putting the cart before the horse here, but the fact remains that in most US housing markets, it's cheaper to buy than it is to rent and with home prices continuing to appreciate (and likely to continue for quite some time), if you're planning on staying put for at least the next 5 years or so, then buying is a much better deal than renting!

Many, Many, More Ways To Save

I've only touched upon some of the bigger steps that you can take, but there are a whole bunch more, such as consolidating your student loans and utilizing libraries. So, here's a link to an article that lists 100 tips for saving money...some are better than others, but they're all good!

As always, the opinions expressed in this article are those of Bob Mitchell alone and do not necessarily represent the opinions of Resource Financial or any other entity. All photos published under creative commons license with attribution when requested.

* Shovel digging courtesy of of pexels.com under creative commons license.

** Wiki bank statement courtesy of wikimedia commons under creative commons license.

*** Super Gig Gulp courtesy of wikipedia.com under creative commons license.

****Month Calendar courtesy of wikimedia commons under creative commons license.

R. B. "Bob" Mitchell

NMLS# 1046286

Cell: 314-503-6657