I know a family, which I’ll call Todd and Jill Merrill. During the economic downturn of 2008-2009, Todd lost his job, and the family decided they needed to move. When they prepared to sell their home, they discovered, like many others, that the value of their house was less than the money they owed on it.
The Merrill’s have done their best to move on and rebuild their lives. Although they lost money on their last home, their goal is to buy another in about a year. If you’re coming out of a similar situation, and looking to buy another home, realtor Richard Martinez addresses common questions you may find helpful.
Talking with my friends and calling on my own observations, here are a few strategies that can help anyone like the Merrill’s reach their goals much faster.
Set a Timeline
By setting a timeline, you can identify a specific date in the future when you can reach your goal. Obviously, you’ll need to determine how much and how fast you’ll be able to reach that goal. If you set aside a specific amount from every paycheck—treating “saving” like any other expense—you can really make some headway.
Eliminating Unnecessary Expenses
To save up for a down payment, look at where you can trim any excessive expenses and then become disciplined enough to eliminate them. In general, for things like groceries and clothing, it’s a good idea to buy what you need in one visit, instead of going whenever suits you.
I imagine that we all have a few items that we splurge on from time to time. But think of the long-term good you’ll find by foregoing some immediate pleasures.
Manage Your Credit Cards—make them work for you
Having a running credit card balance can be a tremendous burden. If you’re saving up for a down payment it’s best to get rid of whatever debts you can. Tackling the accruing interest from a credit card debt is a great place to start.
I mentioned my friends the Merrill’s earlier. One thing they have done is find ways that ordinary (and conservative) spending habits can start working for them. They are too careful to fall in the potential trap of credit cards, but they’ve managed to use some of the perks that come with using them to their own advantage.
What they’ve done is use the Amazon Chase credit card, which puts every dollar you spend on the card (on groceries, gas, travel, etc.) towards points that can later be redeemed through gift certificates at Amazon. They’ve managed to get a baby stroller, bookshelves, a computer, even breakfast cereal from the online retailer – all at no cost to themselves. Many other credit cards make offers like this. If you’re disciplined enough to make a credit card work for you—instead of you working for it—then it may be worth looking into.
What tips can you share about saving for a home? Do you have any experience with using self discipline to help you reach your major financial goals?