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Saturday, June 24, 2017  
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If You’re Really Serious About Buying a House, Get Serious About Saving

Scott Bilker Scott Bilker is the founder of DebtSmart.com and author of the best-selling books, Talk Your Way Out of Credit Card DebtCredit Card and Debt Management, and How to be more Credit Card and Debt Smart. Receive the 5-Year Loan Spreadsheet when you subscribe to his email newsletter.

Even in a brutal economy, homeownership remains a dream for millions of people. Traditionally, owning a home has been a symbol of stability and a mark of success. Unfortunately the Great Recession put a damper on that dream for many folks, and even though the economy is improving overall, millions of people – particularly younger ones – are not buying homes. That isn’t from lack of interest or a radical change in values, but rather from a variety of other causes, such as low income and debt or credit problems. And in many areas there is a serious shortage of affordable housing, one reason being that many builders are focusing on higher-end properties that are less risky and more profitable.

All of these factors have resulted in a phenomenon known as – generation rent – in which millions of people (mostly but not exclusively millennials) despair of ever owning their own homes. But if you really want to become a homeowner, caving in to despair is not the answer. Instead you need to get serious and formulate a plan to make your dream a reality. One major step in that direction is coming up with a down payment.

Getting creative

Setting aside the considerable sum required for a down payment might seem like an impossible task, especially if you find yourself running out of money before you run out of month on a regular basis. Even if you’ve already taken the first step and have worked up a reasonable budget and are sticking to it, there are ways you’ve probably never thought of to make that down payment account grow at a faster rate than you might have thought possible. Some involve finding sources of additional income you might have overlooked, while others are ways that you can reduce the outflow of cash. Here are a few examples.

Make extra money from your talents – If you’re one of those folks who enjoys making things both practical and impractical, you should be able to market those skills and/or the items they produce. If you’re handy with tools, you might consider making and selling the kind of things that every homeowner needs, such as shelves, decorative items, and the like. Whether you’re making and installing custom-sized shelves in someone’s pantry, closet, or garage, or selling cute little wood projects at local flea markets, the extra income can be significant. You might even offer your services to take care of home projects that the homeowners don’t have the time for, or simply don’t feel like doing. Taking care of other people’s yard work can bring in several hundred dollars a month in your spare time. You can also apply those talents to doing little projects that you might normally hire someone else to do. You don’t want to get into rewiring your house, but simpler projects such as hanging a ceiling fan or fixing a leaky faucet aren’t that challenging, and will save you quite a bit. If you’re skeptical, check with local contractors to see how much they would charge to do the jobs. And if you really want to see your down payment account grow, just deposit the amount that the pros would have charged for every project you complete. Just don’t overestimate your skills, and take advantage of free classes and instructional videos that the major home supply companies produce.

Start a coin jar – You know that handful of change you have at the end of the day? Instead of dumping it on the dresser and putting it back in your pocket or purse the next day, start tossing it into a jar and leaving it there. When the jar gets full, take it to your bank to have it counted and deposited into your down payment account. It won’t seem like much at first, but it will add up pretty quickly, and every bit helps.

Sell what you don’t need or get much benefit from – Take an objective look at the things you possess, keeping in mind that everything you own either serves you or is served by you. If the effort involved in maintaining, securing, and/or storing something outweighs the enjoyment or usefulness you get from it, selling it might be a good idea. You’ll get more money selling, even at a bargain price, to friends than you will get from pawn shops or in garage sales. Reliable auction sites, on the other hand, can be veritable gold mines for selling unwanted items. An additional benefit, aside from the extra deposit money you’ll get, is that there will be less stuff for you to move when you do buy your own house.

Making your down payment savings work for you

Once you’ve been contributing a few months to that down payment savings account, and you see the balance growing, you’ll likely get into the spirit and start looking for ways to make it grow faster. The interest on a savings account is pretty meager, after all, and might not even keep up with inflation. But since it will probably take you several years or even a decade to come up with a significant down payment, finding a way to increase the income you get from your savings can make a big difference in how long it takes to reach the goal you’ve set for yourself.

Keep in mind that any investment poses a risk. If someone offers you a guarantee, and you’re not buying a toaster, the only thing you’re likely to be guaranteed is that you’ll lose your investment. Look realistically at the risk involved, diversify your investment in several unrelated investment vehicles, and don’t invest more than you can afford to lose in any single investment. You’ve got time on your side, should a stock or other investment not pay off, but you still want to be careful, and most importantly, follow the advice of a certified investment professional.

If you are really determined to become a homeowner, you have to make it a priority, and every action you take with your money must be in support of that objective. Even if homeownership simply isn’t feasible for you right now, it very well may be at some point in the future – but only if you prepare and keep on track with your financial goals.

This entry was posted in Financial Planning, Mortgages. Bookmark the permalink. Read more articles by Scott Bilker. (Also see articles by all authors and articles in all categories.)

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