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  • Overcoming Obstacles: Tips For Saving For A Home Downpayment

    Monday, June 11, 2012   /   by Justin Hoffmann

    Overcoming Obstacles: Tips For Saving For A Home Downpayment

    For buyers, the downpayment is often the area where they have the most trouble. It can be the biggest obstacle when trying to move from renter status to homeownership. Saving for a home can feel like saving for something that's intangible because the gratification is not instantaneous.


    In a world where so many things are at our finger tips–for instance, with the click of a mouse, you can buy just about anything online and have it delivered nearly instantly–a house is not one of those deliverables.


    Yet, the American dream to own our own home remains alive. Overcoming the obstacle of saving for a downpayment has a lot to do with what you do daily.


    It's not only about how you're saving your money but also how you're spending it that ultimately will determine how easily you can accumulate a downpayment.


    Here are five tips to help you save for that downpayment starting right now. Like dieting, many people put off saving for another day. They think that one last spending spree on clothes, appliances, nicknacks, hobbies, daily coffee drinks, and...(fill in the blank)...won't matter. But those things do matter. In fact, today, matters.


    The first step is starting to save. As silly as that may sound, it really is important. You probably know many people who are renters and may forever be renters because they keep putting off saving money to pay for the downpayment. Some might be looking for a financial windfall or a lucky lottery ticket to come up with the downpayment funds. For most of us, those aren't viable options, so the picture can look bleak.


    Saving for a home's downpayment can seem nearly impossible, especially when you consider that salaries have shrunk and some people are working fewer hours and for less money. Plus, the ideal savings amount for a downpayment is 20 percent. Depending on where you buy, that can be a lot of cash. The task, however, doesn't have to be unreachable, nor does the process have to be incredibly painful.


    Saving for a downpayment is really about forming and maintaining good financial habits. The financially-sound habits you put in place today will, hopefully, be carried with you into the land of homeownership. Once, you become a homeowner, having a nest egg is vital for many reasons including a loss of job, home repairs, and medical issues, to name a few.


    Psychologists have proven that to effectively create a habit you have to change your actions and exercise will power. The problem is many people exercise their will power all day long for their job or their personal life, so their ability to be disciplined and exercise will power often diminishes as the day passes. That's why many people come home and have a few to several drinks after hours, even if they know they really should be at the gym.


    Step two is to write out how you exercise will power when it comes to saving for a downpayment. Write down in detail where you plan to cut back in your spending and how much you will save from each month's income. Having a plan written down will help you to stick to it. Then, if and when, you are feeling weak, refer to your detailed savings plan to garner some strength to say no to that extra night of dining out. Also, include the amount of money you are wanting to save for your downpayment. Keep this figure in your head and in sight as much as possible.


    Step three also involves a written task. This time write down your reasons for wanting to own a home. If you can't clearly see the value in homeownership, you won't make saving for a downpayment a priority. The reasons can be bullet points but the more you list them with detailed notes, the greater you will feel connection to your goal.


    Step four: copy and distribute. If you're really eager to commit these reasons to memory, do the copying the old fashion way–by hand. However, making print-outs works, too. Keep copies on your desk, on your bathroom mirror, on your refrigerator, and, most important, in your wallet with your money and credit cards. Make sure every time you're about to spend money, you can see your reasons for wanting to buy a home.


    Step five: read. Yes, read as much as you can about homeownership. Columns like this one and other articles will keep the idea of homeownership fresh in your mind. Saving tens of thousands of dollars will get easier if you understand the value of owning a home. If you clip articles or save links on your computer about the real estate industry, you will be inspired to reach your goal and become a homeowner, especially as you read about how people love having control of their own home to decorate as they please and live in comfort being their own “landlord”.


    I realize these aren't the typical money-saving tips like get your hair cut less frequently or stop going to the coffee shop every day. Those are important tips too, but really following through and accomplishing any goal requires will power, discipline, and solid reasons why the goal is worth achieving. When you don't own a home, sometimes it's hard to see why you should. That's when these steps will help you remember and accumulate your downpayment savings.


    By Phoebe Chongchua


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