Saving for Home Ownership

“My landlord just raised my rent $50," says the exasperated apartment-renter over lunch with her colleagues. "I'd love to buy a home, but I don't think I'll ever be able to afford one. That's just a privilege for rich people, I guess." While the three co-workers dig into their wallets to pay the bill, the exasperated renter notic that she spilled pesto on her Versace-dry-clean-only suit. Anticipating another bill at the dry cleaner's, she finishes off her wine and dessert, then heads back to the office in her shiny new sedan.

See anything ironic here?

Many renters bemoaning their fate may actually be able to afford a home– if they can start exercising some discipline with their finances, something this exasperated renter obviously hasn't learned. The very activity in which she's engaging here – a lunch out colleagues – certainly isn't something we have to deny ourselves. But is a four-star restaurant necessary? And more important, is it necessary every day? Some of us do just that – dining like royalty with appetizers, entrees, wine and dessert – and then complain when our finances are looking a bit low at the end of the month.

It's easy to remain on automatic pilot in our daily lives a fail to notice how much money we actually spend wastefully. This isn't going to be a lecture on the virtues of frugal living or selfdenial, but if home ownership is a goal about which you're serious, you've got to get serious about cutting corners where ever you can find them. And the above-described scenario is a perfect example.

The following suggestions can help you save money without denying yourself of fun for the sake of home ownership. Getting started, ask yourself how you pay for things. Cash? Credit cards? Checks? There's certainly merit in paying cash because you're immediately held accountable for your spending, and you don't face a bill latter. But cash can be sneaky. You withdraw it from your checking account, and the next thing you know, it's gone. For what did you use it? Can't remember? That's common problem, and one that you need to correct. It's fine to use cash, but keep a record of your spending. Too much trouble? Just keep all of your receipts in one place, and at the end of each month, look through the stack to refresh your memory about just how you spent your earnings over the past four weeks.

It practically goes without saying that you've got to keep those credit-card expenditures – and number of credit cards, for that matter – to a minimum. Choose one major credit-card, and leave it at that. If you choose to pay for everything with your card in order to receive frequent-flier miles, that's fine. Just keep track of your spending and realize that what doesn't hurt now will hur even more later when the bill arrives. Many check-writers don't bother to keep up with their checkbooks. Balancing that checkbook is a worthy goal, sure, but how many people are faithful to that practice? If nothing else, record every single expenditure you make. Be aware of your balance.

In some cities, restaurants are the main focus of social life. People are eating out more than ever, and restaurants are more than happy to accommodate them. But, it might surprise you to learn that if you spend $10 (an average figure) on lunch every weekday, that adds up to $2,400 each year. Staggering, isn't it? And $10 is lowballing it for many people; some of us spend $20 or more each lunch. And we're not even touching on the subject of happy hours and dinners. Just as many of us pick up dinner on the way home every single night. What about the three large cokes you enjoy every day? That addiction is draining your savings, as well. Before you wave off that $3 daily treat, sit down and add it up over the course of a year.

Entertainment, too, is a savings-drainer. The price of movie tickets has risen to an all-time-high about $9 or more in some cities. Cover charges, nifty electronic gadgets for your home, clothes you can't live without but that remain in your closet with the tags still attached, upgrade to your computer, a bigger TV set or stereo, a nicer car with more extras, the pricey gifts you feel obligated to buy your friends to express how much they mean to you... all of this is contributing to your money shortage.

So do you have to lock yourself in your apartment, subject yourself to your own cooking and whatever is playing on "Must See TV"? The answer is a definite no. For starters, cut the daily eat-out habit to twice or even once a week (celebrate each Friday with co-workers, and all of a sudden you'll be looking forward to that lunch out instead of heading to yet another restaurant). No four-star restaurants, at least not as long as home ownership is your objective. No drive-throughs, either – just something middle-of-road, budget-wise. Cut that coffee habit to once weekly (each Monday morning to get you jump-started, for example). Learn to brown bag-it, and yes, you do have time. Take your lunch outside, and it won't be long before you'll influence others at work to do the same. You'll be saving money and traffic-induced stress. After all, how much fun is it to go out and check your watch compulsively throughout the entire meal?

Stick to matinees, and when it comes to clothing expenditures, stay away from clothing stores unless there's a sale in progress. The easiest way to avoid temptation is to avoid walking in the door. If you're ever contemplating a big purchase, try this trick: Carry it around the store while you continue to browse. Give yourself a while to "cool off," so to speak. After a 20 minutes to half hour, that item may have lost its appeal. As far as electronics items, steer clear of them for the time being, and keep reminding yourself that you'd rather own a home than a stereo with a CD changer.

If you haven't opened a savings account, do it now. If you can arrange it, have a portion of each paycheck electronically deposited into your savings account (out of sight, out of mind). You should already use direct deposit if you have access to this feature. Cashing your paychecks is a bad idea if overspending is a problem for you.

Need incentive to keep saving? Read the real estate section of your newspaper. Tour open houses. Start determining what your price range is and how much you'll need for a down payment (it's usually about 10 percent of the asking price). While you're saving money, remember to save for your closing costs, which are usually a minimum of 3 percent. If you're having difficulty determining how much you need to save and what your price range is, consult a Realtor or a lending agency. They can help make your goal definable... and only you can make it attainable. It's true that home ownership will be exponentially more satisfying than a four-star meal or a CD changer. With that in mind, a little self-sacrifice suddenly doesn't seem that difficult anymore.

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