By Carol Shuttleworth - 28 Sep 16

Protect Your Home-Buying Budget

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You know you love house hunting and looking for the dream home is a fun pastime but to move from being an open house and model home butterfly requires that big initial financial outlay … the dreaded downpayment. In fact, sticker shock sometimes deters potential homeowners from even making the decision to buy.

To get from where you are to where you want to be, you need to create a budget that allows you to live today AND save for that down payment as well as closing costs. Once you have created a budget you then need to protect it from the temptation to dip in now and again.

The following are some navigational savings tips AND budget-busters:

Saving Strategies:

  • Establish a savings account.  Many people do not have one savings account let alone additional accounts. If you already have an account, open another savings account solely for your downpayment. Having an account established explicitly for your downpayment might make you think twice about raiding it for other expenses.
  • Use a different bank. There are two main choices for your savings account: use the same institution you use for your checking account OR use a different institution. If you are  having trouble saving up that downpayment, you want to make it harder to get at so consider opening up a credit union account or a savings account in a different bank.
  • Use direct deposit. If your employer’s payroll system allows, have the savings portion of your paycheck sent directly to your savings account. You will have less immediate access to it and may be less likely to spend.

Establish a budget:

Once you have a plan in place, establish a budget around your remaining income. You can find many online programs to help you create and keep track of your budget, some of which are free. The following is a short list to get you started:

Budget busters:

Living on a budget may seem restrictive. That idea keeps many people from reaching even simple financial goals. The challenge is that many of us see spending money as a reward but money is really a tool to help get you what you really want. If you REALLY want to own a home, watch out for these budget-busters that will keep you from reaching your goal:

  • Overpriced vacations. Whether it is the “dog days of summer” or wanting to escape the “winter blues”, the lure of travel is everywhere.  A new home or a vacation, big or small,l does not mean giving up vacations but rethink before paying too much and later having regrets.
  • Overpriced coffee (and other beverages).  If your coffee, tea, cola and energy drink habit adds up to more than $10 a day, you are probably “busting” your budget. If you saved just half of that ten dollars a day, you would have $1825 in your savings account by the end of the year. If two or more members of your household curb their caffeine habit, by year end you could have saved $3600 to $4500.
  • Dining out.  Dining out can break a budget quick. According to The Simple Dollar, the average American spends $232 per month eating out. If you just cut that in half, you will have an extra $116 a month or a whopping $1392 a year added to your savings.
  • Expensive apparel.  Many offices allow casual dress, but if you work in an environment that requires a more professional appearance, you still can stay within the budget. Consider purchasing the key pieces with which you can do double duty and then change out the accessories.

Add these savings plus extra monies received throughout the year, i.e. birthday, bonus, holidays, is a good start in growing your down payment account in just one year.

Compliments of Carol Shuttleworth   760.522.2267

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