It was backbreaking work for a five-year-old — but it was totally worth it.
I spent six grueling hours cutting down brush in my backyard with my dad, clearing an area that would soon become a place for Mom to send us when my siblings and I were being too loud in the house. When we finished clearing the brush, he handed me a crisp five-dollar bill. It was so much money I tried giving it back to my dad, assuming that my family wouldn’t be able to eat for a few days because of his immense generosity toward me.
Of course, he made me keep the money and used it to teach me about the power of saving money. So I put that money in a bank and continued to save – until I had $20.
Then I blew it candy, comics, or some other pleasure that I’m sure felt worth it at the time.
I realized then – I was terrible at saving money!
Like my five-year-old self, most Americans have a hard time saving money. An increase in income usually results in an increase in spending. In fact, according to the U.S. Federal Reserve, 47% of Americans do not have enough savings to cover a $400 emergency.
Savings, however, are incredibly important, especially if you are looking to someday buy a house or get an investment property loan. RealtyTrac recently reported that the average American down payment was around 15% in 2015. With the median sales price for a house hovering around $250,000, house buyers may need to save $40,000 or more to buy a house. Even low down mortgages like an FHA loan can cost you 3.5% plus closing costs, requiring $10,000 or more.
So, how can people save up the massive down payments needed to purchase a property? Rather than getting just my ideas and opinions, I asked this question to a variety of financial writers and bloggers to share their top tips, which you’ll find below.
1. Prioritize It
“I think people need to get laser focused and remember their value system with every purchase. Every time they make a purchase (at Target), they need to realize that the foolish purchase is making their goals get pushed further and further away. They need to make their spending a reflection of their value system and put that down payment at the very top of their value list.”
Lauren Greutman | Author of the book The Recovering Spender, Financial Counselor, and Founder of LaurenGreutman.com
2. Automate It
“Create a separate savings account and name it ‘down payment.’ Automate savings deposits from your paycheck or checking account into the account each month. Start with a small amount and increase the amount over time once you get comfortable with the process. Banks require a down payment for a reason; they want to know that you are financially responsible enough to live within your means. Prove it!”
Phillip Taylor, CPA | PTMoney.com, Founder of FinCon
Read Full Article Here: How To Save For A Real Estate Down Payment: 20 Financial Experts Share Their Tips