When you think of the home of your dreams, what comes to mind? A cozy beach hideaway, or an urban apartment with amazing views? Dream homes vary, but they share one common aspect – each will require a down payment to buy it. Let’s face it, most of us will need financial guidance when trying to save.
At one time, America was home to the Land of Savers. In 1975, Americans saved 15% of their income. In 2016, Americans saved a pathetic 4.7% of their income.
The act of saving is easy when your income exceeds your expenses. Conversely, when your expenses exceed your income, it becomes nearly impossible to save. This concept is easy to understand when considering the following: The U.S. Census Bureau revealed that 2013’s income statistics, (when adjusted for inflation) were 8.7% lower than 1999’s income statistics.
Remember, buying a home requires a gigantic hunk of savings upon purchase. Consider the following guides:
- Roughly estimate the amount you will need. You also need to consider the amount of time you have to save. It is noted that this is the perfect time to seek advice from a professional financial resource, especially if you feel overwhelmed.
- Find space in your budget. The amount will need to be saved is likely to be thousands of dollars each year. As such, you will need to cut back on expenses, find another income source, or both.
- Automate the process. Allocate a specific amount of to go directly into a savings account. The saving process tends to become invisible, which helps you fight tempting moments.
- Establish an emergency fund. Predictable expenses must also be accounted for.
- Save and save!
Risk is subjective which implies that each of us experience risk tolerance differently. For market investments, risk tolerance is quantifiable. However, it is more difficult to define risk tolerance for new-time savers. Therefore, heed the guidance offered by more seasoned financial professionals.
- Short-term (time specific) financing requires that you choose investment vehicles with very low associated risk, like a Certificate of Deposit or savings account.
- Long-term investments are more suited for stocks and other products that carry additional risk.
In some aspects, savings is a habit. If you begin to focus upon the ‘act of saving’, it will eventually become an integrated part of your daily world and set you on the path to homeownership. Contact us today to learn how we can help finance your dream home!