Why You Should Buy a Home

April 11, 2011— -- People often ask me if, given the real estate meltdown, I stand by my advice to "Buy a House ASAP." I do. Buying a house is still the only investment you can make with money you have to spend anyway – your monthly housing payment. You can't buy stocks with your rent money, but you can buy a home!

YES, I still think buying a house is a great way to save money (by not throwing money away on rent), BUT with certain conditions:

1. You should plan to live in the house at least five years. Ten is better.

2. You should buy within your means, not stretch for a fancier house. I suggest buying a house for which the monthly mortgage payment will be the same as your monthly rent payment. That way you KNOW you can afford it.

3. You should save up an old-fashioned 20 percent down payment. More, if you can. That chunky down payment is what makes a low, rent-like monthly mortgage payment possible.

So this week I thought I'd give you some creative ideas for ways you can jump start your savings for a down payment. You will need techniques that save you big money because a 20 percent down payment is a sizable sum. Skipping lattes and brown bagging lunches isn't going to do it! That's small stuff. You need to SAVE BIG, and as you know, that is the title of my recent book AND it is my passion.

First, let's lay the groundwork. To get serious about saving for a down payment, I highly recommend setting up a separate house savings account that is for that and nothing else. A home is a unique investment and deserves its own pot of money. Now, here are some ways to pile up savings:

• Negotiate your rent. Assuming you are renting now while you save up for your first home, approach your landlord and threaten to leave unless you get a reduced rate. If you're a good tenant, they'll likely comply.

• Never buy a new car. Cars depreciate an average of 45 percent in the first 3 years. So buy a 3-year-old vehicle and you will save 45 percent. Buy a lesser known "dark horse" car like a Nissan Altima instead of a Honda Accord and you'll save another 15 percent or so.

• Shop around for car insurance. The same coverage at another company could be hundreds or thousands less. While you're at it, consider raising your deductible and canceling collision and comprehensive coverage if you have an older car that is not worth repairing if you wreck it.

• Become a creative couponer. Fiendishly match up store sales with manufacturer coupons and you can save as much as 80 percent on groceries. Just copy a coupon queen who already does it to learn all the tricks. Many blog about their great buys. Still too much work? Try the "not shopping" grocery savings method. If you currently shop once a week, cut out one out of every four trips to save 25 percent. (For this to work, you can't overspend when you return to the store the following week.

• Set a spousal spending limit. Resolve that you and your spouse will not spend more than X dollars without each other's permission. This does wonders to prevent pricey impulse buys.

• Cancel cable. The average American household pays more than $700 a year for it! Check out the website www.cancelcable.com for ideas to see all your favorite shows without cable.