Money-Saving Tips to Get Your Dream Home

Talking finance is hot these days. The economy is booming and people have money to spend. But are they saving?

If you want to buy a home, saving is the key to getting there. A down payment is typically 10% of the value of the home. With today's housing prices, that is not a small number. But how can you save that kind of money?

Here are some pain-free ways to save your down payment and smarten up your financial health. Remember that once you buy the home, you will still need to maintain it. You may even want to remodel it. And you will absolutely want to have spending money for life's little adventures. Smart financial tips can get you into your dream house, and help raise your standard of living.

Use these strategies to get the most out of this financial boom:

1. Find ways to get the best return for your hard-earned dollars. If you want to buy within the next one to three years, stick with short-term financial investments. Stocks and stock-based mutual funds won't make sense. Look at the rate of return and the risk. You will want high return with relatively low risk if you need the money in the short term.

2. Look at high-yield Certificates of Deposit (CD). They have a short turnaround and often offer a high rate of interest for your money. Some are even offering six percent. That is far more than the typical savings account or money market account.

But finding where to put your dollars is only part of it, and the hardest part. The easiest part is finding out where your money is going right now. Most of us don't spend wisely. If we did, we would have the money we needed to take advantage of this good economy. So, stop buying $400 briefcases and start buying into your future.

1. Keep track of what you spend. Record at least one month's worth of expenses and see where all those dollars are going. You may be alarmed to see how much you are spending for those costly lattes and bagels every morning. It is often the small purchases that are the ones that add up to trouble in the end.

2. Take your spending record and divide your purchases into groups for easy management. Then figure out how much you can and will spend on each area. This will help you budget what you have so you can save more.

3. Now take that amount you are going to save each month and decide where to put it. You may want to divide it between short-term investments and long-term ones.

4. Save as much as you can. Now this doesn't mean don't eat. But even a few dollars a week can add up to a lot. When making your budget, decide if you really need all those new books or clothes. Do you really need to eat out every day with the boys? One lunch at your desk could save you $10. Saving small amounts can add up. This is particularly true if you are looking for long-term accrual. Even ten dollars a week could add up to more than $45,000 in 25 years if invested in an IRA.

5. Consider your age. If you are relatively young, you can afford to go high-risk with some of your money. Pull it out of the traditional savings accounts and money markets and plunge into stocks or mutual funds. You will see a higher rate of return in the long run than the conservative approach will offer.

6. Get professional help. There are wonderful financial advisors out there who will manage your money for a small percentage of the yield. This means you pay them out of their success. If they don't earn money for you, they don't make money. Many financial advisors are also great motivators. If you agree to put 15% of your income into a retirement account, there are some advisors out there who will hound you each month for the check. It helps those of us who tend to spend what's there.

7. Take advantage of your company benefits. As many as 82% of companies with 401(k) benefits offer some kind of matching percentage, often as much as 50 cents on the dollar. This is free money. Take advantage of it. Where else are your going to get a 50% return on your money?

8. Be brave. Take the plunge into the higher risk investments. The statistics show that the stock market won't bottom out the day you decide to invest. In fact, most reports show that people who invested in 1979 when the market hit its highest peak made twice as much as those who invested in U.S. Treasury Bills, a very conservative investment. It pays to be brave.

9. If you are planning on staying in your home for more than five years, take advantage of the refinancing boom. Even saving one percent on your mortgage loan could reduce your payment a significant amount. You could use that savings to invest.

10. Diversifying. Don't just choose one way to save. Sure it is great to invest in a mutual fund, but don't stop there. Be sure to spread your money around. Every financial expert will tell you that diversifying your accounts will give you the best return overall. Try opening an IRA and mutual fund as well as buying some stocks. This also helps protect you in case one of your investments does bottom out unexpectedly.

Source: Based on information from Redbook Magazine.