One Life Stand

The is the second post in my homebuying series.  Click here to read yesterday’s post if you haven’t already.  The next step in the homebuying process is GET YOUR MONEY RIGHT.

• Open an online savings account.  Why not a "regular" savings account, you ask.  An online account will give you a better interest rate (4% or more) vs the 1% or less you will probably get at your current bank.  In addition, you can’t easily access the money so less temptation to overspend and dip into your savings.  No ATM card and while you can transfer money out, it will take 1-3 business days to post to your checking account.  I like HSBC because they have the highest interest rate (5.05% last I checked) so that is where I keep the bulk of my money (my emergency fund or e-fund).  However, I have an ING account as well.  They only have a 4.4% rate right now but I like the fact that they allow you to have sub-accounts.  So I have two different accounts there - one is my new car fund and the other I use to save money for an investment I plan to make next year.  Also, if you deposit $250 or more, ING will give you a $25 opening bonus.  Nothing like free money.  I’ve posted a referral link for ING below if anyone wants one.  (Disclaimer - you’ll get $25 and I’ll get $10.)  I hear Citi’s online savings as well as Emigrant are good too but I don’t have either of those.

Click here for the ING referral link - it’s one time only use so leave a comment if it’s already been used and you’d like one.

• Pay yourself first - put everything but what you REASONABLY need to live on until your next paycheck (i.e. gas, groceries, etc.) into your savings account from the start. You can’t spend what you don’t have. If you only have $65 in checking until your next paycheck you will be forced to brown bag it rather than buying lunch everyday.  I leave myself $50 extra over what I believe I need until my next paycheck but that money isn’t for spending.  It’s in case something truly unexpected comes up.  That brings me to my next point…

• Plan for it - irregular expenses like car insurance are not emergencies and should not be unexpected.  If your car insurance is $600 every six months, then you need to be setting aside $100/month (preferably in your "regular" savings account that’s attached to your checking account) so that when the bill comes, you already have the money for it.  Apply the same technique for birthday/Christmas spending.  If you know you like to buy $600 worth of Christmas gifts every year, you should be setting aside $50/month all year so you don’t have to charge it.  Which brings me to my next point (don’t you love how it flows - LOL)…

• Stop charging stuff!  If you’re putting expenses on credit cards and you’re not paying the bill IN FULL every month, then YOU CAN’T AFFORD IT!  You’re spending money you haven’t even made yet.  You’re jeopardizing your future for some Red Lobster and PF Changs???  Come on, you’re better than that.  If you’re like most people, you probably don’t even realize how much money you spend on unimportant things (the important thing being getting a house).  So…

• Write down EVERY CENT you spend - this can be a simple notebook, Excel spreadsheet or software like MS Money or Quicken. You will be surprised to see how much money you nickle and dime away.  Once you do this, you’ll see how much money you have to save as well as how much money you COULD be saving every month if you cut back your spending on the unimportant things.  Next up….

• Create a budget but be sure to leave yourself some room for fun.  It’s kind of like being on a diet. If you force yourself to eat healthily ALL the time, one day you’ll get tired of depriving yourself and eat the whole bag of cookies in one sitting. However, if you allowed yourself three cookies per week, you’d be better off for it.

I think that’s enough to digest for now so let that sink in and post any questions in the comments section.  The next post will be WAYS TO SAVE MONEY.