The New York Times had a very interesting article about some people that cut costs and saved as much money as they could to afford a downpayment to own their own home in the area. Their goal of saving isn’t that much different than debt reduction. You still have to spend less than you earn to make it happen.
First up are Janey Lee and Pablo AgÃ¼ero. This family of three had their sights on a $445,000 two-bedroom condo in Upper Manhattan. With their income of over $100,000 (they are freelance web designers), they could afford the mortgage. However, they needed a down payment.
They kicked it into gear and started cutting expenses. Pablo cut the daily dose of chicken, soda pop and cigarettes. They both quit socializing with friends as much and didn’t buy new clothes, etc.
By figuring out where they were spending money, but didn’t have to, they were able to save up $90,000 in 5 years (comes out to $18,000/year). They will be moving into their new condo shortly.
Next up is Amy Wegenaar. As a single woman making around $85,000/year, Amy would find herself crying because she thought a single person could never make home ownership happen. With her rent currently at $1,550 she was losing some breathing room in her finances.
What she did was start saving $400/month. Anything extra such as raises and bonuses also went directly into the savings. Then she started cutting costs like crazy, and even started buying fabric and sewing her own dresses.
In October of 2006, she found a $220,000 one-bedroom co-op that only required a 10% deposit. She had $17,000 saved which was $6,500 shy. Not wanting to lose out, she pulled out a credit card check and paid the rest with that. (I can understand why she did that, but I hope she turned around and paid off that credit card as aggressively as she was saving money!)
Those are only two recaps. There are two more to be found in the New York Times article about Obi Onyejekwe and Carina Katigbak & Michael Lenton.
Even though these individuals were saving money instead of using their money for debt reduction, they all have one thing in common with the rest of us:
They set a goal and worked very hard to achieve it!
Hat tip to Chris and May for sending me this story!