In part 3 of this 4 part series, David Sidoni, the How to Buy a Home Guy, tackles steps 8-15 on preparing first time home buyers financially. Figuring out if, when, and how you can buy a home can be mad confusing. You need a degree in finance just to understand it all, and yet everyone seems to be able to do it. So, are they doing it correctly? The answer, almost all of them are waiting far too long to learn these steps. Forget your high school and college econ classes because, unfortunately, nobody is teaching this stuff. Step in and get ready to be ahead of the curve!
How To Financially Prepare To Buy Your First Home – Part III
A First Time Home Buyer Guide To Getting Financially Ready
This is episode number 21, How to Financially Prepare To Buy Your First Home, Part Three.
We’re going to be focusing and digging deep in the financial preparations to buy that first home. It’s my mission to help first-time buyers all over North America and in fact, all over the world. I’ve got a friend named Albert in London who found the podcast who emailed me and we’re talking about trying to figure out how to find him a unicorn agent in the UK. If you’re not familiar with what a unicorn agent is, you need to go back and read all these other free informational podcasts and they’ll tell you exactly how you benefit from finding yourself a unicorn realtor, real estate agent or an estate agent in the UK. If that doesn’t make any sense to you, you probably haven’t read and this is going to confuse you because you just jumped halfway in part three of a four-part episode all on one topic, financial preparation for buying your first home. Hopefully, you’ve read one and two which starts at episode nineteen and twenty.
Here comes the recap. Let’s go over the steps we’ve done and then we’ll go into the remaining steps we’ve got. Step one is save. Suck it up, #Adulting. If you’re not into it, too bad. It’s a good practice. We talked about the 70-10-10-10 and if that idea is killing you, take the last ten and turn it into your FOMO account. Don’t deny yourself living your best life, but if you do the other 10-10, you’ll be living a better life later on and you can automate your saving. How do you do that? Step two is use the apps. I told you last time to stop reading and use the app. Research the app and download them to your phone. They’re all on the website, DavidSidoni.com. Look for episode twenty and find that app.
Step three is start an emergency fund. Step four is credit. Learn all you can. Check on your credit and remember what I said. Start doing it now because the longer you’re fixing it, then the better your score is going to be. Step number five is improve the interest rates you have by just making a few phone calls. Step number six is money chunks. Disgusting, not so great terminology but it’s good for you. Use them wisely. Step seven is house hacks. Think about having roommates when you move into your new house or think about buying a duplex as your first property that you own.
Step number eight is change your job. You’ve got to earn more money. I don’t make the rules. If you flatlined on your income or you don’t think you’re going to make much more and that income that you’re at doesn’t qualify you for a home, that means you have to find a job with more income growth potential. I’ve got some ideas for side hustles and second jobs, but the reality is if you sit down and you do the math and your income, your salary doesn’t qualify you, then that means you are renting for life. Rents always go up and a mortgage stays the same. Unless you can figure out a way to keep that job and save up enough money to buy home cash someday, which is pretty tough, then you’ve got to start looking at making a change.
Change Your Job
The average raise is hovering around a measly 3%. If you want to earn more money, you need to think about changing your job. This is a scary stat. If you stay in a job longer than two years, you will make an average of 50% less over your lifetime than if you had job-hopped early in your career. One of my mentors who has no idea that I’m alive, Gary Vaynerchuk, he’s 43-years-old and I listened to his stuff all the time. He always talks to entrepreneurs in their twenties. He says, “I’m 43 and I bet you think I’m old.” If you know Gary, you know he’s from Jersey. The idea is that he’s in his 40s and he’s an entrepreneur. He’s out there talking to people, changing the world.
Work A Second Job
He says, “I’m 43,” and I’m telling you I’m 49 and I feel like I’m 22, 25 and a lot smarter. “I’m 49, do I sound like I’m done? I’m starting a revolution at 49 years old. I’ve lived two lifetimes so far. I’m just starting number three.” If your numbers aren’t working, you’ve got plenty of time to change your path. If you stay in your job with little future for two years, you make an average of 50% less over your lifetime if you don’t job hop. A lot of you phase two-ers and phase three-ers out there, you’re either on your way to or at an income that qualifies you. Now, you’ve got some math to do. You’ve got two options. You can live on 70% of your income and start doing the math to figure out how much time it’s going to take you to save up that minimum that we talked about in part one or you could start your side hustle and use some of the tips I’ve got that will help you to get your down payment. This leads me directly into step nine, which is work a second job.
This is good advice for any of your life goals, not just saving for a down payment. This could be saving for your dream vacation. Trying to pay off your debt, trying to take a trip to Coachella. Maybe you’re trying to retire early, maybe you’re trying to take a trip to wine country. Maybe you’re trying to take an Alaskan cruise. I don’t know what you’re trying to do, but this can be something that could help you. A second job doesn’t have to be forever. Some of you guys know me talk about my girl, Casey. She’s probably 22 years old. She graduated from college. Her passion is music. She took her degree from UMass. She came home here to SoCal and she got a job with Yamaha, but because she’s thinking about saving up and making sure that she had her future all set up, she took a second job at Disneyland on the weekends. She was working in the park improvement and cleanliness department. That’s what I call sanitation.
It’s actually a cool department at Disneyland with some sweet people and she finished the Yamaha gig. It was a six-month job and she’s going to go full-time as Mickey Mouse’s janitor. This second job offers her more opportunity and more happiness than she ever had dreamed of and that was in her passion in music. You never know what a side gig can do for you. You might find your happiness at another place of employment. It might offer you bigger chances of promotion and at the very least you’re going to be doubling your money when you’re working with the second job because you’ll be working instead of finding ways to be spending on all your days off.
Get A Side Hustle
Step ten is it doesn’t have to be a straight-up job. You can just get a side hustle. If you’ve got a regular hour or if you just want to figure out how to work a side hustle on a weekend, start doing a side hustle that gives you more flexibility. How much downtime do you need from all the rough and tumble rigor of your full-time job? Do you seriously need the whole weekend to recoup so you can wake up bright-eyed and bushy-tailed on Monday? If you don’t, then go ahead and get your side hustle. You don’t have to do that side hustle forever. You can just try them out. A lot of the side hustles are online. I know that sounds that’s the easy way to make money. Make money in your pajamas while you’re sitting on your computer.
A lot of times it’s faster and easier to make money in a regular world. Take a look at both options. If you want your side hustle to be something that you’re thinking about turning into a career, then by all means, dig deep into that whole eCommerce online entrepreneurial side gig. If you’re just looking for a side gig for extra money, think about the real-world options. Start driving for Lyft or Uber. You become a tasker through TaskRabbit. You can use your graphic artistry or your other skills, voiceover, all kinds of stuff on the site Fiverr. Check it out. It’s originated with anything for $5, but you can pretty much find everything on there. I know a lot of professionals that use Fiverr to get graphic arts, voiceover, sound effects, all kinds of interesting things. You could start a babysitting service, give music lessons, be a dog walker. A side hustle is just that. It’s a side gig. Embrace what it is. It’s smart planning for your future. Just an extra way for you to make some money in your spare time.
Sell Your Stuff
Step eleven is sell your stuff. If you’re reading this episode, that means that you’ve got first-world problems. You’re reading this on some smart device, which means you’ve got enough money to have a smartphone. There are a lot of people in this world that are trying to get clean water. You probably have too much stuff. Do you like that girl on Netflix? “Does it bring you joy? You don’t want your home to be cluttered. Find everything that brings you joy. If your t-shirts don’t bring you joy, throw them away.” You might have some stuff in there that somebody else wants to buy, so go for it. Go minimalistic. It’s free. eBay is a gold mine if you live in the first world. You used to collect stuff maybe or maybe you got some stuff that you don’t use anymore. Somebody out there is probably excited to either start collecting that or start using that stuff that you don’t use right now. If you want to get visionary about this, the less stuff that you have, that means the more space you’re going to have in your new place and the less money you have to pay the movers or in beer and pizza to your friends to move your stuff into your new house that you buy. How’s that for optimistic?
Step number twelve is transportation. This is a weird one for me because I spent my whole life growing up here in SoCal. You’ve got to have a car. Your freeways are your life and I know some of you are going, “What’s a freeway?” because you live in other parts of the country where you call it an interstate. We don’t call it 405, we call it The 405. I don’t know why. That’s just the way it is. Where do you live right now? Maybe you’ve got to have a car too. I get it. You can’t bail on your car totally, but do you have to drive everywhere? My boys from the How to Money Podcast, Joel and Matt, they actually started that podcast because they figured out that they liked biking. Their first episode is just all about biking. It’s called How to Money, but it sounds more like How to Bike. They figured out that with their biking, they could get to places and save some money and they decided it was a cool thing for them to do. Here’s something to do if you need to have your car to get everywhere. Keep a small notebook in your car. Document every single little trip with little planning, maybe a little less TV time, or getting up a little earlier. After a week, you can figure out which one of those trips you could have done with perhaps an alternate means of transportation. What if all those people who say, “I totally work out if I had the time.” How about this? Skip your favorite bingeable TV show. Go to bed 45 minutes earlier and get up 45 minutes earlier and then take a brisk walk to a coffee shop.
After you’ve already started your budgeting, you’re not walking into a Starbucks because probably a $5 mocha-frappe-latte-chino milkshake thing is not your budget. You’re walking into Dunkin Donuts for $1.25 coffee, but you take a walk to get that and we take a walk back instead of driving through in the morning. It’s not necessarily saving you major on your transportation, but you’re getting some walking and biking and starting to put that into your normal routine. If you are more strategic with planning all of your errands into one trip instead of two or three or four, that’s a great way for you to save on your transportation as well.
If you are someone who lives in an area with public transportation, seriously consider getting rid of a car if you have one. I know so many people that have cars in places just in case road trip. Everyone’s so excited, “You’ve got to have a car, road trip.” At one point in my life with two kids, we ended up becoming a one-car family and I Ubered just to try it. It totally worked out. If that didn’t work, I rented a car. When you figure out how much money you spend on registration, car insurance, parking, storing a vehicle versus renting for that one road trip, you’ll see it’s way cheaper. Think about it. Get rid of that car. Remember, a car is the greatest depreciating asset you can have and a house is an appreciating asset that you get to sleep in.
Lower Big Expenses
Number thirteen is lower those big expenses. We’re going to talk about working on those small expenses, but they don’t have nearly as much impact as cutting down on the big-ticket items. If you’re having trouble swallowing this concept, I don’t know why you’re reading this episode. It doesn’t make much sense. If you’re reading this, you’re probably thinking, “What are the big things I can cut down on?” Here’s the big one, move to a cheaper place while you save. It’s something to think about. It’s something that you might be able to do. Maybe go from the roommate situation to sleeping on the couch. Have a friend move into your room and you sleep on the couch as long as you and all your roommates are cool or move back home with the parents.
One of the times in my house, we had a big leak in the kitchen and I had to put plastic all over the kitchen and my kids were like, “What’s going on?” Was it rough on us? Yes. Was it tough? Yes, but you know what we said for two months? “Whatever, it’s an adventure.” By the end of it, we were like, “It’s an adventure.” Sure, our house looks like a biohazard with plastic all over it. We can’t get water downstairs or the kitchen. If you think of it as an adventure and you realize that there’s going to be something great at the end of it, whether it’s six months, eight months or a year that you are sleeping on the couch or living at home with your parents. When you get that plastic rip down and you get your fancy new kitchen but instead for you, it’s going to be a whole house. It’s a great feeling. We’ve all got different big expenses. What’s yours? Maybe not just your living expense. Do you have other ones? Think about it. Does it add up? Having that big expense in your life when you consider all the math of owning your own place and building your wealth versus being tracked to renting.
Lower Small Expenses
Number fourteen is an easy one going back with all the early steps, lower those small expenses. It’s not going to have the same impact as moving to a cheaper place or saving on a big expense, but every single dollar counts. Use those apps. You know my philosophy here. Live your life. Go ahead. Don’t deprive yourself of anything. Don’t do that, but the app is going to tell you when you’re overindulging. These things add up. If you’re serious about buying a home, then you’ll be able to give some of that stuff up. Go through your app, take a good look at it and see where you’re overspending. Track it and you’ll be able to figure it out.
Live On One Income
Step fifteen, live on one income. That sounds funny, but there are different people reading this maybe somewhere out there with you and somebody else are thinking about buying a house. Try living on one income. A lot of people do it. The most courageous people in our country, single parents, they all live on one income and make it work. Couples with a stay at home parent, they make it work too. Who else makes it work? Single people. Why can’t you do the same? I had another great Disney couple getting ready to buy their first house. I talked to Mark and Tiffany and they’re putting 50% away each saving their money. It’s the same concept. It’s easy for you. Just figure out the simple math. You can do 50/50 or you can just say, “You, all your money goes into savings.”
There’s a great story about a guy who took a big chunk of savings like that and it was pretty scary the way he did it. I’m going to get parts of the story wrong, but I remember he was a postal worker who was making $14,000 a year. This is the part that gets fuzzy. I can’t remember who it was, a financial friend, a mentor told him like, “What would happen if you had to take 40% out of your paycheck?” He was like, “I’m making $14,000 a year. How can I do that?” Whoever this friend or mentor was, he said to him, “What if the government said that you’re getting taxed 40% more?” The guy said, “I’d pay it or go to jail.” This advisor said, “Do that. Pay it. I’m the government.” Cut to the end of the story. This guy retired with $70 million. Think about it. Take a chance. Compound interest is the eighth wonder of the world. The two of you will figure out how to live on one income or you can put the rest into a savings account.
Here’s the recap of steps one through fifteen. Number one, save your money. Number two, app it up. Use those apps. Automate your savings. Number three, start yourself an emergency fund. Number four, check your credit. Number five, change your current interest rates on the revolving credit that you have right now. Number six, use those money chunks wisely. Number seven, think about a house hack when you’re getting ready to buy, roommates, duplexes and all kinds of fun things. We talked about step eight, which is change your job. That might be what you’ve got to do. Step number nine is to work a second job. Don’t work twice as hard, just pick up some extra shifts someplace else. Number ten, get your side hustle on. It could be combined with your second job. You’ll never know. Number eleven, look around, you might have money lying at your feet in your apartment in your garage, maybe in your parents’ garage. What can you sell?
Number twelve, reevaluate your transportation. Go green to make some green. Number thirteen, watch the big expenses. Is there one big expense that you can cut? Number fourteen, keep an eye on those small expenses. It takes just a week or two of tracking to see where you could save some money. Track it, you’d be surprised. Number fifteen, is a sugar daddy or sugar mama? Give it a shot. Live on one income. The next episode, part four. This is going to be the last five steps. I know I said nineteen, but I added one because we need to talk about PMI because so many of you out there asking what PMI is. If you don’t know what it is, then good, tune in next time and you’ll find out.
Remember, if this brought up more questions than answers, that’s a good thing. Questions are good. This is a big deal. I want you to face the evil high-rank monster head-on, armed with a barrage of weapons and knowledge. If you’ve got more questions, feel free to email me directly at DavidSidoni.com. Send your questions directly there. At that same website, you’re going to find a list of resources so you can dig deeper into your research. I’m going to tell you all the places where I got some of the information that I gave you. I narrowed it down cliff note style for you.
I’m also on Instagram with bonus videos and bonus content for you. There’s a Facebook page, How to Buy a Home, stick in with the How to Buy a Home guy theme. Go on that Facebook page. If you’re not on Facebook, check us out on YouTube, DavidSidoni.com or on Instagram. Don’t let these questions or the fear of homeownership stop you from defeating your insane high rents or stop you from being financially free. Either you’re already paying rent right now or you’re going to decide someday you want to move out from your parents’ house. That means you agree to pay this large monthly bill for the next 30 to 80 years.
Let’s go ahead and get you a plan so that you can make that bill start to work for you. I promise, I’m going to keep giving you the roadmap. Keep giving you the guidance so you can come out of this with your head held high. All you’ve got to do is help me spread the word and I can keep doing this. Go ahead and give me a review. Click the stars and more importantly, write a review and share this. It helps so much. The more people that reading, that means the more time I can dedicate to this. Share it out there to everybody. We want everyone to feel like the hero that you’re starting to feel like right now. Think about it. How are you feeling? A little more armed, little more prepared? Good. Share it to someone else who can feel like you. Then they can realize that just like you, they have the power to. You can do this.
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This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!