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Strategy for saving for downpayment

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slasher
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Strategy for saving for downpayment  Reply with quote  

Anyone got any good ideas? My house downpayment money is also my business startup money in case a good opportunity comes by or if the market crashes again so I can invest when everyone is running.

I just applied for a second job and will be making more than double what I am making now.
Post Wed Mar 20, 2013 7:14 pm
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slasher
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quote:
Originally posted by wleisnar
Have you tried applying for a mortgage:?:

I want a hefty down payment before I do any of that and I am planning that a few years down the line.

I want to save now so I have to do less penny crunching in the future.
Post Thu Mar 21, 2013 12:32 am
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oldguy
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quote:
or if the market crashes again so I can invest when everyone is running.


If you ever find a way to do this, please share. Very Happy

My way of buying houses is a bit unconventional, I build up the money in our Taxable SP500 Index fund. And then I don't use it for a DP, I leave it in reserve. I leave it invested and borrow for the DP. So I am free from the shortterm fluctuations of the market, I just leave the money invested.

A small example. When we get a new car, I could sell $33k of the stock, use $3k to pay the cap gains on my profits and use the $30k to buy the car. Instead, I leave the $33k invested and borrow the $30k for 60 months, costs about $3K for interest. I sell the old car privately fo rabout $4k, and add that to the SP500. Then I expect that $37k to approx double in 6 years to $74k (about the same time I pay off the car).
Post Thu Mar 21, 2013 12:47 am
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coaster
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Re: Strategy for saving for downpayment  Reply with quote  

quote:
Originally posted by slasher
..... or if the market crashes again so I can invest when everyone is running.

This is very, VERY difficult to do ... to go against the crowd ... to buy when others think the world is going to end if they don't sell, because you're going to feel the same way. Your emotions are going to tell you you're throwing your money away and when you watch your stocks you just bought at what you thought was a fire-sale price continue going down, and down, and down, your emotions are going to tell you "GET OUT NOW BEFORE YOU LOSE IT ALL!!!!"

If you've never experienced this before, it's HIGHLY unlikely you'll be able to do it the next market crash. I've been through a major crash, several bear markets, and traded futures, and when the market crashed in '08 I knew the best thing to do was to BUY, BUY, BUY .... and I disciplined myself and threw all my spare cash into the market, but I gotta tell ya, even with my experience, doing it made me sick to my stomach (almost literally). But ... it was the right thing to do, and turned out well.

But if you've never done it before, well, I don't think you even want to plan on it. Just put your money to work right now. You're more likely to be in the market. And when it happens, all you have to do is just stay in and sit tight, and that's a whole lot easier than going against the crowd and steeling yourself to do what the whole world is telling you is absolutely the wrong thing to be doing, even when you know they're wrong.

Psychology is a VERY strong motivator when it comes to LOSS, because it's a survival thing, and runs to your very inner and most primitive core.

~Tim~
Post Thu Mar 21, 2013 5:27 am
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oldguy
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quote:
Psychology is a VERY strong motivator when it comes to LOSS, because it's a survival thing, and runs to your very inner and most primitive core.


Brokers did a 23-yr study, maybe 10 yrs ago. The clients that bought the Index and left it alone got about a 13%/yr return. The clients that sold when the Market went down and then bought back in a couple yrs later thru the 23 years got less than 3%/yr. Ie, they literally snatched defeat out of the jaws of victory, they could have got 13%/yr by doing nothing.

The market crashes, the market lows, the market highs, can only be seen in the rear view mirror. Your intuition is your worst enemy in the Market - in the 1960's & 70's I traded corn futures, index futures, derivatives, puts, calls, wrote covered calls, traded penny stocks, bought individual stocks - and I became wealthy after I QUIT that. Very Happy
Post Thu Mar 21, 2013 2:49 pm
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gilbertholdings
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i don't think there's any shortcut. getting the second job will probably help the most. anything else you do to leverage the money will probably cost interest making it that much harder to come out ahead.
Post Thu Mar 21, 2013 3:36 pm
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slasher
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quote:
Originally posted by oldguy
quote:
Psychology is a VERY strong motivator when it comes to LOSS, because it's a survival thing, and runs to your very inner and most primitive core.


Brokers did a 23-yr study, maybe 10 yrs ago. The clients that bought the Index and left it alone got about a 13%/yr return. The clients that sold when the Market went down and then bought back in a couple yrs later thru the 23 years got less than 3%/yr. Ie, they literally snatched defeat out of the jaws of victory, they could have got 13%/yr by doing nothing.

The market crashes, the market lows, the market highs, can only be seen in the rear view mirror. Your intuition is your worst enemy in the Market - in the 1960's & 70's I traded corn futures, index futures, derivatives, puts, calls, wrote covered calls, traded penny stocks, bought individual stocks - and I became wealthy after I QUIT that. Very Happy

Well in 08 I wanted to get into the market in September but unfortunately I didn't have the required capital since I didn't have a proper job. I got my father to invest though and he was able to come out very nice. Maybe because it wasn't my money I was more keen on him to invest it?

LOL I have 10k in my account right now waiting for the market correction so I can toss it into an index fund.
Post Fri Mar 22, 2013 12:59 am
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oldguy
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quote:
LOL I have 10k in my account right now waiting for the market correction so I can toss it into an index fund.


But how do you know that 14,400 ISN'T the market correction? And 30 years from now when the Dow is at 200,000, will you care if you got in at 14,400 or 14,000? Very Happy
Post Fri Mar 22, 2013 2:53 am
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coaster
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quote:
Originally posted by slasher
LOL I have 10k in my account right now waiting for the market correction so I can toss it into an index fund.

Well, just keep waiting. Don't do any research. Don't do any work. Don't use any method. Don't have any discipline. It's people with that kind of approach to investing, just waiting to toss their money in at just the right time, when everything lines up as they hope to see it, that wait and wait and wait, and finally get tired of waiting so they put all their money in just as the market tops, goosing it another few percent. That's fine. I was one of those people in 1987 and learned the hard way. As you will, too. I'll be happy to see your money goosing my returns; I'm fully invested right now.

Best wishes and good luck. The wishes you'll toss aside, but do keep the luck. You'll need it.

~Tim~
Post Fri Mar 22, 2013 5:09 am
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Destiny
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I think the best way of saving money for a down payment can be done by opening a special "down payment savings account" as the fund in the account will only be withdrawn for one purpose only i.e. to pay for your new home. Apart from it, we can save all "extra" income that is over and above regular salary (holiday bonuses, tax refunds, and cash birthday present) into savings account.
Post Fri Mar 22, 2013 7:26 am
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coaster
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quote:
Originally posted by Destiny
I think the best way of saving money for a down payment can be done by opening a special "down payment savings account"

I think that's a great idea, and in addition, set up an automatic deposit plan using money automatically deducted from wages or another account.

~Tim~
Post Fri Mar 22, 2013 3:21 pm
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slasher
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quote:
Originally posted by coaster
quote:
Originally posted by slasher
LOL I have 10k in my account right now waiting for the market correction so I can toss it into an index fund.

Well, just keep waiting. Don't do any research. Don't do any work. Don't use any method. Don't have any discipline. It's people with that kind of approach to investing, just waiting to toss their money in at just the right time, when everything lines up as they hope to see it, that wait and wait and wait, and finally get tired of waiting so they put all their money in just as the market tops, goosing it another few percent. That's fine. I was one of those people in 1987 and learned the hard way. As you will, too. I'll be happy to see your money goosing my returns; I'm fully invested right now.

Best wishes and good luck. The wishes you'll toss aside, but do keep the luck. You'll need it.

They are different views on investing strategies but are you telling me when we hit rock bottom in 08 that you didn't realize that we had hit a low point? As long as the market drops a significant amount I will toss the money in and forget about it. I follow Warren Buffet's strategy of investing when everyone is running and running when everyone is getting greedy.

And it isn't like I am just taking all my money and leaving it out of the market. I am just leaving a small portion of it out to invest when the market tanks. When I can get stocks for below their REAL value.

I wish in 08 I had the capital to go all in at the time.
Post Fri Mar 22, 2013 4:46 pm
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slasher
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quote:
Originally posted by coaster
quote:
Originally posted by Destiny
I think the best way of saving money for a down payment can be done by opening a special "down payment savings account"

I think that's a great idea, and in addition, set up an automatic deposit plan using money automatically deducted from wages or another account.

This is what I am doing right now...

Too bad they don't have a tax deferred home down payment savings account. Laughing
Post Fri Mar 22, 2013 4:47 pm
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