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How to save for buying a home

The recent recession was supposed to make Americans less materialistic. But researchers who track consumer behavior say there’s no data to show spending habits have changed.

For over-spenders, impulse purchasing is still driven by the desire for immediate gratification, according to Dr. Ryan Howell, an associate professor of psychology at San Francisco State University.

But people in the habit of shopping as a “pick-me-up” can put at risk financial goals that are extremely important to long-term happiness, he says.

The good news for those prone to emotional spending is that research shows they can alter their behavior if they focus on a couple of simple steps. “Every time you’re about to make a purchase, ask yourself out loud why you’re buying that item. Then you’ll be much more aware of your emotional drivers,” Howell says.

Here are other pointers for those trying to save for a home:

Give up shopping for entertainment. Gerri Detweiler, a consumer advocate and personal finance author, says that even though research shows people derive more happiness from experiences – like visiting friends or going to a park – they continue to pursue shopping in the belief that it’s more rewarding.

“One way to put an end to random, unfocused shopping is to create a list of alternate activities you’d also enjoy,” Detweiler says.

Monitor your accounts regularly. Many people use debit cards rather than paying with cash or checks. But they fail to track their debits, which means they’re only vaguely aware of their account balance at any given time. This leaves them susceptible to the embarrassment of blocked purchases or overdraft fees.

To avoid such costly scenarios, Detweiler urges you to monitor your checking account activity. “The best idea is to do this every day. If not every day, do it at least weekly.”

Seek free help with budgeting. Most financial planners aren’t set up to do budget counseling for middle-income people on a tight budget. They’re oriented to helping those who’ve already accumulated considerable financial assets.

But, as Detweiler notes, there’s free help available for those struggling to limit spending, pay off debt and save for a down payment to buy a property.

Would-be homebuyers can locate free counseling services in their area through the website of the U.S. Department of Housing and Urban Development (www.hud.gov). Once on the site, search for “HUD approved housing counseling agencies.” Or call HUD’s toll-free counseling locator: 800-569-4287.

Reduce your expenditures for dining out. “Restaurant tabs are enormous budget busters for lots of folks,” Detweiler says.

Save automatically. In the past, many Americans used the “envelope system” to manage their spending. Each time they were paid, they’d tuck away dollars in specified envelopes for food, rent, utilities and clothing. They’d also regularly allocate money for savings.

This envelope system was effective because it helped ensure essentials were covered and savings accounts were fed. It increased the odds that money would be available for big-ticket items – such as a replacement car – without going into debt.

Nowadays, you can be equally effective in reaching your savings goals with automatic withdrawals from your paycheck to your savings account on a weekly or biweekly basis, Detweiler says.

“Given the high cost of living, advance planning is absolutely critical for families trying to buy a first home or make a move-up purchase,” she says.

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