If the headlines are to be believed, it’s been a tough few years for the first-time homebuyer. Reports circulate of homes listed in the morning and under contract by the evening. Interest rates are inching up, credit scores are tightening, and those pesky student loans mixed in with car loans and credit card debt are creating a debt-burdened buyer with little wiggle room to take on an additional mortgage.
Yet despite the unfriendly market, attendees of our Down Payment Assistance Workshop given by Easter Seals Greater Houston in The Woodlands, continue to realize their homeownership goals. As class settles in Saturday mornings, and we begin to discuss available down payment assistance programs, the conversation around the table always seem to return to two main concerns: where am I going to get the money for down payment, and how do I dare add a mortgage payment to my already hefty debt load.
I’m happy to say that the first question has a simple answer. There are a variety of down payment programs designed for the homebuyer lacking the out-of-pocket funds for a home purchase which may be combined with a number of great mortgage loan products.
To the second question, there is no simple answer. Creating a realistic budget which controls spending and reduces debt continues to be the subject of scrutiny from social scientists to behavioral economists, with agreement as to the need, but little consensus as to what constitutes a successful plan.
In our present-day digital world, the proliferation of budgeting and spending apps designed for your mobile device of choice has been overwhelming. Mint.com, the ‘Cadillac’ of apps, with a reported 20 million users to date, set the standard in app technology for linking all financial accounts, and with one stroke, allowed a user to monitor the flow of dollars in, dollars out.
Pocketsmith.com, referred to as a crystal ball for your bank accounts, generates what ifs scenarios through delightful images of your future if you stick to your budget – key word here being if.
YNAB.com, You Need a Budget app, preaches zero sum game approach, with every dollar assigned a ‘job’. As the app says, you are in effect, the ‘maestro’ in charge of sending every dollar to its pre-determined role; i.e., savings, vacation, credit card debt, etc., before buying that impulse item. The thinking here is that if every dollar coming in is already pledged to some expenditure, then you are less prone to splurge on that fun spur of the moment experience not included in your master plan.
As software designers have become more bold, recent apps have devised more and more ingenious ways to move dollars from the ‘to be spent’ column to savings. For example, Acorns.com focuses on your pennies by rounding up your expenses to the next dollar and investing in a pre-determined investment portfolio.
Digit.com app takes an even bolder approach to policing your disposable income by sifting out anywhere from $5 to $50 of your fun money and stashing it safely away in a savings account. Their website states that this dollar round-up is accomplished so surreptitiously, that “you should never notice its missing”. (Somehow, I think I would notice!)
Yet despite all these sophisticated apps, we still struggle to control our spending. For most of us, the recommended emergency fund of 3-6 months of living expenses remains a pipedream, and paycheck to paycheck living is far too common.
Maybe the problem is that budgeting apps have not gone far enough in making spending so unpleasant, that we are forced to become a nation of savers. If we look outside the app world of money management, you find some pretty extreme versions of self-help strategies conceived to reach your goals.
For those people who renew their New Year’s pledge every year to exercise on a regular basis, Equinox, a health club chain, has designed a chatbot that reaches out to members weekly to “encourage” them to stay on track with their exercise regime. (I think the word “encourage” here could be a euphemism for nag or hassle.)
For those people who struggle to wake up mornings, there is a very annoying alarm clock called Clocky on the market which doesn’t just beep you awake, but actually jumps off your bedside table and runs off to the far corners of your room. Needless to say, if you want to turn off Clocky’s beep, you have to get out of bed and chase it around the room. You would start your day on schedule, but probably not in a very good mood – always trade-offs! Do we really want or need to design budgeting apps with similarly irritating functions to help us reach our financial goals?
I suggest that there are other approaches to achieving a financial stability that opens the door to homeownership. Easter Seals Greater Houston offers a variety of classes focused on credit building and debt reduction through our HUD-certified Homebuyer Education Classes. As a great first step towards homeownership, our Down Payment Assistance Workshop covers a range of assistance programs, mortgage products, and income/debt ratios review in determining how much house you can afford. The combination of peer-support group classes and one-on-one counseling is invaluable in helping you create a realistic action plan that moves you forward to your goals.
The proper money management app can serve as a great budgeting tool for individuals working towards specific financial goals, but are only part of the equation. The Easter Seals housing staff is here to provide you with comprehensive counseling services to ensure that your financial plan will take you where you want to go.
Katy Thorstenberg, Housing Program Manager, Easter Seals Greater Houston