Many of our potential and current clients have asked us (far too many times to remember and count): “How can I save enough for a downpayment?” The first answer that always comes to mind is: “through savings discipline and financial planning.” As one of Houston’s premier private residential lenders, and native Houstonians, we know and have witnessed how hard it is to earn enough money to make a decent living in our city, let alone to save for a mortgage downpayment. Dedicating part of their earnings to the future and the unexpected is even more critical for most people. So, we thought that we could give some pointers as to how you could save enough for a downpayment.
Savings discipline and financial planning matter
Not too many months ago, we read an interesting article[1] written in October 2021 that cites a 2020 Northwestern Mutual study. As quoted in the Yahoo! Finance article, this study found that “71% of U.S. adults admit their financial planning needs improvement. However, only 29% of Americans work with a financial advisor.” Thus, chances are that you are one of those Americans not working with a financial advisor. You must have figured out by now where we are headed. You should seriously consider working with a financial advisor to strengthen your savings discipline.
The same Yahoo! Finance story mentions that research suggests that “people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement” or, we could add, could end up with more money to put towards their downpayment.
Even though popular advice such as “save on that $4 latte that you drink every morning and drink it just every other day” or “do as the Japanese and put 14% of your income in a savings account” is fine with us, we want to stress the importance on considering hiring the services of a licensed financial advisor. When you fall seriously ill, you most likely do not follow Dr. Google’s or your neighbor’s advice, but instead, you pay for a consultation with a good doctor. Consequently, it would help if you did not rely solely on your neighbor’s or brother-in-law’s financial advice but instead looked for a financial advisor to help guide you toward financial well-being.
Issues to consider when searching for a Financial Advisor
When looking into finding a financial advisor that suits your needs, including saving towards a downpayment, whereas you are on your own or are working with some type of online site representing financial advisors, take your time to find the one that is right for you. The last thing on your mind should be whether you chose the right advisor. Instead, you want to feel comfortable taking the advice of someone telling you how and where to put your hard-earned money to work for you.
One such site, SmartAsset.com has offered several recommendations on how to feel comfortable with your financial advisor, which we rephrase here for your convenience. [Full disclosure: we do not earn any commission or revenue from SmartAsset.com, and we have paraphrased the recommendations published in the Yahoo! Finance section.]
When choosing an advisor, take into consideration the following Smart Asset’s recommendations:
- Hire an Advisor who is a Fiduciary. A fiduciary is someone who takes prudent care of money or other assets for another person. The former is ethically bound to act in another person’s best interest. Hiring a Fiduciary will eliminate all conflicts of interest and make your Financial Advisor’s advice more trustworthy and unbiased.
- Do not hire the first financial advisor you meet. When shopping for the services of a financial advisor, you should take your time. You should try interviewing at least three to four candidates before picking the best match for your needs.
- Choose a Financial Advisor with the specialty that suits your needs. Just as in the case of a doctor you consult, some financial advisors specialize in retirement planning. In contrast, others are better for business owners or high-net-worth individuals, and some might be best for Millennials or Gen Z members starting their financial journey. If so, let them know from the start that you are saving towards a downpayment.
- Pick a Financial Advisor with an investment strategy that makes you feel comfortable. Recall that investment strategies can be conservative, moderate, or aggressive. Choose a style that matches your personality and financial interests.
- Ask for credentials, such as licenses, tests, and/or certifications. Maybe we could add: the more, the better.
- Understand how your candidates for Financial Advisor get paid for their services. Examples of payment schemes include “fee-only”/flat fees, percentage of assets under management, distribution commissions paid by mutual funds (a conflict of interest), and a mixture of the previous. This way, you will not feel that “the advisor has ripped you off” when it comes time to read and analyze your year-end statements.
Summary
If you are worried about your present and future financial well-being, including eventually purchasing a home or switching to a larger, more comfortable one, seek the advice of a Financial Advisor who will have your best interests at heart. All signs point to the importance of being advised by one if you are not a financial wizard.
If you have decided to purchase real estate in the Houston area, consult with AMI Lenders, as we are one of Houston’s fastest closers and premier private mortgage lenders and could become your financial ally. We fund most of our loans and can move as fast as the law allows. Borrowers in Houston will also have difficulty finding lower rates for hard money or private loans than those we offer. We want our customers to succeed and take advantage of the financial opportunities provided by real estate investments. Visit our website today and fill out an application for a loan backed by real estate.
[1] 7 Worst Mistakes People Make When Hiring a Financial Advisor. SmartAsset. October 5, 2021.
