Introduction | Pop-Up Budget | Advice
	How do you save for a home?  Our experts tell Michael and Samantha—and anyone else who has trouble saving—what to do. They worry about money. They obsess about it. Sometimes they even fight about it. What Samantha and Michael aren't doing is saving enough of it.  I spoke with two financial advisors whom I have known for years: Lew Altfest of L.J. Altfest Co. in New York City, and Steven Enright of Enright Financial Advisors in Westwood, New Jersey.   1. SET SPECIFIC (AND REALISTIC) GOALS. Samantha knows all about her ideal home: It will be a three-bedroom spread in Westport, Connecticut, with about two acres of land. Sounds heavenly. Unfortunately, heaven doesn't come cheap. Samantha's dream house could easily cost $1 million—which is far more than our newlyweds can afford. A rough rule of thumb: The cost of a house should not exceed two and a half times the buyer's annual income. Which translates into about $325,000 for Sam and Mike. However, since both newlyweds can expect raises in the next few years, let's assume that in five years' time they will be looking for a $350,000 home. For that amount of money, they can find a modest, smallish 3-bedroom in Westport, possibly with a quarter-acre of land. Not Samantha's dream house, maybe, but a pretty nice place to start.  LEW AND STEVEN RECOMMEND: Sam and Mike should start saving now for the $35,000 (10%) down payment they will make on their home. They should factor in a number of other costs involved. These include moving expenses and the "closing costs" associated with buying a home, and will probably come to at least $10,000. To come up with $45,000 in five years, Sam and Mike will have to save roughly $9,000 a year toward their home. 2. SAVE 15% OF YOUR GROSS INCOME. This is considered a reasonable goal by most financial planners. This will take effort, as our couple is currently saving only about 5%. With their $130,000 gross income, they should be saving about $19,500 a year instead of the $7,000 they're saving now. That leaves a hole of $12,500 that they will have to plug with a new budget.  To help Mike and Sam get a handle on where their money goes to each month, I asked them to keep a spending diary. For one week they kept track of every penny they spent. The diaries show that Sam and Mike have a few expensive habits—cigarettes and coffee for Michael, taxis to work ($10 each way) for Samantha. They may decide that these habits make them happy and are worth keeping. But if they truly want to buy a home in five years, they will have to make some hard choices.  LEW AND STEVEN RECOMMEND: The planners tore through our couple's budget looking to curb expenses. Some of their favorite places to cut: vacations ($6,000 a year sounds steep); clothes ($6,000 a year is a lot of money); gifts for friends ($3,600 a year sounds high, and Sam and Mike admit they probably overspend); and dining out ($8,400 a year). By reducing these costs, they could save more than $8,000 a year.  Both planners also note that having a car in a city like New York is a real luxury, though they don't feel comfortable telling them to give it up. "It depends on how long they want to wait before they buy a house," says Lew. "They have to set priorities, but they have to enjoy life, too," adds Steven.  3. FIND A CHEAPER BANK AND LIMIT ATM TRIPS. Bank fees may not look like much—$2 here, $1.50 there—but they sure can add up. In fact, Samantha and Michael pay an astonishing $1,700 a year in bank fees alone, most of which is totally unnecessary. Michael and Samantha have three checking accounts: his, hers, and a joint account. For each account they are required to keep $6,000 on deposit to maintain free checking. Since they hardly ever meet that requirement in any of their accounts, they end up paying three maintenance fees every month. To avoid these fees, they need to find a bank that has lower minimum balance requirements. In addition to switching banks, Michael must curb his ATM habit. Instead of going twice a day, he needs to figure out what his expenses will be and withdraw the cash he needs once every two weeks. Samantha should do the same. This will also help them stick to a budget more easily.  KOBLINER RECOMMENDS: Samantha and Michael should switch to New York's Amalgamated Bank (212-255-6200), which features no-fee checking with no minimum balance requirement. Conveniently enough, Amalgamated has branches near both their offices; they should use the ATMs there to avoid the fees that other banks would charge.  Some Internet banks also have free checking accounts and no monthly fees, but they'll have to watch ATM charges. Check out www.compuBank.com and www.net@bank.com. WHAT MIKE AND SAM COULD SAVE TOTAL SAVINGS: $12,500 per year 4. GET OUT OF INDIVIDUAL STOCKS. Michael and Samantha got $28,000 in wedding gifts from generous friends. Based on advice from a relative, the couple invested this cash in six individual stocks. Tragically, they made these investments in early 2000, right before the market headed down. Current value of those stocks: $13,000!  KOBLINER RECOMMENDS: Mike and Sam should sell their money-losing individual stocks and put the money to better use elsewhere, as detailed below. Individual stocks may be too volatile for money you know you'll be needing soon—like the money Sam and Mike will need for their down payment.  5. PAY OFF YOUR HIGH-RATE DEBTS FIRST. Samantha and Michael have nearly $6,000 in credit card debt, all of which is being charged at least 19% interest. They also owe nearly $4,000 in other loans. This debt is dragging them down financially (and hurting their credit rating as well). The best investment they can make is to pay it all off right away. (For a more detailed explanation, see Get Out of Debt). KOBLINER RECOMMENDS: Sam and Mike should take $10,000 of the money they will make from selling their individual stocks, and use it to wipe out their credit card debt and other loans. To avoid getting in debt in the future, they should pay off their credit card balances every month.  6. MAX OUT YOUR 401(k)S AND IRAS. In May 2000, Michael signed up for his company 401(k). He currently puts away about $500 month ($6,000 a year) into his plan. But at his income level, his company would allow him to contribute an additional $3,000 a year. He should do so, especially because his company allows him to borrow against his 401(k) to buy a first home.  Michael and Samantha should also put $5,000 each into Roth IRAs, up from the $1,000 that Sam already contributes. Roth IRAs permit penalty-free withdrawals of up to $10,000 for first-time homebuyers. (Read more about IRAs in Get a Financial Life).  LEW AND STEVEN RECOMMEND: Both planners feel that Michael should weight his 401(k) heavily with stocks. But as the time approaches to buy a home, and if he thinks he'll need to dip into his 401(k) to help with the home purchase, he might want to shift a large chunk of his holdings into bonds. As for their IRAs, Lew thinks they should consider investing them in The Strong Small-Cap Value Fund (800-359-3379; www.strongfunds.com ) or the Vanguard Small-Cap Value Index Fund (800-871-3879; www.vanguard.com ). 7. GET INTO MUTUAL FUNDS. Sam and Mike should take the $3,000 left over from the sale of their individual stocks—as well as the new money derived from their budgeting—and invest in mutual funds.  STEVEN RECOMMENDS: The Value Line Asset Allocation Fund (800-223-0818; www.valueline.com), a mix of stocks, bonds, and money market securities. By including some bonds and some money instruments, this fund is less risky than a 100% stock fund.  LEW RECOMMENDS: Spreading their savings among three funds: The Royce Opportunity Fund (800-221-4268; www.roycefunds.com ), a small-cap value fund; T. Rowe Price Mid-Cap Growth (800-225-5132; www.troweprice.com), a middle-size stock growth fund; and Selected American Shares (800-243-1575; www.selectedfunds.com ), a value-oriented fund. (See the glossary for definitions of these terms.) As they get closer to making a home purchase—say, two years away—they should start shifting their money into less risky funds like the Warburg Pincus New York Intermediate Municipal Fund (800-927-2874, www.warburg.com) and the Longleaf Partners Fund (800-445-9469, www.longleafpartners.com).  HOW THEY COULD DIVVY UP THEIR NEW SAVINGS: TOTAL: $12,500  KOBLINER'S LAST WORD: By focusing on where they want to be in five years, Michael and Samantha have learned that they will need to save at least $9,000 more a year than they currently do. That's not easy. But with a combined income of more than $100,000, it can be done. And by paying off their credit card and other debts now, they are not only saving themselves a lot of money but also improving their credit ratings—which will help them get better terms on their mortgage when they shop around for one a few years from now.  Because they will be saving more each year, Sam and Mike will be better prepared in five years to have a child. If they do, of course, they will probably find themselves tightening their belts even further. But some saving will no doubt occur naturally: Samantha and Michael won't be able to eat out as much if they have a child, for example, or take as many vacations. For now, they're on the right track.
	Introduction | Pop-Up Budget | Advice