'Money Train' Guides Listener to Home Ownership

In the latest installment of Money Train, finance guru Alvin Hall checks-in with Missouri listener Gloria Ellis, who's on the road to home ownership. Hall helps Ellis sort through a recent financial dilemma that and offers tips on how to save and spend more wisely.

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MICHEL MARTIN, host:

And now it's time to climb aboard the Money Train. If you recall, this summer we put out a call to listeners who wanted advice from our finance guru, Alvin Hall - our conductor, if you will. Alvin is working with listeners who wanted advice in three areas: reducing debt, buying a first home, or starting a small business.

So now it's time to check back in with one of those listeners. Let's welcome back Gloria Ellis. She's a finalist for the homeownership section of the Money Train. She works at a manufacturing plant in West Plains, Missouri. She'd like to own a home, but needs help in getting ready to make that purchase. Gloria joins us now from her office in West Plains, Missouri.

Hi, Gloria.

Ms. GLORIA ELLIS (Resident, West Plains, Missouri): Hi, Michel.

MARTIN: Hi, Alvin.

ALVIN HALL: Hello, Michel.

MARTIN: Gloria, give us the short version of what you're trying to do with your money. Why did you want Alvin's help?

Ms. ELLIS: Well, I wanted Alvin's help because I'm very interested in purchasing my first home, but I know it requires a lot of money, especially for a down payment, which is something I want to do. I don't want to have to have one of these loans with no down payment. So right now, my huge project is starting to save money, and I think Alvin would be a huge help with that.

MARTIN: Okay. So, Alvin, refresh us on what was your first bit of advice to Gloria? Keep track of expenses, I think it was.

HALL: Yes. Keep a 30-day diary in which she comes to understand how she is spending her money, because that's the first thing you must do. We all have little crazinesses, little ways we waste money. Gloria needs to learn what those are and then take control of them.

And in the process of keeping a diary, what have you learned, Gloria?

Ms. ELLIS: I learned that I do spend a lot of money unnecessarily. I learned that over the 30 days, that I spend a large portion of my money on normal monthly bills - your rent, your utilities, things that occur every 30 days. However, there were some one-time expenses that I hadn't expected. I also learned that I spent a huge portion of my money on eating out.

HALL: Really?

(Soundbite of laughter)

Ms. ELLIS: Yes. Yes.

HALL: How often do you eat out?

Ms. ELLIS: Oh, I think I eat out every day, at least for lunch.

HALL: Whoa!

Ms. ELLIS: Yeah.

HALL: So that means you're spending money every day.

Ms. ELLIS: Yes.

HALL: This is amazing to me, because one of the things that's pretty true, if you're spending like that every day, it's hard to save because it's almost like you spend as a reaction or something. You don't think about it as a part of your normal day-to-day life. And for somebody like Gloria, one of the things she can do is to have what I call no-spending days in her schedule. Rather than going out and buying lunch every day, she can save that same amount of money by simply saying today is a no-spending day. I'm not going to spend any money. All the money I normally spend, I can now put it into savings. And she can learn this by doing the 30-day diary.

Ms. ELLIS: Mm-hmm.

MARTIN: So what's the next step, Alvin? Now that Gloria has done the exercise, what should she do next?

HALL: The next step is to see where she can cut or save money in her budget and start allocating that money to her dream of getting a house.

MARTIN: How are you feeling, Gloria?

Ms. ELLIS: Again, I'm feeling excited. I think there are a lot of areas for me to have some potential savings, a lot of things that I could cut back or trim down, or at least, like Alvin said, budget for. And that'll give me a good template to have to start saving.

MARTIN: Well, give example. Like what else?

Ms. ELLIS: Well, for example, I have a very high-powered cell phone that works almost everywhere, but I also have a home phone that costs about $30 a month. I know it's not a lot, but overtime, I think that's an area where I could save. I also think that buying groceries once a month and just preparing my meals -especially lunch - ahead of time is also a place for me to potentially save. And if I do decide to eat out, plan for it, budget for it, know the limit that I'm going to be spending so I can keep track of things and I won't be caught off guard.

MARTIN: Alvin, aren't you proud?

HALL: I am, because Gloria has hit one of the major areas where most people waste a lot of money: food. Because food is such a comfort to people, it makes them feel good. They - people tend to go shopping every day. They tend to buy something every day for food. Planning a little bit better, deciding to make some meals or take some meals to the office can save you a huge amount of money. And you can still have the social interaction with other people, it just won't be around laying out money at a restaurant.

MARTIN: By the way, Alvin, how often do you think people should do this - keep track of expenses? Like once a year? Once every six months?

HALL: About once every two years, because most people can keep it in their minds. Gloria will remember here's something I'm doing that I'm doing without thinking about, I can stay in control of that for a while. But then all of us backslide into old habits. So if you do this about once every two years, you'll see that certain patterns reemerge, and you have to take control of them.

MARTIN: Okay. So keeping track of expenses, and then what? Setting up…

HALL: Then set up a realistic budget that involves a regular savings plan. The way she eats out with her friends almost every day at the office, she should also be putting money into a savings account as often.

MARTIN: Alvin Hall is the conductor of our Money Train. He joined us from his home office in New York. Gloria Ellis works in finance at a manufacturing plant. She joined us from her office in West Plains, Missouri.

Thank you both.

HALL: You're welcome.

Ms. ELLIS: Thank you.

MARTIN: You can post comments on our Web site at npr.org/tellmemore. And you can take a look at the four steps on the Money Train journey, take the challenge, and let us know how you're doing on our blog.

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