Wealth

The Keys to Paradise

With a methodical approach to saving and a strategy for cutting costs, you can go from zero to second-home hero in just 5 years. Here's your 15-step action plan for making it happen.

By: Chris Taylor, Photographs by: David Yellen & Misty Keasler
[ Updated: Jul 14, 2008 - 4:58:31 PM ]

You love your house. But let's face it, the passion has waned.

Sure, the old ball-and-chain is fully functional: It's close to work, in a good school district, and big enough to contain all your stuff. It's your physical shelter and a great tax deduction. But after a tough grind at the office or during lunch, when your mind wanders, you might find yourself fantasizing about something sexier, more exotic. Admit it: You're mentally cheating on your house. Embrace it: Buying a second home is the only form of betrayal that your lovely lady will ever endorse.

So let's cut to the chase: Can you make this happen? Yes, you can. In fact, with a little discipline, you can get there in 5 years. By earning just 4.5 percent on your money, you'd be able to secure a 10 percent down payment on a $500,000 dream home by socking away just $25 a day.

That's the price of 7 gallons of gas and a cafe latte.

Why the 5-year target?

Economic reality, that's why. You've got a retirement to prepare for, and you probably have kids to educate. You also need to be ready for any unforeseen financial challenges that crop up. Just as rising interest rates are helping cool home-price appreciation and discourage real-estate speculators, rising rates will boost the return on your savings. A 5-year runway enables you to leverage compound interest to get to your down payment without disrupting your other financial goals. Five years is also plenty of time to explore your second-home alternatives, find ways to trim costs, and turn your real-estate fantasy into reality.

If Lenin could muscle the entire Soviet economy in 5-year time spans, you can marshal your resources and achieve your second-home dream. Here's how to make it happen.