There’s no doubt…it’s hard work saving for a down payment. And, it may take longer than you want, especially in the current economy. But you must remember, like all difficult tasks, it’s possible when you have a plan. So if you are in the market for a new home, here are 3 tips on how to save money for a house.
3 Tips on How to Save for a House
1. Establish clear savings goals.
Whenever I’m facing a monumental task, I have to break it down into manageable steps. So if you want to save money for a house, you have to create stepping stones to get you to your final goal. The first is to determine how much you will need for a down payment. Most people want to have 20% for a down payment, but first-time buyers may only need 5-10% with private mortgage insurance.
The next step is to set monthly savings goals. Once you know how much you need, you can better gauge how long it will take to save. Having a dedicated savings account will make it easier by separating your funds. And if you put it in a high-interest savings or Money Market account, it could help you save even faster.
2. Fast-track your savings strategy.
Increase your income.
The easiest way to fast-track your savings strategy is to bring in more money. Furthermore, it’s the best option if you don’t have a lot of room in the budget to cutback.
There are a variety of ways you could generate more income. For instance, you could pick up extra hours with your current job or look to promote to a higher-paying position within your company. Nowadays, it seems like many people are getting a second job or side gig to reach their savings goals.
Eliminate excess spending.
Another strategy to put your skills to use and trim your budget. If you tighten your monthly spending and cut unnecessary expenses, you could save you more than you realize.
The following list are the things my husband and I looked at the last time we had to do some extreme budgeting. While we didn’t enact all of them, it gave us a better outlook on how much we could save each month.
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- Suspend gym membership: $50/month
- Cancel streaming services: up to $50/month
- Cut the cable: $100/month
- Prepare meals at home: up to $250/month
- Buy generic brands: up to $150/month
- Shop second-hand: depends on the item, but potentially hundreds of dollars
- Use one vehicle: $150/month for insurance and $150/month in fuel
- Down-size: hundreds each month
Making these decisions is tough. However, they could save you hundreds or even thousands of dollars every month.
Focus on a single savings goal.
It’s even more important to start building savings when you are on a timeline. Unfortunately, sacrifices have to be made. If budgeting isn’t helping you hit your goal, you may have to take more extreme actions. This could mean temporarily suspending contributions to your other savings goals like retirement accounts and vacation funds. Or, only making minimum debt repayments to help you build capital faster.
This advice may seem wrong and goes against all traditional financial advice. However, it’s only a temporary change until you have enough money for your down payment. As long as your bills are paid and you aren’t accruing any more debt, a focused goal will help you save more quickly. And once you reach it, you can allocate funds like you did before.
3. Talk to your financial advisor.
Most people already know the fundamentals of saving. And even if you struggle, there are hundreds of money saving strategies that can help.
But, each financial situation is different which is why it’s important to speak with your financial advisor. They know you and your habits, so they are in the best position to give advice. They can help you optimize your savings plan and gave specific ways to save money for a house that fits your budget and needs.
Read More
- 7 Tips for Saving Money for Your Big House Move
- Saving Big: Your Weekly Roadmap to a No Spend September
- 10 Ways to Save Money on Household Repairs
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