Finding money to buy a house can be difficult, especially when we struggle with high rents, student loan debt, or credit card payments. The good news is that saving for a home isn’t as complicated as we think. We only need dedication and some common sense advice, be it about how to begin to compare bridging loans to cutting out unneeded expenses. Below are some tips to kick start our saving journey.
Create a house fund
Some of us take years to build up enough cash for a down payment on a house. That’s why it’s essential to get our savings off to a good start. By opening an account that is specifically designated for the goal of buying a home-a “house fund”, we can “write off” contributions from our income taxes (as long as we keep the receipts to prove it).
What’s more, when we finally complete our new home’s purchase, we won’t have to use valuable cash for closing costs such as title fees or survey charges. The house fund is simply an account with a percentage per month going into it until we can purchase our first home. I can make this fund as formal or informal as I want, but having a plan will keep me from splurging the money on pizza and ice cream.
Cut out unnecessary expenses
Most things we spend money on are not essential. Knowing what is genuinely necessary for our lives ensures that we cut out all of the meaningless expenses. If we want to save money for a home, there is no easier way.
Make sure that everything has a purpose. Rent accounts for the biggest chunk of expenses we incur. Luckily, there are many ways to cut down on such costs. We can move in with a roommate or shift to a town where rental prices are lower. Many financial advisors suggest reducing overall expenses before paying extra toward our mortgage.
A budget is everything
Let’s face it. We can’t save money faster without a budget. When we’re saving money for a 20% deposit on our first property, it’s much easier to stockpile cash if we already have a budget.
Running a budget is often regarded as difficult and time-consuming, but it only takes ten minutes a week to enter all our spending and income details into an online program such as Mint or YNAB. Before long, we’ll be better placed to spot our spending habits.
Have a plan
One of the biggest hurdles in saving is getting started. When it comes to buying a home, we can feel overwhelmed by the number of things we need to save for, and may not know where to start.
Besides saving for a down payment, we’ll eventually need money for closing costs, moving expenses, and homeowners insurance, so it’s no surprise that saving for a home can feel like one long checklist. Starting early, making a plan, and finding the best way to make our money last as long as possible on each item, we can save for a home more efficiently
Use down payment assistance program
401 (k) or other savings plans are suitable for a down payment. As years roll by, home prices tend to be on the rise. As first buyers, down payment assistance programs, help us put less of our own money down to purchase a home.
Saving for a home can seem daunting. But with a solid plan in place, it is possible to save for a home without suffering financial burdens. First, we should crunch some numbers and figure out how much we need for a down payment. After that, come up with a realistic saving schedule to meet our goals. And remember to stick with it.