We live in interesting times, where everything is handy at the touch of a button, and we can have things at our door in no time, even if they are on the other side of the world. Although living in a fast and efficient world has its perks, we have come to expect to have everything now, but despite what we are used to, we can only have some things the second we want them. Are there any smart ways to save money to buy your dream house?
Career goals are one example of something that requires time and patience, and so is buying our dream home. It can take years for you to buy your dream house, and the process is no easy feat. You need vision, planning, discipline, and a knack for saving to save enough for the down payment.
Knowing the price range of your dream home is the first step to understanding where you need to go. Research current real estate prices and see how much houses are going for in the areas you are interested in. From there, take an average price and use a loan calculator to determine how much you would owe monthly and the down payment you would need to manage the loan.
Once you have an idea of the sum you need, then you can work out the timeline it will take you to reach your down payment goal. At this point, saving money is the only way to achieve this goal. Although hard, saving to buy your dream home is not impossible.
There are clever ways you can save money, and the following are some of the best ways you can do so.
1. Establish a monthly budget and savings goal
In order to know how to save money for a house, you must calculate the sum you plan on saving to have enough for the mortgage. Knowing how much you will save each month is important because the sum will tell you when you will reach your down payment goal.
To determine how much you can save each month, you will need a monthly budget to determine how much money you need to live on. Current loans, food, and rent are all things that cost you money but do not stop there.
You must consider everything, from entertainment spending to recurrent appointments you may have and so on. The easiest way to stick to a budget is to download one of the many free apps available in app stores.
With a budget app, you can set limits on your spending to keep yourself accountable. Moreover, you can set up savings folders, too, to know how your savings are doing. For best results, log in everything you spend (including those tiny coffee cups you think don’t add up to much).
Every little change you spend or save will determine how much time you spend longing for your dream home. If you are going through this process with your partner, ensure they are on the same page too.
Agree to use the money app together and hold each other accountable monthly if you exceed the budget. One study shows that pooling your finances together can positively affect your relationship. Working as a team and sticking to your limits is the only way to reach your down payment goals quickly.
2. Set automatic savings transfers
For best results, you need to be consistent with your savings. One way you can do this is by automating your savings, so you always remember to set them apart but do not simply put your savings into another standard account. Consider saving your money in a high-yield savings account for a more significant return.
Speak to a bank representative or seek a certified financial planner to advise you on the best places to save money. A suitable medium to high-risk account can significantly increase your savings quickly.
Another hack you can consider to automate your savings is to enroll in your employer’s 401 (k) plan or open an IRA account. When you open these accounts, you save money for retirement and reduce your taxable income, paving the way for more savings to purchase your dream home.
Lastly, the best money savers out there will not stop at automated savings accounts but will turn to their current accounts too. Every month, one day before you receive your salary, see how much money you have left in your current account. If any are left, consider putting that many in your savings account for a little extra cash toward your dream home.
3. Lower your debt-to-income ratio
The debt-to-come ratio (DTI) is a measure banks use to determine how much debt you have compared to your income. A high DTI will affect your chances of getting a large mortgage loan for your dream home, so lowering it is essential.
Often, credit card balances are the main culprits of a high DTI, but you can change this by paying off the high-interest debt. If paying it off in one go is difficult, consider taking a loan with a low-interest rate to pay off the debt.
4. Consider finding a better-paying job
The most straightforward way to save more monthly is to earn more monthly. Look at your current job situation. Is this a good time to ask your boss for a raise? Do you see any prospects of a promotion soon that will lead to better career prospects and an increase in income?
Consider other income options if you need more time to ask for a raise, foresee a promotion later, or think it is best to keep your job the same.
One way to earn more money is to find a part-time job or offer your services as freelance work. You may be surprised to discover that many people make six figures a year doing freelance work. Although it can take a while to get there, making money as a freelancer is possible, especially if you find your niche and stand out amid the competition.
A side business can also help you earn extra income. Be sure not to spend a lot of money to build your side business and end up costing your savings.
Make informed decisions about the best ways to earn extra income to save money, but always prioritize your mental health. Decide whether saving more each month is worth it or waiting longer to purchase your dream home is for the sake of your mental health.
5. Use cashback apps and credit cards
High-interest credit card debt is not good if you hope to be eligible for a home loan. However, if you pay off the balance in time to avoid the high-interest charges, credit cards can help you save on everyday expenses like groceries and gas, together with cashback apps.
Take advantage of these apps and credit card offers to get the most out of your monthly budget. The list of the best cashback apps out there is extensive, and there is always one that will work for your country no matter where you live.
6. Consider downsizing temporarily
When you have a big dream, such as buying your ideal home, you must make sacrifices if you ever want to reach that destination. One significant way you can do so is to downsize your living situation. If you are renting, consider moving to a smaller and cheaper place to save the extra rent for the down payment.
This is a challenging decision and can bring much discomfort and chaos. However, it is a short-term solution if you know an end in sight with your dream home waiting. Another way to save on rent is to negotiate a lower rate with your landlord or switch to a month-by-month lease for more flexibility.
If you own a home, speak to your bank loan manager to see if you can refinance your mortgage to lower your monthly payments. Another way to do this is to rent a part of your house to travelers via apps like Airbnb. You can make a reasonable sum of money, especially if you live in a hot spot and can be a gracious host.
7. Say no to big purchases
Buying your dream is a grown-up decision that comes with adult-sized sacrifices. You must say no to big purchases like going on vacation or buying a new car to achieve this goal. Even purchases like clothes can add up in a year if you regularly invest in your wardrobe.
Stay focused on the ultimate goal, and know that vacations can wait until you settle into your dream house.
8. Use unexpected cash gifts wisely
Sometimes the money gods throw us a bone, and we end up with an unexpected sum. You could receive a bonus from work, inheritance, or the always-welcome tax refund. It is natural to want to spend that money fast, but the wisest thing you can do is use it as savings for your dream house.
9. Take advantage of employer benefits
Lastly, take advantage of employer benefits that can help you save money. Ask your employer or the human resources department if you work in a big company about benefits and let them guide you through your best options to save your money more wisely. Be open to their advice, and stay focused on the ultimate goal.
Although buying your dream home takes time and sacrifice, it is worth the hard work if you have a better living space to share with your loved ones. Dream goals must be worth the wait, and if you know that this is what you want, then you will have no qualms about doing all it takes to get to your destination.