Saving takes discipline. Saving for a large purchase, such as your dream home, takes even more discipline. To give your savings a jolt, review your monthly budget and see where you can reduce some excess spending. Make sure you have taken care of any high interest rate debt payments that you can then use towards your new savings goal, and create an automatic savings plan via payroll deduction into a separate savings or checking account that can pay you a decent interest rate.
Consider picking up some freelance work or part time work, if you can do so. This can keep you busy from spending your current income and also help you accumulate more to save at a faster pace. Try and work backwards on your timeline and figure out how much per week or month you need to save to meet your future goal. Keeping track of your savings and having a set goal in mind will make you more mindful of accomplishing it.
Buying a home is a short-term goal. So, as you are saving for this, I recommend using an interest-bearing savings account or money market fund where you have the ability to access the funds or cash quickly and easily. Money market rates are currently very competitive due to current inflation rates. You could be earning up to 5% in interest while you continue to save.
If you have high interest rate debt, then there is already a warning sign that saving for a home might be difficult for you. Paying off unnecessary debt (high interest credit cards, personal loans, etc.) should be the first priority. The less small debts you have to pay on a recurring basis, the more flexibility you have to use that income towards your mortgage payment or saving for the down payment.
Don’t spread yourself too thin. Get your budget under control before you become a homeowner. There are many costs related to home ownership and maintaining your house and property. It isn’t just about being able to afford the mortgage and down payment.
Saving for a big goal like a home requires budgeting and discipline. As you increase your income by way of promotions, pay increases or bonuses, consider setting this extra income aside in savings versus improving your lifestyle.
For many, their dream home may seem out of reach. However, with proper budgeting, inventive savings plans, additional work, and strong discipline, your dream home may be more in reach than many realize.