Are you starting to think about homeownership but think that you can’t do it AND still be able to eat avocado toast?
The good news: homeownership isn’t out of reach; it just takes some strategic planning and a bit of saving. We have some tips that don’t involve a piggy bank that will help you to start saving for your home now.
Start with the basics
Whether you’re making a handwritten list complete with colorful tabs and highlighters or creating a complicated spreadsheet, the first thing you’ll need to figure out is how much money you’re going to need for your new home, and how you’re going to go about saving for it. Here are some things to consider:
- Do you have an emergency fund?
- What about a savings account?
- Have you checked your credit? And not just your credit but your partner’s credit too, because this will have a big impact on the kinds of loans that you’ll be able to get approved for.
- Do you have a 401k plan (obviously, you don’t want to pull money from there because you’ll get dinged by the IRS) but you’ll want a secondary savings especially if you’re keeping your personal savings for a down payment.
- Not everyone can afford to save for an emergency fund, but are you able to put money into your savings account? Crunch some numbers to see how much you can afford to contribute to your savings (every little bit helps).
- How much money do you need for a down payment? It depends on what sort of loan you qualify for, so do your research. Check the housing market in your desired area and beyond to what and where you can afford to buy. Not to turn this into a PSA, but “the more you know” in this case can potentially save you time, money and hassle.
- See if your city has a first-time homebuyer program. Something like this can be invaluable for people just starting out.
- Try and curb your consumer habits: skip the morning coffee run, online shopping, try meal prepping instead of eating out or ordering in, invite friends over for movie, game or wine nights instead of going out on the weekends, etc.
- Form a support group with friends and family where you can exchange goods and services rather than buying stuff.
- Downsize your residence by moving into a smaller home or apartment to save on rent. Consider moving further from the center of town to a suburban or quieter area which tend to have cheaper rents. If you live by yourself, and have an extra bedroom consider also finding a roommate to help lower your living expenses.
Make a list, and check it twice:
- It starts with figuring out your finances. What is a necessary expense, and what isn’t; where can you tighten your belt; what can and can’t you afford to live without – cable, manicures, brunch, etc. Don’t think of this as giving up everything that makes your life worth living, instead think of this as an opportunity to think outside the box and get creative with less pocket money. You may be surprised by how much fun you can have.
- Apps like Mint help you manage your spending habits. Mint gives you a big picture look at your finances so you can see how you’re spending money. Bill Guard is another great money management app that will help you to completely understand your spending habits, which will come in very handy when you try and figure out your spending pros & cons. Need a bit of extra help budgeting? You Need a Budget will keep you on track, and sticking to it could help you to get out of debt.
Art of the Deal:
- Just because you’re ready to cut the cord on certain expenses, it doesn’t mean that you necessarily must lose them. If you’re not a natural born negotiator, hit up friends and family that work in sales for some tips on how to bargain with everyone from your cell phone provider to your cable company to see if they’d be willing to cut you a deal rather than cut you loose. There are no guarantees here, but these bargaining skills will prepare you for future house hunts.
To manage or not to manage:
- Money managers seem scary to people that don’t have more than $10k in savings, however, anyone can go in for a consultation. We’d recommend reaching out to friends and family. Do they have a money manager that they know and use? You can rely on Yelp but a personal reference is best, not to mention, you may get a deal if they know you’re related to/friends with a client. Money managers make money when you make money, so even if you start small -with the right person that amount can grow, which is good for everyone. A consultation may not result in your being able to purchase your first home within the year, but it may give you the tools that you need and some great ideas for how to become a homeowner in the next five years.
- Want to start saving money but don’t have the time to think about it? Try apps like Digit which moves money into your savings so that you don’t have too. $1 here and $10 there adds up quicker than you may think, and you might be pleasantly surprised to discover how much you’re saving without even thinking about it. Thanks, App Store!
- A side job doesn’t necessarily mean slinging lattes on the weekend. You can not only save money for a home, make extra cash, and indulge in a talent or hobby that you enjoy but can afford to turn into something full-time. Ask yourself: Do you have time for a second job? Does your employer allow you to take on side gigs? Think Income + Revenue – Expenses to figure out what you need.
- Are you crafty? Start selling at an online marketplace. There’s always someone out there who is dying for a leatherwork cell phone case, or a crocheted coozy. Whether you moonlight as a writer, or dabble in photography there are plenty of sites where you can get paid (and, set your own schedule and rate) online. Upwork, Elance, Freelancer among others are great places to find work.
We hope these tips help you to get started. Before you embark on this homebuying odyssey be sure to speak to a professional who can ensure that you are armed with all of the best possible knowledge for you and your family. Saving money isn’t always easy, and neither is the prospect of having to give up certain “fun” expenses, however, it all is worth it when you finally have a place to call your own. Happy piggy-banking!