Buying a home can be a long and tedious process, but buying a home is only one half of the process. First, you must save.
If you’re saving for a house, here are a few different ways to get you started.
- Pay Off Your Debt
Before beginning the process of saving for a home, the very first step is making sure your debt is paid off! The amount of car loan, student loan, and credit card debt you have can easily limit the amount you are able to put toward a mortgage as well as limit you from more attractive mortgage rates. A good rule of thumb before saving for ANY large purchase is to first pay down your existing debt.
- Work on Your Credit Score
It’s time to start building your credit. Cash is definitely NOT king when you’re looking to buy a home. This is a time where you want to be using your credit cards and building up an amazing credit score — so long as you are paying your card off on time, every single month. Tip — your creditors are only reporting balances to the credit bureaus once a month, so pay twice a month to avoid looking like you have a high balance and credit utilization rate.
- Pay Yourself First
Instead of waiting until the end of the month to see what you have left after a month of spending and saving that small amount, pay yourself first. This simply means that before you begin spending, you first designate a certain amount to go into savings accounts. The very first bill that you pay every month should be to yourself. Even if you have only been investing in retirement accounts, you can withdraw up to $10,000 in earnings from either your after-tax Roth retirement account (or from your pre-tax traditional if you pay income tax) without any penalty fees!
- Automate, Automate, Automate!
One of the biggest keys in saving is automating the process as much as possible! Set up that 401k to automatically deduct at least 15% per paycheck. Create a recurring deposit into your money market every week. Allow money to move from your paycheck to your savings accounts without you ever having to see it and be tempted to spend it. Put your money on auto-pilot!
- Bring Lunch to Work
Did you know? if you’re spending $10 per day out on avocado toast, that’s $300 per month that you are just throwing away — or $3,600 per year. More than that, assuming an average 8% rate of return, that money could double in 10 years. Is the avocado toast worth it or is it time to consider meal planning? When meal planning, aka planning and cooking your meals ahead of time, you can save up to $9 per meal on average. Buy in bulk and on sale so you can more affordably prep the foods you eat most often.
- Save Safely
What’s your time frame? If you know you’re looking to purchase your home in the next few years, keep your money safe. That means avoiding riskier investment vehicles such as stocks, trusts, funds, etc and investing in money markets, savings accounts, and CDs instead. If you’re saving for a house, the worst-case scenario would not be missing out on returns, it would be losing some of the money you needed to buy your home.
- Take a Look at Your Current Housing
It might be time to take a closer look at your current housing situation. Considering that rent is the highest expense among the majority of Americans, lowering your rent is the easiest way to save the most money every month. Is your balcony and in-unit washer and dryer worth a few more years of saving up for that amazing, dream house? It might be but it’s worth looking into more cost-sensitive housing options when you know you’re in the market to buy a home as soon as possible.
-The Proguard Team
Getting ready to move into a new home? Check out our self storage locations page for more information on a Proguard location near you!