One of the most expensive and important purchases you’re likely to make in your lifetime is your first home. Let’s face it, home ownership is one of the central components of the American “dream.” Moreover, owning a home continues to be talked about as one of the safer investments a person can make.
To that end, when is the last time you attended a family gathering or function without hearing some random uncle or third cousin holding forth near the cooler about how renting is akin to flushing money down a toilet?
It’s not, but that’s another topic for another day.
The fact of the matter is purchasing a home has become a staple of most Americans’ cultural diets, but it’s an investment that should be made wisely. A person should carefully reconsider buying that first home just to “make some cash in a buyer’s market” or simply because “it’s time to be a grown up.” Instead, an individual looking to acquire a home should be motivated by an opportunity to settle down in the same place for a substantial period of time, or perhaps to establish roots in a specific setting.
In preparing for this investment, a potential buyer must realize that they will likely need a substantial loan; and with all the risks inherent in any major purchase, it’s best for a first home buyer to have established excellent credit, steady income, and an ample amount of cash that’s been saved for the occasion.
Most experts say that you will need a down payment of anywhere between 3.5% and 20% of the purchase price. With this financial target in mind, let’s look at some ways a person can wisely set aside money in preparation for acquiring their “dream.”
Do you know where your money goes every month? Some people are surprised to see how much they spend on purchases that, upon reflection, are performed blindly and may even be unnecessary.
Begin this process, first, by asking yourself what can be designated as inessential. For example, how often do you purchase coffee from a shop rather than making it at home? How often do you pay exorbitant prices to see a movie at the newest exclusive theater, or attend a sporting event live? How expensive, typically, is the check at your favorite restaurant?
Other “necessities” to inspect:
- Consider cutting the cable
- Consider second-hand stores for some of your clothing needs
- Consider the brands you prefer at the grocery store
Ultimately, compartmentalizing your expenses can reveal available funds to save that you didn’t even realize you had.
Alter Your Habits—Especially the Unhealthy Ones
One of the most antithetical aspects of life is our tendency to spend a lot of money on stuff that isn’t very good for us. Two of the biggest expenses in many people’s budgets are cigarettes and alcohol.
- A person who smokes on average a pack a day costs himself almost $200.00 per month.
- According to an article in the Huffington Post, even a person who only drinks on weekends, at two drinks per day, spends about $2,500 a year on spirits.
Boost Your Income
Sometimes you can gain ground in savings merely through self-advocacy—ask for a raise.
However, that’s not the only way to increase your earnings. Consider, too, a side-hustle. Many people have formed passions and talents not necessarily connected to their normal means of income. Why not get paid to produce something or to serve others with those skills?
Have the requisite time or energy on weekends? Plenty of retail stores post part-time jobs throughout the year, but especially during holiday seasons.
What about caring for people’s pets while they’re away? Or delivering for a major retailer or for a food delivery app on weekends?
A person willing to put some extra work into their life for a short amount of time, can augment their savings quickly.
You might be surprised at the ways you can save or earn additional money.
- What do you own that you could sell? Sometimes, people have collectibles or hardly used items of value that they’ve long since forgotten about.
- Rent out your space. Have an extra room somewhere? Have any storage space you’re not using?
- Set aside the pay raise. According to Investopedia, the average pay increase in 2019 was 3.1%. Assuming you received a similar raise, why not pretend it never happened? Take that amount and put it away in savings.
Buying your first home will require steady and committed financial discipline in order to set aside a sizable down payment. Using these strategies can reduce the amount of time you will need to wait and can boost that final total.
Looking to buy a home soon? Let’s talk! Contact Gregg to get started!