You may be renting your current home and have an eye on purchasing in the near or distant future. The good news is that with some effort, you can grow your savings account for when it's time to buy! In this article, we prepared for you 10 steps that will help you start saving money.
1) Know your goal.
Knowing how much cash you’ll need and when is the best place to start. Typically, you should aim to save 5-20 percent of your planned home purchase price from qualifying for a traditional 30-year mortgage. This amount might seem overwhelming initially, but it'll feel much more manageable when you break it down into annual, monthly, and weekly goals.
Defining your timeframe goals will help you understand what money you need to save. Once you've figured it out, you may wish to re-evaluate your time goals to reflect a more relaxed saving schedule if the first iteration feels too aggressive.
2) Pay Down Credit Card Debt.
If you’re carrying any consumer credit card debt, try to reduce that first before focusing on saving. When you attack your high-interest credit debt, you're moving towards a higher credit score which will improve your chances of getting a mortgage-- debt is considerable factor lenders use to qualify you for a loan. Your higher credit score can even result in better mortgage interest rates!
Once your debt is paid off, you’ll not only have a lot more money available in your budget to set aside for a down payment, but you're ultimately decreasing the cost of paying off your debt in the long run.
3) Set up a dedicated savings account.
Having a savings account will help you keep track of your progress and make it harder to spend the money on other things.
4) Make accessing your savings inconvenient.
It’s easy to see something you want and find a way to rationalize dipping into your savings. Take the willpower out of the decision by making your savings difficult to access. Put the savings in an account that doesn’t have an ATM card linked to it, or use a bank that requires you to make withdrawals in person.
5) Use a budgeting app.
Many free budgeting apps rake through your bank accounts and online credit card statements to track your spending. Once you understand how much you’re spending, assess what could be cut back and set a maximum budget for each category.
6) Lower your living expense.
If you're looking for ways to save money, try reducing expenses by 10%. Put that 10% into your savings account.
7) Automate your savings.
Set up automatic transfers from your paycheck or checking account into your new savings account. This way, you'll never even see the money, and it will start to add up quickly.
8) Make more money.
If most of your income is already tied up in expenditures that can't be cut from your budget, consider taking on some side jobs. Look around your home for things you’re no longer using and arrange to sell them. You can also use one of your strengths, like writing or painting, to start a viable side hustle and get paid for your skills; all this extra money can go directly to your home savings goal.
9) Ask for a raise.
You might be surprised at how much money you can save by asking for a raise. The best time to ask for a raise is during your annual performance review – but it’s also not too early or late. Come prepared with specific data and results from the projects you've worked on and an outline of how busy/productive that was this past year (or quarter). Your manager can see why they can't afford to lose such valuable staff.
10) Stay positive.
Frame your down payment goal as an exciting thing to look forward to rather than a chore. This helps to avoid stress as you approach dealing with financing your new home; you'll also find that saving money will start to feel less like a fixation on money you don't have and more on the wonderful home you will have in the future! Don't forget to budget for a small treat now and then to reward yourself and keep things feeling upbeat. You may even find that you're so excited about saving that you use some of your flexible spending funds to save extra money for the month!
