For young adults, renting an apartment is perfectly acceptable and in fact, is the norm for most millennials. But many of us dream of having a home we can call our own. That’s especially true for growing families, as children can make everyone feel that an apartment just doesn’t have enough space for them.
But to buy a home, you need to have sufficient income to meet your mortgage payments. What’s more, you have to have enough money in the bank to cover the down payment, which is often equal to 20% of the price of the home. With house prices basically going up year after year, saving up that much money can be challenging.
But that’s a challenge you can meet if you spend frugally and save money. Here are some ways that can make it less painful for you to set aside money for your future home:
1. Monitor Your Spending
Many people, especially young adults, have no real idea where their money goes as they live from paycheck to paycheck. They spend some money here, and then a bit more there, and suddenly there’s no money left. It’s hard to fathom how small purchases here and there can nibble at your bank account until it’s sorely depleted.
So track your spending. Every time you spend money, note what you bought and how much you shelled out. There are even some apps that can help with this. After checking your expenses each week, you may then find what various purchases you could have avoided so that you’re able to leave more money in your bank account.
2. Inspect Your Monthly Expenses
Some bills come by regularly once a month. You have to pay for electricity, heating, and water. There are Internet and cable TV bills to pay. Mobile phone bills may come once a month, along with your gym membership bill. Then there are credit card payments, along with insurance payments for health insurance and car insurance. You may still be paying for your car every month, and of course there’s the rent.
Check what you’ve been paying out, and see if there are ways you can reduce your payments. Perhaps you’ve been paying too much for electricity, so you may want to do research on how to conserve energy. Paying for cable TV may not make sense when you’re not really watching too much TV in the first place, especially if you can just legally download or stream TV episodes online.
Perhaps other insurance providers and mobile phone companies can offer better rates. Maybe you can exercise at home and save yourself the expense (and the trouble) of going to a gym. Just examine your monthly bills and see if there are better alternatives so you can pay less.
3. Find Cheaper Places to Rent
Even your monthly rent can be reduced if you move to a cheaper place. If you can find a new apartment that’s even just a few hundred dollars cheaper per month, your savings can add up over time.
4. Pay Off Your High Interest Credit Card Debts
Do you pay a lot of money to cover your credit card expenses? It’s unfortunate, but this is a common problem for so many people. It can help you to save money in the long run if you can pay off these debts as quickly as possible. This is especially crucial when you have high interest rates to cover, and in these cases paying only the minimum amount for each month can extend the payments and the total amount paid in interest.
If you have a bunch of credit card payments each month, focus on covering the balance of the credit card with the highest interest rate. Once you’ve cleared on the balance, close the account and then move on to cover the next higher interest rate credit card. You should only keep credit cards with the lowest interest rates, and even then you should still limit your spending on those cards. When you pay cash, you at least save yourself from paying interest.
5. Tighten Your Belt
In life, there are necessities, and then there luxuries. You may not be able to spend less on necessities, but you can opt to make more frugal purchases in the future.
You can start by laying off any big money purchases. Thinking of buying a new car? If you’re also thinking about buying a home in the future, a new car can wait. That’s especially true when your current car is still in good condition.
Then you can minimize your “fun” times. You can always have fun times with friends at home, instead of eating out and spending a lot more money for the evening. If you like to relax sharing a few drinks with buddies, do that at home too.
Finally, you may want to cut back on your brand label purchases. High priced fashion items may need to make a back seat and you can go with perfectly good yet cheaper alternatives. The key is to maximize the “value for money” proposition of your purchases. So stop dreaming about that Rolex for the meantime. If you absolutely need an automatic watch, go for a Seiko 5 instead which is very good and 50 times more affordable than a Rolex.
6. Set Aside Your Windfalls
Sometimes you get lucky receive a raise or a tax refund. Maybe you may even get cash gifts for Christmas or your birthday. Instead of splurging or having a more luxurious lifestyle, just live like you always have and then put aside that extra money for your bank account.
7. Consider Automation
Talk to your boss and find out if there are ways that you can automatically deduct money from your income directly into your savings account. If this option isn’t available, you may find apps that can transfer set amounts of funds from your checking account into your savings account.
8. Don’t Touch Your Savings
If you’re saving money for a home, then don’t touch that money for any reason whatsoever. To make it easier for you, put your savings account for your future home into a separate account. This gives you an emergency account for life’s unpleasant surprises, while your savings account for your home remains untouched.
And when you do purchase a home, to save even more money on your inevitable home repairs and maintenance needs, purchase an Armor Home Warranty.