Buying a home is like a dream. It’s a great feeling to own a home and enjoy beautiful moments with your loved ones. However, buying a home requires significant planning and savings to be able to afford it. Lenders will readily finance the purchase of your house, but you have to make a down payment that turns out to be around 15-20% of the value of the property. Here are some tips to save money for buying your first home.
1. Set a goal and make efforts to reach it
If you are planning to buy a house worth $400,000, you must save nearly $80,000 to be able to pay down payment and other associated costs of buying. It appears to be a daunting task but if you set small monthly goals and adopt healthy financial habits, you can reach your goal in a few years. Make it a point to somehow save 10% of your monthly income. Give up on your habit of overspending and eating out frequently. Use credit card sparingly and pay with your debit card. Cut down on your expenditure on entertainment. You will surprise yourself by seeing the savings you are able to achieve with some fiscal discipline.
2. Open dedicated savings account for your home
One way to save enough money for down payment for your first home is to open a separate savings account. You will find that you are always depositing money into this account and never withdrawing from it. This is because you feel committed to saving sufficient money as quickly as possible. There are some individuals who start to deposit large amounts of money every month into this dedicated account as if they are already paying EMI’s to their lender.
Another thing to keep in mind is to get the best possible return on your deposits in this savings account. While keeping your money in your savings account is of zero risk, you can obtain a better appreciation for it if you rather invest in medium-risk mutual funds for moderate returns.
3. Make the best possible use of your time
The best way to save more is to earn more. Whether you are doing an office job or your own business, you must find time to do something else to earn extra money. You can find a part-time job to earn money. You can dedicate this income to your savings account that you have opened for your first home. If you have any talent, you can use it to earn money from online sources. There are many ways to earn money online. You can write blogs, give tuitions, or do small jobs as a professional to earn money for your new home.
4. Invest your savings in profitable schemes
If you already have some savings, you can invest it in the stock market or real estate for increased returns. This is a great way to save enough money for your down payment. There are many investment options available to you for this purpose. However, make sure to maintain a healthy balance of high and low-risk investments, and invest only after you have enough cash for emergency and living expenses.
5. Make a monthly budget and follow it
The best way of having control over your expenditure is to make a budget and stick to it. This way you know where your income is going and what you can do to reduce unnecessary costs. It helps to cut down those impulsive purchases no matter how shiny, tasty or even worthy it looks. The golden rule of a budget is that your income should always be greater than your expenses.