3 Tips to Help You Save Money for a House
Saving for your first home—or the next one—can be a challenging time. First-time homebuyers are getting older all over the world (the United States included), and real estate prices are rising over and above the strain of global inflation on the consumer’s wallet. Many factors combine to make buying a home feel like a pipe dream, or at least a reality that remains far off in the distance as savings goals in relation to existing homes or new builds continue to increase out of necessity.
But creating the conditions that will ultimately see you moving into your own home can be completed with much less heartache and hassle than you might think. There are some tried and true pieces of conventional wisdom, like utilizing a savings goal calculator to understand your savings goal and the timeframe that may be required to reach it. However, a full-bodied approach to saving has become a necessity for those looking to make this expensive purchase a reality as quickly as possible.
The truth is, home buyers need to save in a variety of different ways, from their expenses at the family dentist in Morristown, NJ (switching to a cheaper option or boosting insurance coverage often works fantastically here) to purchase the everyday items that a family needs like meals, soap, or Wi-Fi coverage.
In addition to the down payment required of your home buying calculator, homeowners have to contend with repairs, such as EPDM single ply roofing replacement, plumbing issues, and even structural updates after moving into a new home. Managing a budget means prioritizing spending categories and identifying major outgoing expenses in order to plan for any eventuality.
Your financial goals are unique to your own circumstances but in many ways your savings goals and the most effective means of achieving them fit within a common framework of solutions. Real estate pros, like those at Venterra Realty, all know that home buying is a long project. Preparing to purchase your next home may take years of saving and research. However, there are a number of ways that you can stack the deck in your favor in order to speed this process along. Read on for a rundown of simple yet powerful tools for saving as much money as you need to meet your financial goals in rapid time.
1. Think about your expenses as a pie chart.
The first and most important change you must make in order to begin saving for a home is to think about your finances in terms of percentages rather than net numbers. Strictly speaking, it doesn’t really matter how much cash you take in if you can’t rein in the spending and other outgoing expenses that eat away at your ability to save for that home you’ve got your eyes set on. Thinking in terms of percentages will help you to navigate the savings strategy that’s best suited to achieving this important financial goal.
The monthly expenses that must continue to roll out of your paycheck are currently under control for most renters and established homeowners. Groceries, insurance, rent, clubs, and after-school activities for the kids, dentistry, and other healthcare bills are all accounted for in the average monthly budget. Still, all too often, families think about these figures as a running total. But thinking about your monthly savings as a sum instead of a percentage is the easiest way to fall behind the eight balls and then remain there.
This shift will revolutionize the way you think about spending money and it’s easy to implement. Start by totaling your spending in each of your family’s essential purchasing categories for the last three to six months. Then divide that figure by the total cash flow that your family enjoyed per month. This representation can immediately shed light on the frivolous spending habits that are eating away at your financial future and current cash flow health.
Comparing your expenses as a percentage on a monthly basis can help you identify wasteful outgoing purchases. For instance, if you spent 15 percent of your total on groceries in March, and then 7 percent in April, a significant reduction can be found in this spending category.
Finally, once you’ve identified areas in which you can trim the fat, it’s important to dedicate a healthy chunk to savings (some sources suggest 20 percent of your total net income), and then add the additional spending cuts to that fund as well. This way you can substantially raise your total dollar amount saved without cutting out necessities or reducing much of the activities and items that you purchase purely for enjoyment.
2. Reduce your grocery expenditures.
Groceries are a significant factor in the cash flow health of a typical family household. The average household spends about 11 percent on food purchases—both in grocery stores and at restaurants. Grocery spending is one of the easiest reductions that a family can make because the typical household splits this spending roughly in half.
Cutting your restaurant tab down by even one meal per month can shave off a few percentage points, and shopping with a plan of action each time you enter the supermarket can help you maintain or even reduce the operating budget in your own kitchen as well. The truth is, many families run significantly over this standardized metric of 11 percent because restaurants and grocery stores play psychological tricks on their customers to entice them to overspend during each interaction.
Supermarkets are particularly devious when it comes to tricking customers into parting with their hard-earned cash. From cold stores and long aisles to strategically separated high-frequency items, grocery stores work hard to get your mind wandering from the shopping list during each visit. Reducing the overages in the supermarket will help you funnel additional cash into your savings account in order to grow toward your new home faster.
3. Eliminate throwaway cash from your utility bills.
Finally, eliminating unnecessary overages on telephone, internet, insurance, and utility bills can save you a significant amount of money, potentially hundreds of dollars per month if you target each of your necessary bills.
Calling up each of your service providers and discussing a switch to competitors’ services is a surefire way to net long-term price reductions that can go straight into your savings account. Perhaps the most important one is the electricity provider switch. As a consumer, you can direct your power company to provide your home with electricity or gas at the cheapest rate on the market by simply switching providers. This can cut your bill in half and save a huge margin over the course of a year. You can’t afford to not switch.
Saving for a home takes patience and a dedication to implementing systemic changes that will help create and manage a savings goal. Take the first steps today.