Big dreams start with small steps: 5 tips when saving for a home
You may have multiple savings goals and as your priorities change, it is good to know how best to save for the things that matter most, without sacrificing your own financial future. Here are five tips to help you save for your new home.
Build a budget
Imagine living in your dream home. Getting there takes time, and is possible. The first step is to determine how much home you can afford and identify the amount you wish to save for your down payment, the average follows the 20% rule. Then, you will want to establish a home budget and adjust your spending to save as much as you can so you can move in the direction of your dreams.
Simplify and separate your savings
Although you may have a savings account already, consider a separate savings account to keep track of the money you are putting away for a down payment. To make it easier, set up automatic transfers of a specific amount every pay period. This will simplify your savings and give you an accurate view to stay on track for all of your savings goals.
Prioritize your paycheck
When you prioritize saving for a home as being as important as your other immediate expenses, you are essentially paying yourself first. The notion of paying yourself first follows that you save first, not last. An example would be prioritizing a percentage of your paycheck by setting up an automatic deduction of $X amount from your wages into your down payment account. Then make sure to pay all of your non-negotiable bills and expenses. When you prioritize your paycheck for what matters most - in addition to fixed expenses - you are more likely to achieve your financial goals sooner.
Best places to save your money
While saving to buy a home, maximize your savings goal by considering a high-yield savings account. While this type of account will not earn as much as an investment, it is also not as risky. Conversely, it can earn more than a bank savings account. Some of the highest yielding accounts can offer up to 1.35 percent interest. You can also consider a timed account such as a certificate of deposit (CDs). If you choose longer-term CDs, you could earn higher interest as well. There are many options, so do your homework to make the best decision for you.
Set a realistic timeframe
All good things take time and that includes wanting to achieve all of your savings goals. Depending on where you are in life will likely determine your timeline. The amount you prioritize first, will also determine the day you can start shopping for your dream home. Set a realistic timeframe so you can balance living for today while preparing for tomorrow.
Remember, building savings takes time. As you look for more ways to save for a home be sure to budget for all of your other competing savings goals. Save early and save often, so you can provide for your loved ones, and live the life you’ve envisioned.
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