It’s something you probably dreamt about when you were still a kid and it’s the reason many of us are willing to endure stressful jobs: owning your dream home.
But how possible is it to own your own space—big or small—these days?
Firstly, house prices are astronomical even when mortgage rates are low. Also, you may not find the ideal abode in the neighborhood where you want to raise a family.
And then there’s the challenge of financing it:
- It’s hard for some consumers to save the necessary cash for the first down payment.
- Your monthly budget must cover the mortgage payments.
- There are closing costs that increase the expenses.
- Your new home may need renovations to make it liveable.
- You need money for the move itself.
The good news: it’s not impossible to one day get the keys to your ‘castle’.
The hard truth: it requires a bit of hard work and good planning to save enough to make it possible.
Below you’ll find practical guidelines that have helped many regular consumers become financially empowered to own their own homes.
Start today and ‘home owner’ may be a label you’ll have sooner rather than later.
Allocate Your Budget
You won’t get your home simply because you earn a bigger salary in future. If you don’t start planning to save for that down payment, your dream will stay a dream.
Planning to purchase a house in the next few years requires budgeting. Even if you already have a budget, rethink how much you’re allocating to your future plans. If you don’t make a commitment to save enough, your dreams will stay out of reach.
An effective budgeting tool is to follow the 50/30/20 principle:
- 50% of your salary goes to ‘needs’.
- 30% will be allocated to ‘wants’
- 20% is put away as savings
The savings could be for your home, but if you also want to save money as an investment, you can adjust the percentages: allocate 15% for your future home, 15% for your investment and spend a little less on luxuries.
Throughout this process you’ll need to commit to the decisions you make. Allocate your budget and stick to it!
Control Your Debt
Perhaps one of the reasons you haven’t saved the down payment is because you’re battling to manage debt. Payments for credit cards or student loans affect your cash flow, minimizing how much you have to live on and save.
Debt could also affect whether your home loan gets approved, so it’s vital to get it under control.
Here your commitment must be to stop making more debt and reduce what you have, even if you have to sacrifice a luxuries for a few years.
Luckily, technology makes many life decisions easier. You can download personal finance apps to help manage your funds. Apps can tell you when you’re at risk of spending more than you have available. It’s like having your accountant with you all the time.
Automate Your Saving
Why do you think so many people never reach their goals? Because it takes time and effort. When you get home at the end of a rough day you probably don’t have the energy to budget or transfer cash into your savings account.
What happens then? You spend the money before you took the time to allocate it where it’s really needed.
Once again, technology comes to the rescue. If you automate your savings (source SimpleEconomist.com) there is no chance of spending the money you want to use for your future home. Thanks to modern banking apps and banking platforms you can have your savings transferred into an investment account the moment you receive your salary.
It’s also smart to automate other payments such as rent, utilities and insurance so you don’t inadvertently spend the cash elsewhere.
Temporary Hold Your Retirement Savings
Perhaps the tips we’re giving don’t seem realistic because you simply don’t have spare cash to deposit into your house fund. If you’re already saving for your retirement though, why not use those resources to at least give your house-buying plans some momentum?
Consider depositing your retirement plan contributions into a house fund for the next two or three years. It will enable you to collect a deposit much sooner.
Of course, this shouldn’t be a long term arrangement as your retirement fund is important too. If you’re still relatively young this is a viable plan as you have many years to make up for it.
If this seems risky and you need some guidance in planning for your retirement before you apply this tip, go to https://www.collinseow.com/retirement-planning/. Get the insight you need to make an informed decision.
Get a Side Job
If it will take years before you have the necessary funds available and you don’t want to wait that long, why not get a second job? Modern society presents you with various options, even if you already have a full time job:
- Join the gig economy as a freelancer, working a few hours during evenings or weekends.
- Become an Uber driver in your spare time.
- Do work for others in your community and get paid for it, such as running errands on their behalf or walking dogs.
Sacrificing your time now will make your dream become reality a little sooner.
Ask for Gift Money from Family, Relatives & Friends
A last tip is to make your friends and family part of your plan. Make it known to everyone that you would appreciate money for your birthday or Christmas, rather than gifts. Explain to them how important your future home is to you and those who love you would surely want to support you.
You may even inspire some of them to start planning to make their dreams a reality!
Your dream of owning a house can be realized. You may face financial challenges, but tough decisions, technology and new habits can speed up the process.
Will you take up the challenge?
Categories: Real Estate