If owning your own home in Bethesda or Chevy Chase MD is your dream, then you have to set a goal to make that happen. The highest hurdle for most first-time buyers is saving enough money for a down payment. So, if your goal in the next few years is to become a homeowner, you need to develop a game plan to achieve that dream - and you need to plan to make some aggressive moves to cut your spending, boost your income, or both.
The National Association of Realtors reported that the national median home price in June 2013 was $199,900 (and prices are rising again).
To get started, set a timeline and break up your savings goals. For example, if you need to save $20,000 in two years, you'll need to save $833 a month for the next 24 months. Don't keep this money in your checking account! Open a new account and keep the funds separated as you watch your savings grow!
Start Big
If you're truly committed to buying a home and can handle some big changes in lifestyle, you could move in with family for a defined period of time. You could also move to a smaller apartment.
"Going from a two-bedroom to a one-bedroom can drop your rent by 25 to 30 percent, depending on where you live!"
Another possible lifestyle change is to bring in more income by working overtime if possible or taking on another job.
You might look for a job doing something that interests you outside of your current career, such as working at a Lowe's or Home Depot if you're a home improvement enthusiast or want to learn more about how to take care of the home you plan to buy.
If your savings goal is aggressive, you may decide that you're willing to make large trade-offs to meet your goal. For a significant boost to your down-payment fund, consider more substantial cost-cutting and money-raising measures, such as selling your current car and trading down to a lower-cost vehicle.
Small Steps That Add Up to Big Savings
Finding other expenditures to trim requires creating a household budget to see where your money is going.
Some of the easier expenses to reduce or eliminate include new clothes, shoes, and other stuff; daily expenses like your morning specialty coffee; monthly expenses like a Netflix subscription; and gas and parking costs (consider carpooling or take public transportation).
Keep in mind when you're in super-saver mode to ask yourself out loud, 'Do I need this or want it?' before you buy anything. Shop in physical stores if possible (rather than online) and use physical cash rather than credit.
Take a critical look at all of your expenditures -- gym memberships, vacations, entertainment -- to see where you can cut back to meet your savings goal. While you don't want to drain all the enjoyment out of your life, you can keep spending in check without sacrificing much. For example, if you like to go to restaurants with friends, limit your meals out to one a week, and invite friends over for potlucks instead.
Where to Stash Your Cash
When you're saving for a short-term goal, financial experts recommend you stick with a low-risk investment such as a high-yield savings account or a CD. A credit union or an online bank usually offers better interest rates on savings than most traditional banks.
While it is tempting to invest your down-payment savings for a higher return, be aware that there's always a risk that an investment will lose money. The rate of return on your down payment savings is less important than making sure the money is available when you need it.
Whether your goal is to buy a house or meet some other financial obligation, you'll need discipline and an aggressive savings plan to achieve it. But following the savings tips above will help put your goal within reach.
Comments(0)