There are a few key ways you can save money and budget well when owning a home. The first step is to determine your income versus expenses.
This can be done by analyzing your recurring monthly expenses like rent, utilities and credit card payments. You can also look at non-essential expenses like restaurants, impulse purchases and streaming services.
1. Set a realistic budget
A home budget is a vital tool for saving money and tracking expenses. By combining your family’s total take-home income and subtracting all of the necessary costs, you can determine how much you can save each month for one-time expenses like a down payment or closing fees as well as ongoing costs such as property taxes and homeowners insurance. You may also choose to break down your expenses between “needs” and “wants,” such as a daily latte and a monthly music subscription, to find areas of unnecessary spending.
Tightening your budget isn’t always enough, however, as unexpected expenses can arise. Taking steps to reduce your energy bills, exploring tax breaks, paying down debt or reducing homeowners’ insurance costs can help you save even more money.
2. Save up for a down payment
If you’re serious about homeownership, you need to be diligent about saving for the down payment. That means cutting out unnecessary expenses, such as those unnecessary subscriptions you never use, borrowing books from the library or skipping that pair of shoes you’ve been eyeing on Instagram.
If possible, set up a dedicated savings account that automatically moves money into it from each paycheck. That way, the funds aren’t easily accessible for other purposes.
If you’re able to, stash windfalls from work or a tax refund, birthday or holiday gifts into the account to help speed up your savings goal. It might mean depriving yourself of a luxury or two for a few years, but in the long run, it’s worth the move toward your home ownership dream.
3. Look for ways to cut costs
Owning a home comes with many costs, including mortgage payments, utility bills and homeowner’s association fees. However, there are ways to reduce these expenses and save money for other long- and short-term goals.
The first step is to flex your budgeting muscles and look for opportunities to cut spending. This can include switching to a cheaper cell phone plan, buying used items, or using a credit card that offers rewards for the things you buy.
Another way to cut costs is meal planning, which can help you avoid those “What’s
for dinner?” trips to the drive-thru. Meal planning also helps you take advantage of grocery store sales and coupons to cut your shopping bill. Finally, paying down high interest debt should be a priority because it can save you hundreds of dollars each month.
4. Make smart purchases
As a homeowner, it’s important to make smart purchases. This means staying within your budget and not spending beyond what you can afford.
You can keep track of your spending by using a tool like EveryDollar. This will help you see exactly where your money is going so that you can stick to your budget and reach your savings goals.
It’s also a good idea to build an emergency fund, which can come in handy when unexpected expenses arise. For example, if your air conditioner needs to be repaired or your car breaks down, having this money will save you from going into debt. You can build an emergency fund by cash-stuffing, or by funneling any extra income you receive — such as annual bonuses or tax refunds — into your savings account.
5. Invest in your home
Homeownership comes with many benefits, but it’s also a major financial commitment. It’s important to save wisely for the costs associated with buying a home, such as the down payment, closing expenses, mortgage payments and property taxes. Consider your home warranty options and look for the best plan to protect your investment.
Tightening your spending is one way to save money for a house, but you can also get creative about earning more. If a large percentage of your monthly income is going toward high-interest debt, for instance, paying it off could free up thousands per year that you can then put toward housing costs or other savings goals.
You can also boost your savings by investing in a high-yielding vehicle such as a Federal Deposit Insurance Corp.-insured money market account, high-yield savings account or certificates of deposit that are timed to mature just before you plan to buy a house.