You should start saving for a house as soon as the desire to buy one crosses your mind. It is estimated that it could take approximately three years, for the average person, who wishes to purchase a home in a middle-income community, to save the deposit and other associated fees.
Here are some practical steps towards saving to buy a house:
Cut Back on Spending
Avoid spending on non-essential items and impulse purchases, as this type of spending impacts negatively on your ability to save; and will delay your dream of owning your home.
You may also want to avoid taking on additional debt. Therefore, consider reducing the sums charged on your credit card and postpone applying for additional loans.
Also, postpone large purchases. This means you will be accessing less credit and saving more of your income. More time to save means you can put away more money for your deposit and other costs associated with purchasing a home, which could amount to as much as 25 per cent of the purchasing price.
Open a Separate Account
Open a separate bank account, ideally a high-earning savings account and set-up an automatic pay day transfer as well as, make top-ups whenever possible.
It is important to ensure that this “home purchasing account” remains off limits no matter what.
Save Unexpected Money
Also, save 100 per cent of any windfalls or unexpected cash inflows.
Your NHT refund, or a nice year-end bonus, are perfect examples. Use those funds to increase your savings. And, while it is tempting to splurge a little, even as you save a little, achieving a down payment for real estate acquisition requires a lot of restraint.
Be realistic and examine every source of expenditure, including your day-to-day expenses, and one-time cash infusions to determine how much you can really save.
The end product, owning a home of your own, will be a most rewarding achievement.
Get a Cheaper Place
If you’re living in a rental now, consider moving to a smaller, less expensive home or getting a roommate to share the costs for your current place. A $15,000 per month reduction in rent will save you $180,000 annually.
If you’re single, consider living with family for a year or move back home with your parents.
Make More Money
Look for ways to earn a little extra money. Can you handle a part-time job? Do you have skills you can use in occasional freelance work? Are you adept at social media? If so, put all of the extra pay into your house fund.