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A home is a place to make your own and perhaps raise a family. It can provide security, both financial and emotional. And as the saying goes, renting means youu2019re paying someone elseu2019s mortgage. Even though a fair amount of people aspire to own a home, not everyone is able to make that dream come true.
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Building an Investment Plan to Buy a House A home is a place to make your own and perhaps raise a family. It can provide security, both financial and emotional. And as the saying goes, renting means you’re paying someone else’s mortgage. Even though a fair amount of people aspire to own a home, not everyone is able to make that dream come true. The homeownership rate among Americans is 64%, down from close to 70% before the 2008 recession. Purchasing a house is one of the biggest expenses you’ll have in your life, and it’ll take some careful planning. That’s compounded by the fact that housing prices are on the rise in many parts of the country.
Building an Investment Plan to Buy a House Saving enough for a down payment can seem intimidating, especially when you might have to balance that with student loans, retirement planning, and other financial commitments. But being a homeowner is possible if you think ahead and make the right savings and investment plan to buy a house. How To Save For a House? Here are the best tips for how to save for a house and make your homeownership dreams a reality: 1. Track Your Spending To start saving for a home, you’ll first have to get your finances in order. Spend at least one month tracking your expenses, along with your partner if you’re planning to buy a house together. There are plenty of apps that can help with this, but a spreadsheet also works well.
Building an Investment Plan to Buy a House 2. Make a Budget Now that you understand your monthly expenses, it’s time to make a budget. As you make your budget, don’t just copy the numbers you tracked. With each category, ask yourself: Is there a way I could cut expenses here? Start with fixed expenses, such as rent, loan and insurance payments, and utilities. Could you downsize to a smaller apartment, get a roommate, or move in with family? Would refinancing your student loans lower your monthly payment or interest rate? Can you get a better deal from a different insurance or internet provider, or do away with your cable subscription?
Building an Investment Plan to Buy a House Next, turn to your variable expenses, where there’s usually a lot more room to trim. Can you jog outdoors instead of paying for expensive fitness classes? Or having a potluck with your friends instead of going out to restaurants every week? Once you’ve trimmed what you can, develop a reasonable budget for yourself noting how much you will spend monthly on each category. Track your expenses on an ongoing basis in an app or spreadsheet to make sure you stick to the plan. 3. Consider Ways to Boost Your Income When you subtract your monthly budget from your monthly income, there should be some money left over for saving. If there isn’t much, or anything at all, left over, you’ll need to grow your income so you can put that money away for a home. It’s always a good bet to start by asking for a raise in your current role.
Building an Investment Plan to Buy a House If you’ve hit a ceiling in your existing position, consider applying for new jobs to try and boost your salary. Another option is to get a side hustle going, perhaps one that offers passive income. Options include renting your room or apartment, renting out your car or wrapping it in ads, or creating an online course. 4. Figure out How Much You Can Save Once you have a budget and have maximized your income, calculate how much you have left over every month. Before you put all of that cash into a house fund, make sure you have taken care of some other financial basics first.
Building an Investment Plan to Buy a House If you have any credit card balances, or other high-interest debt, your priority should be using all your extra money to pay that off first. Once you’ve done that, if you don’t already have one, use your extra cash to build up an emergency fund with three-to-six months of living expenses. Next, you want to make sure you’ve started saving for retirement, since your money will need time to grow. 5. Set a Timeline Get familiar with how much a house is likely to cost based on the type of home you want and your desired location. Then consider what percentage of the total cost you’d like to save for the down payment. Many people try to save 20% as a down payment in order to avoid having to get private mortgage insurance (PMI), which can cost up to 1% of the loan annually, adding to your monthly expenses once you’re a homeowner.
Building an Investment Plan to Buy a House 6. Invest Your Savings If your timeline for purchasing a house is less than one or two years, you may be fine keeping your funds in a cash management account like SoFi Money. If your timeline is longer than that, investing your money and giving it the chance to grow could be the best way to save for a house. When you open an invest account, financial advisors can help you figure out an investment strategy that works for your financial goals. With financial institutions, you can invest in a portfolio of Exchange-Traded Funds, or ETFs, that aim to reduce some of your risk by investing across many assets while keeping costs low.
