Have you been renting your current home, and been hoping to buy your own the future? The good news is that you can begin now to grow your savings account for when the time comes. See 6 steps that will help you start saving money.
1) Know your what your goals are
Knowing the amount of cash that you will need is a good place to start. You should aim to save between 5-20 percent of the purchase price of the home in order to qualify for a 30-year mortgage. This amount may seem a bit overwhelming at first, but it will feel much more manageable as you break it down into annual, monthly, and weekly goals.
Define your time frame goal as well. This helps to understand what you need to save. Once you have this figured it out, you may want to re-evaluate your time goals to reflect a different saving schedule if the first iteration feels too aggressive.
2) Pay down credit card debt
This one shouldn't come as a surprise! If you’re carrying any credit card debt, you should reduce that before trying to save. Attack your high-interest credit debt as this helps move towards a higher credit score. Your higher credit score may even result in better mortgage interest rates. Also, once your debt is paid off, you’ll have more money available in your budget to set aside for a down payment!
3) Set up a dedicated savings account
By having a traditional savings account, you can keep track of your progress and make it harder to spend the money on other things. Don't make your savings account available to you via ATM withdrawal either.
4) Lower your living expense
If you're looking for ways to save money, try reducing expenses by at least10%. Maybe cut out fancy coffee drinks for a few months and start buying generic brands at the grocery store. Put that 10% into your savings account.
5) Automate your savings
A great way to see your savings grow is to set up automatic transfers from your paycheck or checking account into your new savings account. This way, you'll never even see the money, and it will start to add up quickly.
6) Remember to stay positive
Consider your down payment goal as an exciting thing that you are looking forward to rather than a chore that needs to be done. Saving money will start to feel less like a fixation, and more like and exciting journey to your wonderful new home! Don't forget to budget for a small treat now and then to reward yourself and keep things feeling upbeat. You may even find that you're so excited about saving that you use some of your flexible spending funds to save extra money for the month!