Top Ways to Develop Money Saving Habits

(Best Ways to Save for Your Home)

When you have the American dream to buy a house, you’re looking for ways to save money for that down payment. Although being a homeowner is a big step towards accumulating wealth, the down payment is a lot different from slowly building a retirement account. You need to be more aggressive about saving money quickly. In the end, you’ll have more discretionary income when your house payment becomes stable and you no longer face frequent rent increases. You’ll gain tremendous tax savings and build wealth through ownership and through your retirement account for your future!

The Home Buying Process (link)

Determining How Much You Need to Save

Before you apply to prequalify for a mortgage, you can roughly calculate how much home you’ll be able to afford. Knowing that is the cornerstone of knowing how much you need to save for a down payment.

The rule of thumb is that your mortgage payment should not exceed 28% of your gross stable income (FHA allows up to 31%). That means if your monthly household income is $6,000, your total house payment can be as much as $1,680 ($6,000 X 0.28). This must include insurance, taxes, HOA fees, and other mandatory costs.

Examples of the other homeowner costs are:

Property taxes - $2,500

Homeowner’s insurance - $1,900

Down payment - $9,500 (3.5%)

Interest rate – 4.5%

30-year mortgage

However, there are a few other considerations in the calculation that include monthly car payments, credit card debt, and maybe college debt. You can check your own numbers with this calculator: New Home Calculator.

Or, please send us a note. You can also reach us by calling at (678) 570-8123. We'll be glad to help you!

How You Save Money Fast

If you haven’t at least tried it, you’ll be surprised how fast you can save $1,000 a month by simply going on a budget, staying at home more often and eating at home. Doing these simple things can help you save your down payment in less than 10 months. But there are other things to make this happen even faster…

Before you do anything else, set up a separate account to save towards your down payment. You need to see this amount growing and you will want to think twice or three times before touching it.

Another technique for saving is looking for ways to reduce expenses. When was the last time you shopped around for better prices on life, health, and auto insurance? You can go several months without buying new clothes, start buying more generic and store brands, Cut back on the premium TV cable, or drop that gym membership you don’t use.  Look closely at your personal life to find all kinds of ways to save or reduce expenses.

Big Ways You Save Money

Set up an automatic savings deduction.  This money can be automatically deposited from your paycheck to your down payment account. You can also have your automatically move a set amount from checking to savings each month.

If you have debt trouble, free debt counseling may be available. You can begin with the National Foundation for Credit Counseling® (NFCC®) or Consumer Credit Counseling Services (CCCS). A reputable counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. Trustworthy services offer 45-90 minute counseling sessions free of charge and with no obligations. If a firm doesn't do these, consider it a red flag and go elsewhere for help.

Smart Ways You Save Money

Block the shopping channel on your TV and unsubscribe from marketing emails you receive (unsubscribe link at the bottom of the email). Do the same with any other temptations or triggers you face regularly.

Don’t buy things simply because they are on sale. You don’t save anything if you didn’t have a budget to buy it in the first place.

If you have to borrow money for a down payment, borrow it from yourself. You can borrow, penalty free, from your 401k retirement account for a down payment. You pay the principle and interest back to your own retirement account and it won’t appear on your credit report.

Believe in yourself! You can do it! You can have that down payment sooner than you think!

If you need more information or have questions, please send us a note. You can also reach us by sending an email or calling us at (678) 570-8123. We'll be glad to help you!