Owning a home is a keystone of wealth both financial affluence and emotional securitySuze Orman, Financial Advisor and motivational speaker.
That’s what owning a home or a house is according to Suze Orman, must be cool huh? . But we all know it is not an easy task. It requires a lot of sacrifice for you to stop paying rent because you have your own house but through saving owning a house is made easier. Save until you have enough then buy. It may take time for you to finally save enough to own a house but there are a few creative ways that you can speed up this process. But first things first;
What you need to do before you start saving for a house
1. Know how much you need
The danger of starting to save money blindly without knowing how much you need to be saving is that you will can find yourself saving less money that can’t help you afford a house so you will find yourself settling for a house that you didn’t dream of. The first thing you need to do before you even start thinking of how to save to buy your house is to know how much you need to be saving. The amount of money you need to be saving will depend on which house you have decided to buy. If you know the price of the house then you know the amount of money you need to be saving in total in order to make the house yours. So know the price of the house first before you start saving for it. Know the down payment needed, the closing costs and all other costs like property tax.
2. Give yourself a deadline
Ask yourself, when do you want to buy? So now you know how much you need to be saving, the next thing that you should do now is give yourself a target. With a target here, I mean, give yourself a certain period of time to save enough money for your house. Give yourself a deadline and say, by this month of this or that year I need to have saved enough to buy me a house, or say in five years time I need to have saved enough. The importance of giving yourself a timeframe is that you will know how much you need to be saving each month towards your house or what percentage of your paycheck you need to set aside so that you can realise your goal of owning a house by the time you have given yourself.
3. Calculate how much you need to be saving
So now you have the timeframe and then you have the total amount of money you need to save, the next step is calculating how much you need to save per month or per paycheck. With the two values; time and total amount of money you can calculate the total amount of money you need to be setting aside.
Say you have decided that you want to buy a house worth 5 Million shillings in 5 years time. In order to make this easier on you, you need to calculate how much you need to save each month. For you to save 5 million shillings in 5 years means you need to be saving about 1 million each year. Which when broken down comes to about 84,000 shillings per month, broken down further it comes to about 21,000 shillings per week. It means therefore that you need to aim at setting aside about 84,000 shillings monthly so that by the time you decide to buy your house you will be having enough money.
That’s what calculation does, it gives you a goal that you need to achieve in a particular amount of time in order to buy your house with ease. Suppose you do your calculation and find that the amount of money you need to save monthly is a burden on your paycheck then you need to increase your timeframe which will mean you will realise your goal a bit late or aim to buy a cheaper house.
Saving money for a house
This is the best way to save money not only for your house but also for anything else like saving for kids, saving for your retirement and such like stuff. Automatically transferring money from your primary account to your high yield savings account will eliminate any temptation of using the money you ought to save. (I’ll tell you why you should use a high yield savings account for your house savings later in this article). Automating will make you look like you did not have the money in the first place and that is the best way to save your money.
2. Pay down debts
It’s rare to find people with no loans in the world today, if it’s not car loans someone is struggling with then it is student loans or even credit cards. If you have a loan that you are still repaying, it is advisable that you pay down your debts first before you start considering saving for your house.
This is because if you are paying back debts and at the same time trying to save cash for your house you will find yourself saving little towards your house because most of your money will be going towards your debts and this will slow down the process of buying your house. Concentrate on eliminating one then move on the next, pay down your debts then save for your house it will make the process of saving faster and you will realise you dream even faster.
- Paying down debts through debt consolidation
- 10 mistakes you should never make when paying off debts
- 7 proven ways that will help you get rid of debts fast
By budgetting you will save more money than you are already saving, know how much you got coming in, know where your money is going to, ask yourself whether you can reduce the amount of money you are spending on certain things, l
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4. You come first
Say you are earning 80,000 shillings per month and even before doing anything with the money, you decide to take 40,000 shillings to your savings account. You think this is helping but what it does is that it really messes you up. You will find yourself withdrawing money from your savings account every now and then because the money you thought will sustain you is not enough.
Before taking money to your savings account to help you buy a house, pay yourself first. You come first, then your savings account. Take enough that you need to last you for that month and save the rest. This way you will not find yourself withdrawing money from your savings account because you will be having enough.
5. Make more money
So you find out the money you are saving is not enough because that’s what your paycheck can support and this in turn slows down your dream of owning house, why don’t you look for ways to make extra cash? At least you can use the extra cash to boost your savings account. You can start a side hustle, just for some time. Several options exist it’s just you to choose from them. You can consider options like;
- Driving for Uber or Lyft; If you have your driving license and you are always a good driver why don’t you be a taxi driver just for some to time until you raise enough money for your house.
- Start a blog; You can consider sharing information on what you like most through your blog and earn some extra cash.
- Sell used items online; You have your TV, your DVD, your clothes that you have overgrown or your sound system that is still in perfect condition and you don’t use it, why don’t you sell it online?
- Teach online; You have good teaching skills, why don’t you consider sharing your information online? Like teaching English to chinese students.
- Start a YouTube channel ; You have something that you are good at, say cooking, why don’t you make cooking tutorials post the video in your channel to make money?
- Answer survey questions ; You have more time and less money, consider using that time to answer survey questions and earn money from it.
There are a several options you can choose from in order to make something extra it just depends on you putting in the work to earn. The keyword here is ‘just for some time until you have enough to own your house.’
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6. Reduce your expenses
Reducing the amount of money you are spending on certain things will save you more money than you think. Reduce the money you are spending on major things like transport, energy, shopping, food, insurance, rent, entertainment by;
- Rent: Moving to a cheaper house, getting a roommate, doing repairs yourself, moving to a smaller house, moving further away from the city…
- Food: make coffee yourself instead of the take away one, planting a garden, carrying your food to work, drinking less bottled water, cooking in bulk…
- Energy: Use energy saving bulbs, using a programmable thermostat, turning off lights when you are not in a room, unplugging unused electrical appliances…
- Entertainment: Canceling your gym membership, look for alternative methods of entertainment like going to the library, downgrade your cable bill, reduce traveling, cancel newspaper subscriptions..
- Transport: Use public transport, share a ride, cycle or walk to work, sell your car, rent a car, live near your workplace…
There are several ways in which you can reduce your expenses.
LEARN MORE ABOUT HOW YOU CAN REDUCE YOUR EXPENSES HERE⬇⬇⬇⬇
7. Go slow on retirement savings
For some time, at least until you have enough money to buy you a house, you can consider posing sending money to your retirement savings account that is, if you already have one. The reason of doing this is to speed up your saving process and the faster you save the faster you will buy a house. NOTE: Doing this is just temporary and after you have your house you can resume saving for your retirement. If you feel saving for your retirement is equally important then you can reduce the amount of money you are sending to your retirement savings account instead of stopping and put the amount slashed into the savings account for your house.
8. Maximize windfalls
The money that you did not plan to receive or the money that you receive unexpectedly or extras you are given or you earn for one reason or the other that isn’t part of your monthly income like bonus you receive at work, income tax refund check, gifts from friends or family, should not be used for fun or wasted, instead you should use it to boost your savings account.
9. Consider opening a high yield savings account
Before you put your money in any account, you need to ask yourself which short term account will yield the most benefit. That is where a high yield savings account comes in because you will be ripping the most benefit from it. High yield savings accounts have higher interest rates compared to traditional savings accounts that we have and your money will grow much faster in these accounts.
To make sure you eliminate any temptations of using the money you already saved you can consider opening your high yield savings account at a different bank from your primary bank. This will make sure you have put your money out of reach and will only withdraw it once you need it.
Owning a house is not an easy task if you are on avarage salary but you can make it easier on you by saving. Save Save Save until you have enough to buy your dream house.