Renting an apartment or home is an excellent option and makes sense in many situations. But perhaps you are tired of leasing and want to lay down some roots. You’ve decided to start saving for a house. However, attempting to save up for a down payment while simultaneously keeping a roof over your head can seem practically impossible, even when you take on extra shifts, budget, and put in over time.
But don’t despair. We are here to shine a light on what may seem like a hopeless situation. And since my family and I are also saving for a house while paying rent each month, I am as eager to write this article as you are to read it, so let’s get to it!
Establish a savings goal
For starters, it’s easier to accomplish your ambitions when you have a clear goal and know toward what you’re working. When saving for a house, it’s best to have a down payment of at least 20 percent because anything less than 20 percent means you’ll have to pay mortgage insurance.
Know how much home you can afford by getting a pre-approval from your bank or credit union. Although granting a lender permission to pull your scores counts as a “hard inquiry” and can negatively impact your credit score by a few points, it’s good to know what you can afford before you start saving for a house. For example, if your budget is $150,000, you plan on moving in two years, and you want to put down 20 percent, you’ll need to save up $30,000. That means you’ll need to save $1,250 each month to reach your savings goals.
Pay for things in cash
It’s hard to keep track of your spending when spending is so easy. Just swipe your card, or even better, use the app. Apple Pay and a million other apps allow you to pay for purchases and services with just a click of your phone. Convenient? Yes — if saving for a house is not a priority.
Paying cash for goods and services is a great way to keep track of your spending. Determine your budget, and each week, withdraw a decided amount from the ATM. If you’re short on cash and it’s only Thursday — well, then it’s either gas in your car or a caramel macchiato.
However, if you’re someone who likes to collect credit card reward points make sure to pay off your balance in full each month so you don’t accrue any interest.
Set up autopay for your bills
Despite your efforts to be a responsible adult, the truth of the matter is that it’s easy to forget when one or more of your bills are due. Set up autopay to ensure that you never miss a due date. Those late fees are pesky and can add up if you’re late often. Some companies are gracious and will credit the charge to your account if call and ask, especially if you are generally a timely-paying customer. However, others are staunch and won’t budge.
If enabling autopay isn’t an option for one reason or another, at the very least, set up a reminder on your cell phone’s calendar to make sure that you never miss another due date.
Bill yourself
If you are saving for a house, billing yourself is a practical way to ensure that you save money while renting. Most financial institutions let you set up scheduled transfers from a checking account to a savings account. That way, like a bill set to autopay, you don’t have to worry about forgetting to transfer the funds.
But instead of saving your money in a regular savings account — where interest gains are negligible — there are other types of savings accounts that offer higher interest rates. GICs (Guaranteed Investment Certificates) are a type of savings account which accrues periodic interest for the duration of the loan. Maturity dates can range anywhere from a few months to several years. If you pull out money before the GIC matures, you’ll have to pay a nominal fee. Another option is a High Interest Savings Account.
Stash your tax refund
Am I the only one who thinks that 2018 has gone by insanely fast? My point? Tax season is not that far away. Instead of using your tax money to treat yourself, go ahead and deposit it into your savings account.
Saving for a house while paying rent each month can make you feel panicked — like a fish out of water. Though it’s tough to stay afloat while leasing a home and simultaneously saving, it’s not impossible. Set clear goals, make and stick to a budget, and save whatever extra income comes your way and you’ll be in your dream home before you know it.
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