For many people, buying a home is the largest and most important investment of their lives. Homeownership unlocks financial stability and paves the way for other milestones like starting a family or saving for retirement.
With inflation and rising living costs, saving and budgeting for a new home can be challenging. However, with adequate research and careful planning, you can turn your dream into reality. Here are some tips you can follow:
1. Do Your Housing Research
First things first, know what kind of property you want to buy. Ask yourself, where can you afford to live? How many bedrooms do you want? Do you want to live near your workplace? All of these questions will help you narrow down areas and budget properly.
For instance, if you want to live in Myrtle Beach, South Carolina, start looking for reliable new home builders that specialize in that area. New homes Myrtle Beach blend comfort, style, and affordability. Get quotes from reliable home builders like Dream Finders Homes to know how much you need to save.
2. Buy Within Your Means
Before you start visiting properties, take a closer look at your current financial situation. Buy a property within your means, which means purchasing a property that your income and savings can comfortably support without causing financial stress. Some experts recommend that your home shouldn’t cost more than five years of your combined income.
Here’s a fact many new homeowners overlook: The cost of purchasing a property goes beyond the mortgage payment. Property taxes, insurance premiums, and maintenance expenses are all ongoing costs of being a homeowner.
Take a closer look at what your biggest spending is. For some people, it’s loan amounts, while others spend on luxury vacations and activities. After assessing current and future expenses, decide on a ballpark amount for investing in your home.
3. Follow the 50/30/20 Rule
The 50/30/20 rule is one of the most commonly used budgeting techniques. It involves splitting your after-tax dollars into three categories:
50% of your income goes to needs. This includes utilities, groceries, mortgage payments, and insurance premiums.
30% of your income goes to wants. This includes tickets to entertainment events, dining out, and other recreational activities.
20% of your income goes to savings. Most people build an emergency fund with this section.
While the 50/30/20 rule is often used for short-term goals, such as saving for a vacation or a new TV, experts recommend using it for long-term planning. This includes saving for the down payment on your dream home.
4. Open a Separate Savings Account
One of the most effective ways to budget for a new home is to open a savings account. When you use the same account for day-to-day transactions and savings, things become too complicated.
Having a separate savings account will keep you motivated. You can also put withdrawal limits to prevent frequent withdrawals. You can also look into interest savings accounts to boost your income over time.
Lastly, you can connect your savings account with a current account and automate transactions.
