You took our quiz, and found you’ve got a penchant for bargains, but that doesn’t always help you achieve your short- and long-term savings goals. We’ve made some suggestions on how you could curb some of those impulsive habits, but now it’s time to think about how you might save for some of those bigger dreams. After all, life isn’t just about scoring a great deal on a new pair of fall boots.
You’d love to own a house one day. But a house should never be a split-second purchase, and it’s not super-likely to be a bargain. If you’re financially prepared to snag a deal when the opportunity comes along by having the cash in hand, you’re way ahead of many people. Remember, you’re playing the long game here, but the reward — a home of your own — will be worth some short-term sacrifices.
Figure out exactly what you want.
Spend some time on real estate websites looking for homes you’d actually love to live in, and take note of the price trends in the areas you like. Make a list of what’s important to you in a house. How many bedrooms do you need? Do you want outdoor space or entertaining space? What are the local school districts like, and is the neighborhood safe? What would your daily commute be like, and what’s the parking situation? Then think about the things you could live without but would really love to have if possible (walk-in closet, anyone?). Check out open houses as often as possible to get a real feel for properties, and chat with local realtors about what you’re looking for.
Figure out exactly what you can afford.
It can be easy to get hung up on saving up for a down payment when you start thinking of buying a home, but you should also consider the monthly costs when you start shopping. How much mortgage can you afford? If you’re buying a $350,000 house, you put 10% down, and you get a 30-year mortgage with an interest rate at 4.5%, your monthly mortgage will be $1,596.06. It’s worth playing around with a mortgage calculator to see what you can afford. You’ll also need to consider the cost of homeowner’s insurance, any building or association fees, and general utilities. It’s important to consider all of these while you’re saving to buy a home, because it could influence how much you choose to save. The bigger the down payment, the smaller your monthly mortgage will be.
Figure out an achievable savings plan.
Once you’ve figured out how much your ideal home will cost, take the purchase price and factor in at least 10% of that amount for a down payment. It’s also important to note what closing costs will be. (Some online research can help you find estimates, which can vary significantly depending on where you live.)
For example, let's say you’ve settled on a budget of $350,000, and you’d love to buy a place in five years. Assuming a 10% down payment, you’ll need to come up with $35,000. With the five-year plan, you need to be saving $583 per month just for the down payment alone, without any of the other costs factored in. It might seem like a lot, but if you break that down further, that’s just around $20 a day. Maybe it’s time to really kick your addiction to ordering lunch every day.
Keeping that number in mind and working to achieve it every month can help you manage some of those impulsive short-term buying decisions. Once you set a goal, you're more apt to remain committed to it. It's amazing what a vision board or Pinterest can do to help, too.