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Buying a home is a goal many of us share. Having a place to call your own where you can remodel to your liking, not have to worry about neighbor’s footsteps above you, and finally be able to paint the walls bubblegum pink...or maybe that was just my five-year old self.
Owning a home is what many people would call the American Dream. However, it should not be done lightly. Becoming a homeowner is a substantial financial undertaking and requires significant planning. If this is a goal of yours, it’s best to start saving up for the down payment and related costs, as soon as possible.
Here are seven practical tips on saving up for your first home:
Determine your ideal location and research the average home costs in the area. Your area may even have a first-time homebuyer plan that can help reduce some of the costs. Plan on having to come up with 20% of the home cost in cash for the down payment. You likely won’t need that much for the down payment, but it’s a good idea to have the extra cash cushion because there are other additional costs that many people forget. Which leads us to the second step...
Calculate the approximate closing costs, moving expenses, and three months worth of insurance payments and maintenance costs. Often these costs are forgotten and can be not so fun surprise when they pop up.
Transfer your credit card balances to 0% and/or ask your credit card provider to lower your interest rate. This will help you save money on the interest payments on your current account balances. Money that can go towards your down payment savings account.
Open up a separate savings account. Be sure that the account is a high-interest earning account so you can make money on your money. Cha-ching! Check out Radius Bank’s high yield savings account. It’s APY* is one of the highest on savings accounts!
Create a plan. Determine how much you need to save and give yourself a deadline. Remember, a goal without a deadline is just a wish. Then you can determine how much you need to save each month in order to reach your goal.
Calculate your monthly expenses and see what can you eliminate. Cutting out expenses and being mindful of your spending choices will pay off in the long run. Some items you may want to consider are reducing restaurant visits, eliminating subscriptions or memberships you don’t use, excessive alcohol consumption or shopping sprees.
Pick up a side hustle. Having another income source outside of your full-time position gives you the flexibility to go after ambitious savings goals such as saving up for a home. Consider selling products on Amazon, monetizing the blog that you’ve been working on or teaching fitness classes. If you already have a small business, brainstorm ways that you can increase sales? The sky is the limit when you dream big and take massive action.
Now I’d love to hear from you! Are you currently saving up for a home or have you already purchased your home? What is one tip you can share that can help others realize their homeownership dream? Leave a comment below.
For more wealth building tips that I only share in email, click here to join our weekly Money & Mimosas newsletter.
This post was in partnership with Radius Bank.
*Annual Percentage Yield (APY) is accurate as of 12/19/17. Minimum amount to open account is $10.00. Rate tiers are as follows: 0.00% APY applies to balances of $0.01—$9.99, 0.05% APY applies to the entire balance on balances of $10.00—$2,499.99, and 1.30% APY applies to the entire balance on balances of $2,500 or more. Rates may change after account is opened. Fees may reduce earnings
Hi gorgeous! How was your first week of 2018? Still fired up and committed to being the BOSS of your money? I hope so, because your dream life is soooo close.
In this week's Wealth Wednesday post, I'm going to share one little trick for making sure you don't lose momentum when it comes to sticking to your money goals.
Have you ever set a financial goal, only to lose interest a few months later? Sometimes it’s not even your because stuff does happen. Like, the car has to go into the shop and there goes $1,000. Or your kid had something unexpected come up in school and there goes the $500 you were going to put away this month.
But sometimes, it's not semi-emergencies that knock us off of our money course. Rather it's shiny objects. Like maybe Tieks just released a new, limited edition pair of rose gold flats that you just have to have. Ooops, there goes the $250 you were going to put towards saving up for a house down payment. Times four because who can just buy one pair of Tieks at time? Self-control is so overrated.
Emergencies happen to all of us and are usually unavoidable. You should definitely have an account to cover those types of situations. However, when it comes to shiny objects, you should also have an account dedicated to satisfying those urges. I call this your indulgence account.
It's like being on a 21-day cleanse diet. It's much easier to stay the course when you allow yourself a healthy chocolate bite at the end of each night. Otherwise, you're likely to binge halfway through the cleanse and chow down on all the french fries in sight.
Let's say your big savings goal this year is for a down payment on a house. Depending on where you live, that could be anywhere from $20,000 to $100,000 or more. Which means you need to save anywhere from $1,600 to $8,000+ per month. That is a lot to chew on and can feel overwhelming. Inevitably you'll hit setbacks and feel discouraged along the way. And may abandon your goal all together. But, setbacks don’t have to lead to throwing the home of your dreams to the wayside...
If you make it a practice to treat yo self along the way, you will keep the excitement alive and find it much easier to stay on track. The key is to be mindful and structured about when and how you treat yourself. Setting smaller savings goals and giving yourself an indulgence allowance is the best way to reward yourself as you work up to your bigger goal.
Beauty treatments are my favorite small indulgence to save up for- anything from a monthly massage, to a body scrub, lash appointment, facial...you name it.
The first step in building an indulgence allowance is to open up a separate account. By separating your funds, you are creating clear boundaries for your allowance. I really love Radius Bank's hybrid checking account for indulgence allowances. It has a .85% APY*, which is by far one of the highest interest rates for checking accounts within the United States.
The next step is to determine your monthly indulgence allowance. Your allowance can either be a fixed amount or a percentage. If you are using a percentage, 5% of your gross income (this is income before taxes or expenses) is a good rule of thumb.
If you are using a fixed amount, divide your total by four. This is the amount you need to contribute to your account on a weekly basis.
Whichever method you are using, be sure to transfer the amount each week to your allowance during your #MoneyandMimosas date. Otherwise, if you wait, you may be tempted to spend it throughout the month on other items.
Small indulgences are a great way to press pause and reflect on the progress you've made on your savings goal. Otherwise it can feel like your spinning wheels and can easily get discouraged. The hybrid account also comes with a debit card that could be used specifically for these purchases. This is super awesome because there are a lot of online savings accounts that do not offer a debit card.
And now I'd love to hear from you. What will you be indulging in each month? Let me know in the comments below.
For more money tips, click here join our Money & Mimosas newsletter to make sure you never miss a Wealth Wednesday post.
This post was in partnership with Radius Bank.
*Annual Percentage Yield (APY) is accurate as of 01/04/2018. Minimum amount to open account is $10.00. Rate tiers are as follows: 0.00% APY applies to balances of $0.01-$2,499.99, and 0.85% APY applies to the entire balance on balances of $2,500 or more. Rates may change after account is opened. Fees may reduce earnings.