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Based on a report by the National Housing Conference, the cost of housing continues to spiral higher than most incomes for the middle class.
By saving for a house, you have unlimited control over the ever-growing cost of living.
If you’re already renting but hope to own a place you can call your own, you’re among the thousands of millennials who wish to do so. If you want to own a home, think of saving for a down payment first.
A down payment is basically the money required to buy the home. There are two ways to raise funds for a down payment: borrow cash in the form of a mortgage or loan from the bank or slowly saving up for it.
Taking a loan from the bank is a quick way to raise a down payment, but you’ll be required to raise a large share of the total cost. Later on, after you settle into your new home, you’ll still have to repay the loaned amount plus interest.
To be on the safe side, take the hard path and raise the money yourself. Though it may take a while, at least you’ll have nothing to worry about as far as debt is concerned.
Here are a few tips millennials like you can use to save to buy your first home:
1. Settle Your Credit Card Debt
If you have some massive credit card balances, that may become a stumbling block in your savings journey. This may come across as counterintuitive – especially when you set your mind on boosting your savings.
You may not see it now, but taking care of that high-interest debt can yield a series of positive results. For one, once you pay it off, you’ll have tons more money to spend from your budget.
If you’re keen on getting a mortgage, settling your credit card debt will raise your chances of ever securing one. This is because your credit score will receive a significant boost, thereby lowering your debt-to-income ratio.
Most lenders put factors like these into consideration before deciding whether or not you fully qualify for a loan.
Secondly, the payoff for getting rid of debt with an interest rate with double-digits is higher compared to the return you’d get from depositing your cash into your savings. This money can be set aside expressly for clearing your home’s down payment.
It’s very possible to live without credit card debt. If you can’t clear it as fast as you would like to, you can always settle for debt negotiation. This issue is open for discussion with your bankruptcy attorney.
When it becomes clear that you’re unable to pay your balance, a sudden shift in your credit card company’s priorities may work to your advantage. The credit card company involved may squarely be concerned with getting their money back from you as much as they can.
Clearing credit card debt and saving for a home are both important life goals every Millennial seeks to achieve. If only they could be achieved at the same time, everyone would have their own home by now.
Since it’s not, you’re better off assessing your credit card situation and doing something about it first before you start saving.
2. Save Your Pay Raise
It feels really good scoring a pay raise, doesn’t it? Once it lands in your account, don’t take it as a license to splurge on shopping or other non-essentials more than you already do. It’s rather tempting to spend more on your standard of living once you hit the jackpot.
Contrary to what other millennials might do with their pay rises, choose to deposit it into your savings account. That extra amount will eventually add up to something close to or the exact down payment amount.
In the meantime, you can keep living off your previous income level. For instance, say you earn an annual income of $40,000 and you happen to get a raise of 3% or more; in a scenario like that, you’d have an extra income of $1,200 that’s worth saving.
If you’re not expecting a raise anytime soon, don’t be shy to ask your employer for one. A surprising fact is that 70% of workers in their 20s or 30s who believe they’re entitled to a raise never ask for one.
Provided you’ve stuck around for quite a while and you’ve committed yourself fully to your job, there’s no reason not to get one. Unless, perhaps, you’ve not entirely been in your best behavior for more times than you can remember.
Before asking for a raise, however, check with sites like Payscale.com or Salary.com to check if you’re receiving less (or more) than what others in a position like yours are earning.
Proceed to make a detailed list of what you’ve done to your place of work to bolster your request for higher pay.
It goes without saying that you need to make more money to boost your down payment. You’ve worked hard for your pay rise. When you get, don’t take it for granted. Regardless of how big or small your paycheck bump may be, it can catapult you from being a tenant to a homeowner.
3.Increase Your Sources of Income
Speaking of making more money, have you ever considered the huge bucks you could make if you worked more than one job? Part-time jobs have always been known to add to your earnings.
There are tons of online and offline jobs you can engage in to make more money to add to your savings. Being the millennial that you are, you probably want something you can do from the comfort of your home in your extra time.
The following are four lucrative but straightforward online side hustles you can use to raise the down payment for your dream home with little hustle:
Filling Out Online Surveys
This just had to be first on the list. Online surveys give you the chance to give your honest opinion concerning various products and services. Market research companies around the world are recruiting new members on the daily to be a part of their ever-growing team.
Not all survey sites can be trusted. Do your research and create one or more accounts only on the most relevant survey sites online (e.g. Swagbucks, InboxDollars, Toluna, etc.). From there, you can earn points and rewards which can be traded in for cash rewards.
Creating a Blog
Blogging has withstood the test of time as one of the most lucrative online ventures. It involves nothing more than creating a unique website and write about your daily experiences, share tips and ideas and so on.
The more people sign up for your newsletters and visit your blog often, the more money you make. The beauty of blogging is that there are lots of ways you can make money. Any method you choose is what you should throughout your blogging career.
If you’re looking to start a blog, you’ll need hosting and a domain. For hosting, we recommend using HostGator since you get a 65% discount with our link. For a domain we suggest going with NameCheap.
This particular online venture will require you to work extra hard. There’s great potential for you to make money from online affiliate marketing based on your skills in product promotions and advertising.
Advertisers will pay you up to 50% of the total cost of every product you sell. Create a free account at VCommission, Clickbank, Flipkart or Amazon. The best part is that you don’t have to worry about product maintenance, shipment or handling.
Form Filling or Data Entry
Currently, there are so many kinds of data entry jobs on the internet. How good is your typing speed? If it’s anywhere between seventy to eighty words per minute, you’re good to go.
There are legitimate sites you can sign up for to start filling some forms.
Data entry requires little or no training, therefore making it relatively easy to get started. It’s an easy endeavor that only requires fast internet and a functional pc. Making money from home has never been easier.
These are just a few of the many jobs you can do online as a side hustle. They’re all fairly simple to a point that anyone with all the requirements can get into and start earning.
The money you make from these jobs can be deposited into your savings. In no time, you’ll have more than you need to move out from your parents’ home and into your own.
4. Aim for a Less Costly Home
When you start saving, you probably have a rough estimate of the kind of home you want to purchase.
If you were to set your sights on a less expensive aboard, you not only open up the possibility of a 20% down payment, you also get to cut down on loads of other costs.
According to a 2017 survey by Zillow, only 39% out of 13,000 millennials that were interviewed can afford to make the standard down payment on a new home. If possible, meet up with a certified mortgage lender.
He/she will be able to guide you through the critical process of finding the right home whose down payment won’t be a problem to raise.
A house is most likely the most significant purchase in any millennial’s life. That’s why you should go out of your way in opting for the most affordable home around.
Society often dictates that an expensive home goes hand in hand with success. In the same way, anything that we spend our money on is indicative of our personalities and values. These are cultural norms that we shouldn’t always give an ear to.
As you look into buying your own home as a financial decision, your first instinct should be to spend as little as possible.
It makes sense to spend $1,000 every month worth of mortgage for a simple home than a ridiculously bigger one for a mortgage worth $3,000.
You’re going to spend the rest of your life in the home you’re going to choose. Ensure it’s something that fits within your budget. Prices are bound to go up at some point, so don’t be afraid to spend a little more.
The home you choose should go hand in hand with your financial stability. Don’t borrow loans for a spacious mansion that you may find stressful to pay off later on. Unless you’re looking to have a large family in the future, just keep things simple.
5. Do Away with Online Purchases Every Other Month
Are most of your purchases usually impulse buys, or do you make purchases of items you actually need?
Online shopping is structured in a way that it’s seemingly impossible to genuinely feel or understand the actual cost of any purchase you make.
Now that you’ve decided to buy your first home, it’s imperatively necessary that you stop shopping online every other month. In other words, carry out a thorough digital detox on your accounts and your wallet as well.
That’s an excellent way to save up just about enough money to buy your first home. Here are a few tips you can try to tame your impulse spending habits:
- Be mindful of what’s driving you to buy new stuff online. Most purchases are mostly made out of emotional responses.
- Don’t fall prey to online marketing schemes. If you know you’ll be easily distracted by ads like these, don’t look up a certain product on the online store. Instead, talk to someone about it.
- Before heading online, plan for what you want to buy. Use the site’s filters to narrow down your search to avoid getting yourself into a rabbit hole.
- Shop at sites that offer detailed descriptions for their products. Good online fashion shops should offer in-depth information about a specific product to prevent buyers from spending more elsewhere.
- Don’t buy everything online. The sizing of undergarments and shoes vary to an extent that settling for the wrong size will leave you feeling like you’ve wasted your money.
- Learn to counter methods used by brick-and-motor stores to get you to buy their items. Learn about the tricks used by stores to get you to spend more on items on their shelves.
Online shopping is the most obvious way Millennials spend every penny that lands on their pockets. If you’re at odds with this finding, just think about how much time you spend on your favorite online store.
6. Manage Your Funds by Keeping Track of Your Spending
Tracking expenditures is one of those ‘hectic processes’ that most Millennials wouldn’t waste their time doing. As a result, money goes as fast as it comes.
Millennials continuously find themselves on the receiving end of seemingly impossible financial advice. Compared to previous decades, there’s no denying that they’re making way less money. This leads to a delay in home or car ownership.
Putting into consideration factors like these can give you no reason to save money at all. The one thing that individuals between 18 to 34 fail to do is to keep track of their everyday expenditures.
Are you aware of how much you spend every month? If so, how much do you set aside for your savings and your needs (rather than your wants)? You may work more than one job, only to end up feeling like flushed your efforts down the drain.
It doesn’t have to get to that point to start tracking every cent you spend but it comes a time in every millennials life where they have to prevent themselves from accruing expenses that have no value to their lives.
Managing your funds is just as crucial as raising extra income. How you ask?
As you spend your money on all the important stuff, you’ll be able to set aside something substantial that can go into meaningful ventures such as saving for a down payment.
Within the first few months, you’ll realize that it’s relatively straightforward to go way beyond your budget. That means that you’re either not conscious of your spending habits, or your monthly budget is too low for your current lifestyle.
The more mindful of your finances you become, the more frugal you become. If tracking expenses may prove to be a tad difficult, use expense tracker apps such as Wally, Mint, Penny, or Quickbooks.
7. Buy Your Home in Winter
Summer and spring are the ideal seasons to look for and move into a home – as dictated by real estate wisdom. Millennials are more likely to go house hunting when the weather is just right.
Surprisingly enough, the ideal time of the year to shop for a house is during winter. As you may already be aware of, real estate and moving go hand in hand.
No matter how much we’d like to have a say about when to buy a home and move into it, circumstances aren’t always favorable.
Buying a house during winter isn’t the worst thing that can happen to you. As a matter of fact, you stand to benefit a ton from house hunting during winter.
Among the myriad of advantages, you stand to enjoy by buying a home during winter is having little or no competition from buyers.
As mentioned earlier, most people search for the ideal house to move into during summer and spring. Take advantage of this rather misguided notion and take advantage of the low prices that as a result of the widespread absence of buyers.
The economics are quite simple – low demand equates to good deals in the housing market. During winter, most markets have fewer houses with a low inventory. While this is the case often, it’s more than possible to find just the right space.
An alternative reason why winter may prove to be a buyer’s market for real estate is that there are reduced multiple offers.
This automatically translates to buyers – such as yourself – having the upper hand over real estate sellers in down payment negotiations.
Lean months of less than average sales throughout the winter season will encourage realtors to negotiate on even the lowest sale. This winter, brave the cold and take advantage of the low prices and interest rates.
8. Steer Clear from Making Purchases Using Your Credit Card
Among the most effective ways to avoid using credit cards is to quit carrying them with you to your local store. Carry cash instead. If you make a budget on the regular, try to determine how much money you can set aside specifically for discretionary spending.
Rather than deposit that amount into your credit card, carry it in cash to avoid spending more than you’re supposed to.
For instance, if you’ve set aside $100 as the amount to spend on discretionary expenses, pick a single day of the week then withdraw that amount every week.
Think of it as your weekly allowance. Once you’ve spent it all, wait until the next week to make another withdrawal.
When you write your budget, among the highest expenses that should be on the top of your list of expenses should be rewarding yourself in the form of savings.
This will give you more than enough flexibility to make major purchases, such as buying your own home.
If swiping your credit card now and then is what got you into debt in the first place, you need to build a cash reserve that will come in handy each time an emergency arises.
Until you save up just enough for your down payment, $ 1,000 (or less) is enough to cater for any emergency that may arise.
Don’t wait any longer. Try out any of these suggestions and get serious with your savings goals. If you’ve not yet done it, look for the right home you would want to move into. Your savings, no matter how small, will add up eventually.
Don’t limit yourself to the tips provided on this post. The following is a quick list of other things you can do to save for your home:
- Download and install the best money saving apps
- Apply for a library card – there’s no need to spend big on new books
- Use coupons more often when doing your grocery shopping
- If you’re not accountable on your own, have a friend or family member monitor your spending patterns.
- Rent out a room in your apartment on Airbnb. The extra money you make can go into your savings.
Anything you do right now will have a significant impact on your future. At the moment, it may not feel like you’re making any noticeable leap of progress as far as finances are concerned.
Remain consistent in your savings and at the right time, eventually, you’ll have a home to call your own.