Saving up enough money to buy a house can be challenging for most Americans. It’s especially becoming difficult as the housing market has been skyrocketing lately. The prices of real estate are at an all-time high and it’s unclear when they’ll reach a plateau. There’s no denying that it’s currently a seller’s market.
It can be easy to see news like this and get a little discouraged. You might have to make a few concessions, but buying a home isn’t impossible. In fact, there were more than 6.9 million houses sold in 2021. That’s the most houses sold in a single year since 2006. Experts project that this number will surpass seven million in 2023.
In order to be a part of these projections, you’ll need to make some big changes in your life. The key to saving money is to stay patient and trust the process. All of your hard work and sacrifices will eventually pay off whenever you’re able to finally buy your new home. Depending on how you go about saving your money, you might even get lucky and reach your goal faster.
The First Step
The first step to saving up for a house is to figure out how much money you need to save. Establishing a clear goal is important because it will help you measure your overall progress.
There are a lot of factors that you’ll need to take into consideration, but the two major ones are down payment and closing costs. You should aim to save up enough money to cover the sum of these two expenses.
The down payment will be the biggest cost of buying a home. Putting more money down will increase the odds that your mortgage is approved. There are some lenders that are willing to accept a mortgage with as little as 3.5% down. However, you should aim for a down payment of at least 20% so that you can avoid any private mortgage insurance requirements.
The other major factor that you’ll need to plan is the closing costs These costs represent the sum of the home inspection, appraisal, title insurance, property taxes, escrow account, and mortgage origination.
It’s hard to estimate the exact cost of these expenses, but it’s usually around 2% to 5% of the house’s price. It’s best to save 5% for the closing costs so that you’ll be covered if the costs are high. You can always roll over any leftover money into your down payment.
7 Ways To Save Money
- Create a budget
- Use Yotta
- Cut out expensive luxuries
- Find a roommate
- Save your tax refund
- Ask for a raise
- Get a second job
Based on the last section, you should save enough money to pay for 25% of the house upfront. That means you’ll need to save up at least $75,000 if you want to buy a $300,000 house. Take a look at the local listings in the area where you want to buy a house and get an idea of the costs.
Once you figure out the range of your ideal savings, you can get started on making the necessary changes. Ideally, you should follow as many of these tips as you can. The more saving tips that you follow, the sooner that you’ll reach your goal. These are the most effective ways that you can save money:
Create a Budget
The most important way to save money is to create a highly detailed monthly budget. You’ll need to gather any financial paperwork that you can. Try to go back at least three months so you can create as accurate a budget as possible.
You should be able to divide your finances into one of two categories: Income and expenses. The money that you make is your income and the money that you spend are your expenses. Add up everything that you can from the last three months to get an average for both.
Subtract the cost of your expenses from your overall income. The amount of money leftover is your current savings rate. Calculate your current savings rate on a monthly basis and compare it to your overall savings goal. If you don’t like your current pace, then you’ll need to find ways to increase your income and reduce your expenses.
Use Yotta
Opening up a savings account is one of the most traditional methods of saving money. Banks and credit unions will both offer interest rates that can compound and generate money. The problem is that these interest rates rarely surpass 0.03% annually.
An interest rate that is low will barely generate enough interest to cover a cup of coffee. Instead of dealing in pennies, you should use Yotta and make some real money.
Yotta is a bank account that pays out interest in cash and prizes. Every $25 in your Yotta account will get you another weekly ticket. So if you have $500 in your Yotta account, that means that you’ll be getting 20 tickets each week.
Each ticket has seven numbers that you can choose yourself or have randomly generated. A number is drawn every day at 9 PM Eastern. Depending on how many numbers match your tickets, you can earn up to $10 million in prizes.
Even if you don’t win, the average interest rate for Yotta accounts is 4%. You’ll be making more money in interest and have a free chance to win millions in prizes. It’s a win-win situation and a no-brainer for anyone trying to save.
Cut Out Expensive Luxuries
Home buyers know that the easiest way to save money is to spend less. There are a lot of expenses that can be hard to reduce. You’re always going to have to pay for food, shelter, and transportation. However, you’d be surprised how much extra you spend on these necessities.
Eating out at restaurants, buying new clothes, and grabbing a cup of coffee in the morning can quickly add up. Saving money is all about sacrifice and you’ll need to cut out these luxuries first. Cooking your meals at home, shopping at thrift stores, and brewing your own coffee are a few ways that you can trim the fat from your budget.
You might also need to cancel some of your credit cards or memberships for a while. Gym memberships, streaming services, and other subscriptions are leeches on your bank account. Spending $40 a month for gym access doesn’t sound too bad, but that ends up being $480 a year. There are plenty of ways to exercise at home and you can always get a library card for free.
Find a Roommate
It’s most likely that your largest monthly expense is based on your living situation. Rent and utilities are necessary expenses that can be very difficult to reduce. The best option is to find a roommate so you can split your bills.
Splitting the costs of your bills 50/50 can save a lot of money in a short amount of time. If you have enough space, taking on two roommates can help you save even more. Ideally, you should invite family or a trusted friend to move in with you. If you don’t have anyone in mind, you can always use social media posts to help you find someone.
Save Your Tax Refund
Getting your tax refund back is typically the largest windfall that people experience during the year. A lot of people use these unexpected funds to make impulse purchases. Instead of spending this money, you should immediately put it in your savings account.
You could even ask the IRS to withhold more taxes from your paychecks throughout the year. Since you’ll be paying more than you owe, you’ll end up with a larger refund after you file. Getting smaller paychecks can help you to eliminate frivolous spending.
Ask for a Raise
The average inflation rate in the United States usually hovers around 2% annually. That means that if you don’t get a raise of at least 2% each year, then you’re taking a pay cut. Asking your boss for a raise could go a long way to increasing your income. Even making an extra 25 cents an hour will net you a few hundred dollars.
If your boss is unable or unwilling to meet your demands, you might want to consider your options. You might be able to find a job that pays more. If so, you’ll have to negotiate with your current boss to meet their pay or start a new career elsewhere.
Get a Second Job
Having a side hustle is nothing new and people have been doing it for a long time. A 40-hour workweek leaves you with plenty of time to work during nights and weekends. Picking up a second job and working 20 hours a week can help you increase your income and cut down on expenses.
Plenty of people picks up shifts in restaurants and bars during the weekend. The money is unpredictable, but anything that you get can go straight to savings. There are also plenty of opportunities with “gig economy jobs” such as food delivery or passenger transportation.
Stay Patient and Stick to the Plan
Saving up for a house is a big deal and it’s going to require a lot of discipline. You’re probably going to need to employ several of the tips listed above to get ahead.
The harsh reality is you're probably going to experience a few tough times and setbacks. But as long as you stay patient and stick to the plan, then you should be able to have your house eventually.
Then again, you might just get lucky and hit the Yotta daily drawing. It’s possible that you end up winning enough to afford a house by next week. There’s really only one way to find out.
Head over to Yotta today to register your account and get started. The more money that you save, the more likely that you hit the jackpot. You won’t find the better motivation to save anywhere else.
