How To Save For Your First Family Home
Most young people are priced out of buying homes. Millennials are renting or crashing with their parents rather than buying homes. But this doesn’t have to be the case for those in their late twenties or thirties who want to start their own family. Buying a house is an expensive process, but that doesn’t mean you can’t prepare for it financially in advance. Here are several ways that you can save for the down payment of your very first family home:
Live Below Your Means for Now
Start by saving as much money as possible. If you live in a fancy rental that costs a lot of money, think about downgrading. If you want to afford the down payment, you will need to be frugal for now. Instead of spending thousands of extra dollars on a condo, switch to a simpler residence temporarily. This will help you save up and use it towards the down payment.
Start Investing for the Long-Term
Saving money for a house isn’t like saving for a new pair of designer shoes. The process may take years for some people. It’s a long-term commitment that you will need to mentally prepare yourself for. Saving, even for years, may not qualify you for a down payment. If you want more returns so you can accrue funds quicker, consider investing; especially in assets like penny stocks. Trading stocks is risky, but the returns are much higher than what you get on regular savings accounts. There are plenty of other ways you can invest, but nothing compares to stocks when it comes to high returns in the short term.
Save and Invest
If you are highly risk-averse, you can slowly but steadily create a home-buying fund by saving and investing. Investment tools like fixed deposits (also known as term deposits or certificates of deposits) and buying bonds are great ways to save and turn those savings into higher-yielding investments. Unlike stocks, fixed deposits and similar financial assets are very low-risk. You won’t have to fear losing all your savings on a bad trading day.
Fund Your 401(k)
Did you know that you can borrow money from your 401(k) for the down payment of a house? As long as you have a well-funded 401(k), this shouldn’t be a problem. Therefore, do make contributions to your 401(k) plan with the future in mind. However, do be aware that the money you borrow from the retirement fund is technically a debt with interest. But the advantage is that the investment payment will come to you, and not to some creditor with sky-high rates.
Earn Extra Income
The more income you have, the more money you will have for saving and investing. Therefore, seriously consider taking up an extra job, freelancing, or working a second job from home to earn more, which you can, in turn, use to fund the down payment. You can sell things online from home if you don’t have the time or energy for a second job.
Don’t expect the process of buying your first home to be any less financially daunting. But you can make it smoother by financially planning ahead using the above tips.