Saving for a new home is a daunting task. It seems particularly more difficult when you compare the price of your dream home to your monthly salary. But as the saying goes, Rome wasn’t built in a day. You also, do not need to buy the home instantly. There are ways in which you could reserve money towards owning a home in the future. Ways that are practical and efficient, but also require discipline. Below are five ways to go about buying your dream home in a relatively short time.
- Savings Account:
The first thing to do: find a reputable bank with good interest rates and save that money in there. You could place a standing order on your account so a portion of your monthly salary is deducted and added to the savings account every time you get paid. That way, you don’t physically take money out of one account into another and face the temptation of skipping some payments once in a while. This approach requires lots of financial discipline, however, since you still own the account and could withdraw money from time to time for unrelated expenses, so you need to be strict on yourself with this approach.
- Financial instruments/investments:
“Let your money work for you.” This should no longer just be an obscure saying for you, but a lifestyle. You could put your money into investments whose returns are higher than the interest rates most banks will give you for your savings accounts. You could consider buying treasury bills, which are generally risk-free and have relatively high returns. The fact they’re long-term investments should not be a problem as your goal of owning a house is also long-term. If you are the more daring type, you could consider mutual bonds. Bottom line, talk to your financial advisors about which financial instruments would be right for you. Most financial instruments attract a penalty if you break them before they mature, so that knowledge might keep you in line if you consider taking a little bit out of the account before it’s due.
They won’t make you a billionaire overnight, but if done right, will set you comfortably on your path to being your own landlord/landlady.
- Work harder, get paid more:
Work harder to get promoted so you make more money. Making more money will automatically mean higher levels in disposable income amounts. Having a target amount in mind, it will be prudent to maintain your previous salary’s lifestyle while you shore up the extra income to the “New home fund”. Your hard work will pay off by making you a landlady or landlord!
Taking a mortgage is similar to taking out a loan. But the difference is, in most cases, the collateral is the house you’re buying. A financial institution you have had an agreement with buys the house on your behalf, and you pay them in installments over a period of time till you buy back the house and have complete ownership. One advantage of this is, you get to enjoy the house while you’re paying for it and the fact you live in your dream home is a major incentive for pushing yourself to make all payments on time till you can finally claim ownership of it in a few years.
- Cut back on spending:
It is surprising just how much money you could save or even make by cutting back on spending and reducing the number of appliances, vehicles and gadgets you use. For instance, if you have two or more cars currently, you and your spouse could agree to share one and sell the rest. Not only does this make you some extra income, it also vastly reduces the amount of money you would otherwise have spent in repairing and maintaining the extra cars. Money that will get you to your target so much quicker.
Do you have some further thoughts on how to save for a new home? Are there some other methods that have worked for you or someone you know? Please share with us in the comments below.