How to Save for a House in 2022: 5 Ways to Keep Your Money Saving Goals
Are you one of the few who really started saving this 2022? We are way halfway through the year and you may be thinking about how you can spend less and save more to finally buy a house. And while setting the intention is a great first step, the most important part is actually following through with it beyond July.
Here are some easy ways to keep you on a money-saving spree.
1. Have a SMART Goal.
If you’re saving for a specific goal, you’re a lot more likely to modify your spending patterns. If you’re saving up for your dream home, you’re more likely to stick to a plan if you are anchored to a clear vision of what you want. Take time to map out your plan of action, starting with your SMART goal.
S- Specific What do you really want? Be very detailed about what you want in a house. Is there a specific location you want to live in? Do you need to be close to your place of work? Do you need grocery stores and malls within walking distance? Do you want some outdoor space for your pets? How many bedrooms? Do you need a large kitchen space? Consider your lifestyle and your finances. Identify your non-negotiables vs. your nice-to-haves.
M- Measurable. Understand your financial capability. One of the most powerful tools for success is measurement. As they say, you can’t improve what you can’t measure. Start by tracking your income and expenses, existing debts, and savings for a downpayment. From there, you can set measurement milestones.
A- Achievable. What can you afford and by when? Think through all the details. Does it really make sense to purchase a home this year? If not, you might need to consider pushing your timeline a little further as you work on the nitty-gritty of your homeownership goal.
R- Relevant. Where does “buying a house” fit in your life goals? Take into consideration your short-term plan and long-term vision. Are you building a home for starting or expanding your family? Will you be living in the house you would purchase or would it be a rental property?
T- Time-Based. When can you start the buying process? It might be helpful to define deadlines for each step of your home-buying journey. Set a deadline for each milestone. Instead of just stating, “I will buy a house this year,” it will be much better if you get a little more specific:
- I will narrow down my search area to 3 areas by March.
- I will find a real estate professional by May.
- I will establish my home budget by September.
- I will start house hunting by October.
- I will pay the downpayment by December 2022.
2. Track Non-Essential Spending
Regardless of how large your target savings for your house fund is, you must first figure out where your money is going before calculating how much you can save. Start by reviewing your spending for the previous month on the first day of the next month, categorizing essentials and non-essentials. Non-essentials are “wants,” where you can have some wiggle room — shopping, movies, restaurant trips, and maybe spa trips —while essentials (needs) are largely set prices (house rent, car payments, food, etc.).
Be honest and look into what you could go without and make a commitment to putting that money aside. Can you, for example, forego going out to eat twice a week in favor of cooking at home? Or maybe unsubscribe to your cable and just keep Netflix?
In terms of how much you should save each month, a good starting point is 10% to 20% of your monthly salary. You might also follow the 50-30-20 rule, which recommends allocating 50% of your take-home pay to needs, 30% to wants, and 20% to savings.
3. Get Rid of High-Interest Debt
There is no one-size-fits-all way to tackle high-interest debt, which is often associated with credit card bills. Assuming you have some money set aside in an emergency fund, the first thing you should do is pay off high-interest debt before focusing on long-term savings objectives. If, on the other hand, you don’t have an emergency fund, start there before getting rid of your high-interest debt.
The advantages of paying off high-interest debt are twofold: the sooner you pay it off, the less money you’ll pay in interest. Plus, once you’ve paid off the debt, you’ll be able to put the money you were paying each month into savings. The best thing is that you won’t notice a difference because you’re already used to setting aside that amount.
4. Automate Your Savings
Schedule a monthly transfer from your payroll account to a connected savings account. This method eliminates the need to remember to make a deposit and decreases the likelihood of you squandering the money before it is saved.
5. Don’t Spend “Found Money”
When you have “extra money,” like monetary gifts and bonuses, it’s advisable to put this money toward your savings goals rather than spending it. After all, you won’t miss it since it wasn’t in the budget in the first place. This also applies to raises. Instead of overspending, save the difference (but feel free to treat yourself to a little congratulatory present!).
Saving money isn’t always easy! If you know a friend, family member, or co-worker who is also trying to save, teaming up with them may help you stay on track. Having an accountability buddy can help you stay motivated and stick to your savings plan. You’ll be able to discuss your progress, vent about setbacks, and lean on for support.