So you’re finally ready and you want to take the plunge into homeownership! You realize that in order to do this, you need to start saving up money. But how? It may seem like every dollar you make is already accounted for – and you think there’s no way you can find the extra money you need to put towards a down payment.
I’m here to tell you that’s not true – here are the first three steps you need to take to get started on saving for homeownership.
- Figure out your net monthly income
- Figure out your fixed expense
- Figure out your variable expenses – and where you can cut back to start saving
1. Figure out your monthly net income
Figuring out your net monthly income can be easy or hard depending on how many sources of income you have. If your income varies from month to month, then figure out the average of what you make each month. Take into account:
- Your regular salary
- Tips
- Other regular income – such as child support, dividends etc. you can count on
2. Figure out your fixed expenses
Fixed expenses are expenses where you really don’t have any wiggle room. For example:
- Rent
- Student loan payments
- Child care
It’s possible you could negotiate a lower rent or child care, but you can’t count on that lasting. You could also choose to move or switch child care providers, but the amount you’d save is not likely worth the hassle unless the savings are quite large.
3. Figure out your variable expenses and where you can cut back
After you’ve figured out your monthly net income and your fixed expenses, you should sit down figure out what your variable expenses are. They tend to be irregular and can happen from as little as once a year to as often as every other week. The good news is that they are expenses that you have more control over.
Here are some sample variable expenses:
- Vacations
- Gifts
- Cell phone
- Internet and cable
- Subscription boxes
- Groceries, takeout food, Meals and drinks out
- Entertainment, such as movies, concerts, etc. (Not that any of us are spending much money on big-ticket events these days!)
Now take a look at these expenses and figure out where you can cut back. Perhaps you can eat out less. Or maybe you’re good with just Netflix and don’t need cable. Or you’ve enjoyed that subscription box – but really don’t need to keep getting it. You don’t have to cut out everything all at once – just see where it works for you to make changes.
The Takeaway
It can seem overwhelming to get started saving for a house. But by breaking it down into concrete steps (that you can break down into more little steps) you’ve found a way to get started!
If you have a house – how did you get started saving for it? If you don’t, but want to – how do you plan to start saving up?
