Budgeting Tips When Saving for a Home

    October 12th marks National Savings Day in the US which makes it a great time to discuss budgeting tips when you are considering purchasing a new home. Since buying a home is one of the biggest financial decisions you will make, budgeting and planning beforehand will make the process less stressful!

    1. Organize and Categorize Your Finances

    Understanding where your money goes each month is a great way to get started. Knowing how much you spend on household expenses and how much debt you have is important when trying to figure out how much you can afford on a new home and your ultimate timeline. To get started, follow these tips from OnStride on breaking down your finances into the following categories:

    • 1 – Basics (rent, groceries, gas, etc.)
    • 2 – Emergency Funds
    • 3 – Passive Preparation (401K or IRA plans)
    • 4 – High-Interest Debts (interest rate of 10% or more)
    • 5 – Long-Term Savings (savings outside of your emergency fund)
    • 6 – Leftovers

    2. Do the Math

    How much can you afford? How much do you need to save? Dave Ramsey follows five steps to calculate:

    • 1 – Total your income
    • 2 – List household expenses
    • 3 – Estimate home ownership costs
    • 4 – Leave room in your budget to grow (unexpected costs down the line)
    • 5 – Make adjustments where you can to cut back/save

    3. Set Goals

    Saving for a home can be a long-term goal but setting smaller goals along the way can help you to stay on track and keep motivated. Keep in mind, the ultimate goal will be saving but you can also set goals to cut back on spending as you can along the way. Some ideas:

    • Save $1,000 in 3 months
    • Switch to a cheaper gym
    • Lower/cancel your cable bill
    • Go out to eat less
    • Buy coffee less

    4. Write Your Budget

    Now is time to set out your monthly budget! Using a spreadsheet or even a great budgeting app, write out:

    • Total to be saved each month
    • Life expenses
    • Any unusual expenses for the month

    5. Update Weekly & Reassess Regularly

    With your budget and savings plan in place, the final step will be to hold yourself accountable to the plan you have set out. Be sure to update your budget and goals as needed. Anytime an unplanned purchase is made, add it to your budget and adjust accordingly. Budgeting is fluid but adjusting as things come up will help keep you focused on the final goal of home ownership!

    RE/MAX 5 Budgeting Tips For Homebuying

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