The Money Puzzle.

 

Budgeting to Buy a Home

 

For those of you that are contemplating buying a home and wonder where to start because the bills are already piling up.  You’re still paying off that college tuition but you also need to new car.  You’re thinking about getting married. And worry about saving for retirement.

Here are some techniques for saving for multiple goals—all at the same time.

1. Review your spending

Take a good, hard look at your spending.  Analyze your current spending. by tracking it first— otherwise, you’ll set unrealistic goals and be disappointed when you don’t achieve them. Evaluate your fixed expenses, such as streaming TV services or your gym membership.  Then, search for purchases you made where the amount you spent exceeded your joy. How many shoes do you already have in the closet and only two feet!

2. Prioritize (and visualize) your goals

Set goals like a wedding in two years, kids in year 3 and 4 and a home in 5. Your down payment will be the biggest priority.  In order to save, you’ll have to visualize your future.

3. Try the ‘snowball method’

Knock out your debts one at a time, from smallest to largest.  When you clean up your finances and narrow it down to a couple of bills you’ll start feeling in control and then anything is possible.  Then see #2 about setting goals.  Accomplishing one financial goal at a time might be the push you need to keep saving toward that home.

4. Separate your money

Save for multiple goals at once by making sure to keep your savings in different banks and savings accounts.  Keeping the money separate helps you mentally separate “house savings” from “car savings.”

Choose different types of savings accounts that are better suited to each type of goal. For short-term goals such as a wedding or a new car, keep your money in a traditional savings or a money market account. For the longer term, buy a low-cost index fund.  Heck you can even use a tin can for each unless you can get an interest rate that beats inflation.  Deposit a portion of your paycheck directly into your savings account. Out of sight, out of mind.

5. Decide if you need to sacrifice

First, don’t compare yourself to the Jones.  Evaluate what you really need to get by and what needs to go. Instead of glorious indoor bathroom, put in an outdoor shower. Look for a smaller house or decide to rent a barn for the wedding.  Look for another way to do it.  One that doesn’t break the bank and gets you there faster.  

Think about what you can afford..