Saving money isn’t always easy, but there are some significant reasons to do it. Buying a house is one of those reasons, but it can take time to come up with a down payment. You also have to decide how much house you can afford. That’s why you need a budget. When you’re budgeting for a house, it’s very important that you do it the right way. Then you can save the money you need in a realistic time frame, but still enjoy your life while you’re coming up with the down payment amount. Here are six of the biggest house budgeting mistakes you’ll want to avoid.
1). Save budget for fun.
If all you do is work to put money back for a house, you’ll soon tire of doing that. Yes, it’s an important goal to work toward, but it may not be healthy to put your entire life on hold while you focus on it. Instead, cut back on how much money you would spend on things you don’t need, like dinner and drinks out with friends, a pricey coffee on your way to work, or lunch at that restaurant near your office. By making due with what you have and not going out as often, you’ll naturally be able to save more money. Since you will still go out sometimes and occasionally buy yourself something new, you won’t feel completely deprived while you’re saving money for your new home.
2). Don’t overextend yourself.
Your house budget is going to be more than your down payment. Even once you’ve saved that up, you’ll still have to pay your mortgage and other bills every month. Your lender may have given you an amount that you can likely get approved for, which gives you some information on your finances. Still, consider buying a house that costs less than the lender says you can afford. That way you won’t be overextended, and you’ll have money left over every month once the bills are paid. That can give you a safety net, a savings account, and some peace of mind, along with the opportunity to work on your new home, take a trip, or do other enjoyable things.
3). Don’t confuse a want with a need.
The more you completely deprive yourself in order to save for a house, the less joy you will find in the process of getting to that home. When you save money to budget for a home, take stock of your wants and your needs. You may want something much larger and more expensive than you can afford, but you don’t really need that. There are probably many houses in your price range that you can be happy with. As you look for ways to reduce expenses so you can save money, also consider your current wants and needs. If you work online from home you probably need the internet, but the expensive cable package that comes with it may be a want. Consider making some hard, but fair decisions about what you want and need so you can get ready for your new home.
4).Scale back recurring spending.
Scaling back your spending should be a priority when you’re budgeting for a house. Even with some money in the budget for fun, you’ll still need to make a few additional sacrifices. Things like premium cable, satellite radio, and related types of subscriptions aren’t really necessary. Cutting back on them can mean reducing spending in a way that will really add up. When you couple that with lowering your power bill by keeping it a little warmer or cooler in your home, you’ll be surprised how much you really save. You may also be able to cut back on things like new clothes, your cell phone plan, haircuts, and all kinds of little things that take a lot of your money each month without you really noticing it.
5). Make your accounts work for you.
Making extra money is just as important as saving the money you have. That may mean making some changes in your banking and financing habits. For example, if there is a checking account that earns you interest, that can help. You may also want to consider short-term CDs, so your money isn’t locked up for too long but you earn a little extra. By making your accounts work for you, your money will accumulate faster and you can still enjoy life while saving for a home.
6). Consider lowering your expectations.
There is a lot of real estate advice when it comes to budgeting for a home you want to buy. Among that advice may be to lower your expectations. That doesn’t mean you should buy a house you don’t like just because it’s cheap, or expect it to take 20 years to save up a down payment. It mostly means to be realistic. There are a lot of changes you can make to a house over time, that will help you end up with what you want. That house may cost less in the beginning, though, which can help you buy a home faster. Also pay close attention to how fast you can realistically save money, so you don’t plan to have it quickly and get discouraged when you don’t. Being honest with yourself can go a long way toward the right house-buying budget.
2 Point Highlight
The more you completely deprive yourself in order to save for a house, the less joy you will find in the process of getting to that home.
Making extra money is just as important as saving the money you have.
