Buy a Home Sooner: Efficient Budgeting Strategies for Future Homeowners

Buying your first home is likely one of the most significant financial goals you have set up. Planning and budgeting to save up for the required down payment and buy your first home might seem intimidating. However, with the proper guidance and forethought, you can successfully save enough funds to reach your goal of being a first-time homeowner.

With the right strategies, not only can you save enough money to buy your own home, but there are budgeting tactics that can help you save money faster. Learn how to plan a workable budget for your financial situation to allow you to buy your first home sooner than you may have thought possible.

Determine Your Monthly Income

Before setting any savings goals or creating a monthly budget, you must determine your monthly income. Knowing how much money you have to work with is vital to determining a comfortable distribution of funds into each category of your budget plan. This plan will eventually be your financial guide for saving and spending, so it must be accurate.

Use your most recent pay stubs to determine how much you are earning each month. Next, analyze your bank account statement to total up any other income you receive, such as child or spousal support, VA benefits, etc. This will tell you how much net income is deposited monthly into your bank account.

Another thing to consider alongside your income is how often you are paid. Some employers pay their employees weekly, while others pay every two weeks or on set calendar days. Make sure to note your pay cycle when calculating your monthly income so that when you start subtracting monthly expenses, you can stay on track.

Analyze Your Monthly Expenses

Once you know your net income, the next step is to review your monthly spending habits. It’s good practice to go back at least three to six months to get an accurate picture. You can use your bank statements to look at past months to see what you spent on. As you go, divide your expenses into spending categories: rent, gas and vehicle expenses, utilities, medical costs, insurance premiums, entertainment, and so on.

Once you have a picture of how much you typically spend in each category, see how it matches your income. A homemade spreadsheet or budget worksheet template is a great way to do this. If your numbers match ideally or your income is more significant than your expenses. You’re ready to proceed to the next step.

However, if your expenses exceed your income, it’s wise to balance your budget before moving on to the next step. Look at your more flexible costs, such as entertainment or eating out, and see if you can lower expenses to even things out.

Set Realistic Savings Goals

The next task is to review your spending habits and look for spots where you can make some cost-cutting measures to reduce your spending. If you took extra steps to balance your budget, this is more of the same, but since you’re looking to save, you may want to take things a little further. The underlying goal here is to determine how much you are willing and able to set aside each month for your home-buying goal.

For example, you could lower your utility bill by making energy-efficient upgrades. If you are spending much of your budget on gas for your vehicle, consider using public transportation as a cost-cutting measure. Meal-prep your food on the weekends so you are less tempted to spend money eating out during the week. Consider reviewing your insurance plans and looking for a new provider offering lower premiums. Any money you save from these methods can be set aside for your down payment savings.

There are numerous strategies for reducing personal expenses, ranging from simply canceling unused subscriptions to consolidating debt. The important thing is that you find a tactic or two that works with your lifestyle and that you can stick with.

Important Note: Don’t Go Overboard

When setting savings goals, it’s important not to overextend yourself or feel so boxed in financially that you can’t comfortably manage necessary expenses. For example, reducing fancy coffees and meals would be a reasonable cost-cutting measure, while cutting medical costs may not be feasible if you require regular medical appointments or prescription medication.

You also want to have some measure of enjoyment each month. Budgeting a reasonable dollar amount toward entertainment, however that looks for you, is essential. Without a bit of pleasure built-in, you may be more tempted to throw in the proverbial towel and bust your budget.

Utilize Financial Planning Tools

Once you have created your budget, found cost-cutting measures that work for your situation, and know how much money you are comfortable setting aside each month, you are ready to put your budget into action. Using online or app financial planning tools can be a great way to stay on budget each month.

Do a Google search for budgeting tools or visit the app store on your mobile device. Many great budgeting apps are on your smartphone to help you stay the course. An online tool or app can help you track your cash flow and mark your progress on your home-buying savings plan without constantly thinking about how much money is being spent and where.

Another great way to save is to designate a portion of your paycheck each pay period. Have this amount deposited directly into a savings account expressly set up to save your down payment. This way, you aren’t tempted to spend it.

Your financial situation is unique to you, and your home-buying journey will be too. Maybe you’ll save fast and move in before you know it; perhaps it’ll take a couple of years to reach your goal. As you begin to plan, speak with your lender about first-time homeowner options, such as those offered by Mid-Hudson Valley Federal Credit Union, and know what dollar amount you’re aiming for. Then, it’s time to start saving. Good luck!