HOW TO SAVE FOR A HOUSE IN 6 MONTHS – 5 EASY TIPS
Overview
Saving for a house is a huge, often time-consuming step in most people’s financial journey. This is something I can relate to personally. Here, we’re going to look at cutting back on this timeline and the process of how to save for a house in 6 months.
Here are the five basic ideas you’ll want to implement as you save for your home.
- Have A Clear Goal Amount
- Budget Like Crazy
- Pause Investing And Cut Costs
- Up Your Income
- Stay Motivated
Let’s jump in and look at each of these concepts a little more closely.
How To Save For A House In 6 Months- Step 1: Develop A Clear Goal Amount
To be successful in almost anything, you need to have a clear, measurable goal. In this instance, that goal is a dollar amount.
I’ll make the assumption that if you are really trying to make a home purchase in 6 months, you aren’t shooting to pay for it in cash. You are probably planning to have a mortgage, and are here for information on building your down payment. Operating under that assumption, let’s talk mortgages and down payments.
My preference would be that you put 20% down on a 15-year fixed mortgage where the payments fit comfortably in your budget. In the long run, this 15-year term will save you thousands over a 30-year term. However, maybe you’re shooting for a 10% downpayment on a 30-year term. That’s your decision. Be aware that a down payment less than 20% will result in PMI on your mortgage, increasing your monthly payments. Regardless, you need to research your options here to see what will be best for you.
Check out their mortgage calculator below.
Using this calculator, you can get an idea of what range of home you can comfortably afford and what amount you’ll want to be able to put down.
Example: I want to put 20% down on a $150,000 home. At current rates, I can get a 15-year fixed rate mortgage with monthly payments under $1,000. This fits in my budget. So:
0.2 x 150,000 = 30,000
30,000 / 6 = 5,000
I will need to save $5,000 a month.
At this point, I may realize I’m going to need to adjust my plan and just deal with PMI for a few years. In that case, I may change my goal to put 10% down, meaning I’ll only need to save $2,500/month.
Essentially, once you figure what you want your down payment to be, take that amount and divide it by six. That’s how much you’ll need to save each month. Now you have a clear, measurable goal.
How To Save For A House In 6 Months- Step 2: Budget Like Crazy
Okay, now you know your goal. The next step is actually the key to any type of financial success: Get on a budget!
And don’t just get a budget in place, use it as a tool to get you where you want to be. Manipulate your line items, find places to cut back, and organize things to find where your money is going. Basically, get control of every dollar.
If you’re not sure how to really set up your budget for maximum success, check out my series below on getting started. I’ll walk you through the process of setting up a zero-based budget. This is really the best way to make saving for your home possible!
How To Save For A House In 6 Months- Step 3: Pause Investing And Cut Costs
Once you’ve set up your budget, you’ll hopefully notice that you’ve got some money going into investments. These are probably for retirement. That’s great! But, for the briefest of moments, you may want to pause that. I’m not saying indefinitely. You have a clear goal, once you get there, you immediately restart retirement investing. Don’t get comfy with this “extra income.” You need that money to be building under the influence of compound interest. But, a few months of a pause while you work on this massive goal isn’t going to be the end of the world and can be a big boost.
The other half of this budget manipulating equation is just to cut costs like a crazy person. I’ve written extensively on ways my wife and I have saved on expenses. You can read about those at the link below. Using the information in these articles, you can probably find a surprising amount of extra money in your budget each month.
The bottom line here is to pause your retirement and investing, and cut costs like mad. By doing so, you’re essentially giving yourself a temporary raise to help reach your home savings goal.
How To Save For A House In 6 Months- Step 4: Up Your Income
In the previous section we “gave you a raise” without adding any actual income. Here, I want to recommend that you actually DO add some extra income.
There are so many easy, flexible jobs available now through apps and online that there is really no reason you shouldn’t grab an extra job for a while. I’ve taught English online, delivered food, and done freelancing. And I’ve made thousands doing those things! You can too! And most of it can be done on your own schedule. Check out the link below to read about some of these ideas.
How To Save For A House In 6 Months- Step 5: Stay Motivated
Don’t skip this one.
I know it’s tempting to scroll past this and think, “Yeah, yeah, I already know that,” but I’m very serious here. You need to dream about your goal each and every day. You won’t open that delivery app after your 9-5 to make some extra money if you don’t stay focused on the goal. You’ll go out to eat instead of eating your groceries without remembering why you’re doing this.
If you have a partner, talk about it regularly. I’m not saying obsess over it. I’m just saying that you need to keep your eyes on the prize. Keep looking at homes, track what’s available, look at new neighborhoods being built. In fact, go for drives to look at areas you might want to live. It will keep you motivated and it’s a free way to get out of the house.
Learn more about identifying and focusing on your financial goals below.
Whatever you need to do, stay focused on your goal!
Bonus Tip: Keep Your Savings Safe
Here’s a bonus tip for you: you are SAVING for a home, not INVESTING. You are planning to use this money very soon. That being the case, you want to keep it safe from any type of volatility. In other words, you don’t want your money to be in the stock market growing for five months, only to suffer a huge drop in month six that sets you back another three months.
Stick this hard earned money in a savings account so it’s safe and ready to do it’s job.
Conclusion
Again, here are the five basic ideas you’ll want to implement as you save for your home.
- Have A Clear Goal Amount
- Budget Like Crazy
- Pause Investing And Cut Costs
- Up Your Income
- Stay Motivated
Setting these things in place is by no means easy. Working an extra job and trimming back on entertainment spending simultaneously can lead to some stress. But, if you know your purpose and understand your goal, you can make this happen!
And as always, regardless of your money goals, you can “Bank on a Budget” to get you from where you are to where you want to be!
Setting these things in place is by no means easy. Working an extra job and trimming back on entertainment spending simultaneously can lead to some stress. But, if you know your purpose and understand your goal, you can make this happen!
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Do you have a success story about saving for a home you can share? Give us some motivation!