New to the Live Richer Challenge: Homebuying Edition? Learn more about it HERE.
Day 8: HERE: Your Character
Day 9: HERE: Your Capital
Day 10: HERE: Popular Home Loans
Today’s Easy Financial Task: Developing a savings strategy.
How to rock this task:
- Decide how much you want to save for your new home.
- Pull out your budget and bills to find savings opportunities.
- Set up a savings account for your home fund.
Welcome to Day 11 of the LRC: Homebuying Challenge!
The first few days of this week we talked about your credit and capital. We also discussed popular home loans and what they require as far as credit, DTI and down payment. Today is all about developing a savings strategy for your next home.
Based on the loans discussed yesterday, you should have an idea of what you’re going to need for a down payment. It’s time to start saving!
How to Focus on Saving
When preparing for a home, budgeting and saving need to become a priority months or years in advance. (If you don’t have a budget, I can teach you how to make one quickly in my book, The One Week Budget. Here's a free chapter.
The place to start when saving for a home is writing down a savings goal you want to reach by a certain time. Then, calculate how much you need to save monthly to meet your goal. Say you want to save an extra $4,000 for a down payment and closing costs. You need to save just $334 per month for a year.
Where could this money come from? I’m glad you asked. 🙂
Cut excess spending from your budget
An area of opportunity is often variable expenses. Variable expenses are the ones that can fluctuate from month to month like gas, groceries, eating out, installing a lace front, and more.
Take a close look at your monthly budget and find places where you can make cuts. Don’t worry — you don’t have to give up this stuff forever, only until you’re able to get the keys to your new home!
Negotiate your fixed expenses
Fixed expenses can be reduced too! Here are the steps:
- Pull out the bills for each provider. Look at your bills and review the prices you pay for services like telephone, internet, cable, insurance, and more.
- Comparison shop. Start looking around for competitors to compare prices.
- Negotiate with your current provider. If you find a better rate, call your current provider with the price you found. Tell them you’re going to bounce to the new provider if it can’t be matched.
- Ask to speak to the retention department. This is the last ditch effort. It’s the retention department’s job to retain customers. Explain the new rates you’ve found and let them know you’ll be leaving if they can’t match them. If they can match the rate — yay! If they can’t, move on to step five.
- Jump ship to the new provider. Switch providers to the cheaper one, if necessary.
Refinance your present debt
Refinancing your current debt is another way to find savings. Refinancing debt can lower your interest rate. It can even make your interest rate 0%. Refinancing is when you pay off your current debt with another, more affordable debt vehicle.
Here are two popular options:
- Personal loans: Personal loans with a low and fixed interest rate could be used to pay off your credit card and other high-interest debt. Personal loans give you one convenient, stable payment to keep up with each month.
- Balance transfer cards: Balance transfer cards are awesome, and offer an introductory rate for new customers. The rate can be as low as 0% for 15 months or more. This gives you an opportunity to pay your balances back interest-free. The savings can be put towards your homebuying fund!
Note: If you plan to consolidate or refinance your debt, make sure you do this 6 months BEFORE you start shopping for a home. These options will require credit checks and can disrupt the mortgage process.
Where should you be putting your money?
After you think of areas in your budget where you can save, the last task for today is to set up a separate account for your home savings. The best accounts for savings are ones that aren’t easily accessible. Don’t create an account that’s connected to your checking account that you can spend! Instead, open a new account!
I love online accounts for savings. These accounts have no fees. It also takes a long time for money to transfer from savings to your checking with an online bank, which can deter you from overspending!
My favorite online account is the savings account by Ally Bank. Sign up for it here! This bank has no annual fees, and no minimum balance is required to open.
Once your savings account is set up, you can create an automatic deposit from your checking to your savings. The automatic payment should be the amount of money you need to save each month to meet your homebuying money goal.
You can break this savings deposit into two withdrawals from checking that will happen twice per month if that’s easier to manage. The best way to save is to take the flawed human (you) out of the equation.
When savings is automated, it can grow with minimal effort from you!
That’s all for this task! See you in the next one!
Leave a comment below or reach out to your accountability partner(s) if you have any questions. Don’t forget to check into the Dream Catchers: LIVE RICHER group as well.
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Want to work through the Live Richer Challenge: Homebuying Edition in a workbook? It's part of a bestselling series!
Click the link below and get your copy.
P.S. Don’t forget to get your free Live Richer Challenge: Homebuying Edition Starter Kit. GET IT HERE.
P.P.S. Here’s a copy of the Challenge Calendar. It’s a fun way to keep track of your progress.
You can reach out to me here:
Facebook: The Budgetnista
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