When it comes to a big life goal such as owning your first home, you may be making a common mistake: only saving for the down payment. While the down payment is a crucial cost, it isn’t the only expense. Factor in your broker’s fees, registration fees, money for structural changes to your home, if any and the cost of furniture and furnishings.
Here are some tips which will help you to save for the all expenses associated with homeownership.
1. Spend smartly by understanding your needs
When it is time to save money for your first home, first understand your expenses. Instead of paying attention to all your wants, it makes sense to pay attention to the needs. Maybe you can cut down on your frequent shopping trips, or perhaps you can spend lesser on eating out. Small savings can add up to bigger returns at the end of the month.
2. Calculate and prepare your monthly household budget
Calculate the amount you need to meet the costs including deposit, broker fees, registration, etc. Then, decide how much you can withdraw from your savings and other deposits. With the net figure and purchase time frame in mind, you will know how much you need to save every month. Prepare your monthly household budget accordingly.
3. Consider alternative sources of income
Supplement your earnings by considering alternative sources of income. Perhaps you can rent out spare space such as the garage or take up freelance blogging to find supplementary income to reach your financial goals.
4. Save any large inflows like salary bonus
Use large inflows of income such as maturity of fixed deposits or salary increments to add to the corpus to use for upfront expenses. Using these inflows will help to reduce the immediate requirement of money from your primary source of income like salary.
5. Rent out a smaller place for the present
If you’re living on rent, you may consider moving to a smaller house for the time being. Any form of savings willhelp you get closer to realising your dream of buying your own home.
6. Choose good investment options based on a timeline
Based on the timeframe you set for your purchase, use short-term and long-term investment options to save money:
- For short-term savings, look at fixed deposits. Bajaj Finance Fixed Deposits area good option that offers interest up to 7.85% along with other benefits such as assured returns, high credibility and stability and flexible tenor
- For long-term investments, consider debt-backed mutual funds. Mutual Funds allow you to build your wealth by striking a balance between risk and returns. Managed by highly experienced professionals, your investment is divided into smaller parts and put into different companies for maximum returns
Try not to interrupt your long-term savings plans when setting aside funds to finance your new home. Instead, try to raise the funds by limiting your current lifestyle until you raise the required funds.
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