Do you dream of becoming a homeowner? You can probably picture the perfect home in your mind right now and are dreaming of someday taking that step.
Saving for a house is a big deal. I’ve purchased two houses in my life and every single time was scared out of my mind.
Purchasing a home is a huge commitment of money.
This is one of the reasons I recommend saving for your house for at least 6 months. 6 months gives you plenty of time to research your location, save money for a down payment and learn the housing details you need.
Related Post: How to Avoid Overspending On Your Home Mortgage
As a disclaimer though, I personally recommend having a house down payment of at least 20%. This will help you avoid Private Mortgage Insurance (PMI) which can be very expensive.
A larger down payment on your home will also help you avoid getting underwater with your loan. The more money you put down the better off you are going to be.
Do This Step Right Now!
One of the most important steps to take is to begin working on your credit score. Don’t wait on this one. Please – don’t wait. Sign up for a service like Credit Sesame. It is free and will help you raise your credit score as quickly as possible.
Even if you have a high credit score, there are always ways to get it higher. The higher your credit score the better rates and loan terms you will receive.
How to Save for a House in 6 Month
1. Budget, budget, budget
No one wants to hear it, but having a budget (and actually sticking to it) is the key to saving money. This can’t be your ordinary easy to accomplish budget either. If you are saving for a house, you have to have laser-like focus on your spending habits. Your budget should be bare bones.
I’ve got all kinds of posts on budgeting that I’ll link to below, but I’ve found that budgeting is super personal. Everyone budgets slightly differently and what matters is finding a budgeting system that works for you. I personally prefer using a percentage based budget at this point in my life but have used the envelope system, excel spreadsheets and Quicken in the past.
Find a budgeting method that works for you and then go hardcore. If you can go hardcore for six months I can guarantee you’ll be shocked at how much you save.
- The Two Unbreakable Rules of Budgeting
- How to Avoid Busting Your budget
- How to Create a Percentage-Based Budget
2. Set up a separate bank account
Anytime you are saving for a specific goal, I always recommend putting the funds in a completely separate account. Preferably one at a completely separate bank. You don’t want to be tempted to pull funds for random emergencies, that aren’t really emergencies.
My emergency fund and savings accounts are currently with the Capital One 360 account. They are currently paying 1.60% (as of 5/18) for accounts with balances over 10,000. That is a great rate right now.
It takes me 1-3 days to transfer funds to my regular operating accounts, which makes spending the money a lot harder.
3. Automate the saving process as much as possible
This can be accomplished in multiple ways. Contact your works HR department and request that a dollar amount or a set percentage be put into your new account when you are paid.
If your HR department can’t transfer funds directly from your payroll (which they should be able to do) then set up an auto transfer through your regular bank. Make sure that the funds are debited the day after being deposited.
The number one goal is to make sure that the money isn’t in your regular operating account for long. It is too easy to spend the money when it isn’t in a separate savings account.
One of the sneaky ways I’ve found to save extra money is by using Digit. It is seriously my all-time favorite app since it does all the work for you. You can read more about it in my review – How to Automate Your Saving in Less Than 5 Minutes.
4. Cut costs everywhere to save money for your new home
K – so this is super broad. There are literally hundreds of ways to save money. I’ve got a ton of different posts that I can link too, but here are a couple of quick money saving tips that can make a huge impact immediately.
- Stop eating out
- Do regular spending freezes
- Meal Plan and Meal Prep
- Get rid of monthly recurring costs (cable, music services, gym memberships)
- No vacations, staycations or frivolous extras
- Inexpensive or DIY gifts
- Don’t visit the mall or Target – I bet if you look in your closet you can easily go six months without buying clothing
- Dye your own hair
- No more manicures or pedicures
The biggest thing you have to do to save money for a house in 6 months is learning to say no. It sucks, but you need a scorched earth policy.
Every single extra penny you have needs to go into your saving money for a house fund for the next six months. Literally no exceptions.
Be open and honest with your family and friends and set the expectation that you’re going to be a cheapskate for the next 6 months while you save for your house.
I know it sounds totally dorky, but turn it into a game. See who can save the most money each week. Find inexpensive ways to spend time with family and friends.
You’ll be surprised at how much free stuff is available in your area when you are willing to look around.
I think you will end up surprising yourself when you start to realize how much money you had been wasting.
We did similar stuff at various points in our debt reduction journey and I’ve noticed that many of the habits I developed from that period have continued. I’m not perfect, but I’m consistently looking for ways to save a few dollars here and there.
5. Set a Specific Savings Goal for Your House Down Payment
If you want to be successful you need to set a specific down payment goal. To do this you need to set a budget for your future home.
For example, if you will be purchasing a $200,000 home than ideally, you will have a down payment of $40,000. That is a ton of money to save in 6 months. You don’t save that type of money unless you have a very detailed plan of attack.
Once you have set an amount for the down payment on your new home, you have to work backward. In this case, you would need to save $6,666 dollars per month or around $1,666 per week.
My husband and I make a decent income and we’d have a very hard time saving that much money each week. With this particular example, I’d need to go back to the drawing board and either buy a cheaper home, decrease my downpayment, increase my savings goal to one year or increase my income.
What matters is that you set a realistic workable goal and then throw everything you have at accomplishing your goal.
One of the best things I do when setting savings goals is to track my progress visually. Seeing my balance increase is super motivating for me. Check out either this form or this form for inspiration.
6. Start a Side hustle to Earn Extra Money
Sometimes cutting your costs just isn’t enough and you need more income. I highly recommend getting a second job or starting some type of side hustle. I’m a huge advocate of having multiple revenue streams and firmly believe it is the best way to save money.
Besides, when you are focusing your free time on earning extra money, it is easier not to feel the pain of your spending freeze.
When you have extra income coming in all of a sudden the numbers in my example above aren’t so crazy. Depending on your skills and willingness to work, making an extra $400-$800 per week isn’t hard. When you have two people earning that type of extra money saving for a home in 6 months isn’t so crazy anymore.
I’ve got two posts on ways to earn extra money that give some great suggestions for side hustles.
I’m also in the process of doing final edits on my new book, The Income Equation: How to Start Your Perfect Side Hustle. This book is a detailed how-to guide for anyone who wants to start a side hustle. It is currently being reviewed and will be ready for sale in Mid-July.
Sign up for my newsletter below to get an early bird deal.
Saving a Large Down Payment For Your Home in six months is Worth the Sacrifices
I know that making an aggressive goal to save for a home in 6 months is a lot of work. Depending on your financial situation you may need to extend your home saving goal from 1 to 5 years. The important thing is to make the leap and start sacrificing now.
The more money you can save now, the better off you’ll be when it comes down to making a down payment on your new home.
On a side note, while saving money, I also recommend working on your credit score. Sign up for a service like Credit Sesame. It is free and will help you ensure your credit score is as high as possible. The higher your score the better rates and loan terms you will receive.