It’s getting harder for the younger generations these days to buy homes due to the rising land costs brought about by inflation, a lack of land, and income disparity.
Simply put, the average worker needs to save a lot to purchase a house and lot, and since this is likely only one of the large purchases they’ll make, it requires careful planning, research, and a long-term investment.
The good news is, if your budget is in order, you can pay off your loans faster and buy your home with little financial issues and a bright future ahead of you.
Today, we’ll go over some strategies on how you can get your personal budget in order, save for a down payment, and finally purchase the home of your dreams.
7 Ways To Build A Better Budget For Buying Property
1. Determine your household income after tax
What is your actual financial situation? Check your pay slips or use an online income calculator to figure out how much money you have left after taxes each month. Afterward, list all monthly expenses, including bills, utilities, insurance, groceries, and any extras such as tuition.
Set a personal budget that covers your immediate needs—how much are you left with? How much is the surplus from your income that you can save for property investment? It’s essential to know the answers to these questions to get your budget in order.
2. Figure out where you can save money
Once you’ve tallied all your expenses, examine them to see if there are any areas where you can save money. Perhaps you are spending more than anticipated on eating out or paying for a service you no longer or only often use.
You can downsize, as it is a quick way to save money for a down payment. Downsizing is the process of reducing your expenses and living within your means while saving. When you downsize, you lower your expenses and put the extra money into a savings account.
Downsizing can be done by moving into a smaller place, selling a few of your family’s extra or unused stuff, or relocating to a more affordable spot. Many people do this to save for a large purchase. Who knows—you might also discover that you prefer a simple life.
3. Reduce or eliminate a bad habit
Cutting off your vices can help you save hundreds per year. Consider giving up your bad habits and redirecting the money to your down payment:
i. Impulse buying
We get it. It’s convenient. It’s fast. It’s retail therapy. However, you should limit your purchases to increase your budget. Unsubscribe from marketing emails, so you aren’t tempted to spend. Not only do you get to save, but you also avoid clutter in your home.
ii. Getting takeout
There’s no denying that takeout or deliveries are perfect for those who live a busy lifestyle, those who live alone, or just anyone who doesn’t want to risk going out and getting sick. However, it is not so easy on the wallet. Instead of ordering takeout, save by cooking a few meals weekly.
3. Pay off debts
Purchasing your first home will always land you with a little debt. However, it is easier not only to get approved for a loan but also to keep up with your payments when you don’t have any outstanding debt. It will also improve your credit score, which is an important determinant when buying a home.
4. Save for a down payment
Before getting a housing loan, you first need to save for a down payment. Lenders are cautious about lending money. Many require at least a 20% down payment upfront.
It may appear to be a large sum of money—and it is—but if you focus your budget on saving for it, you can complete it and improve your chances of approval to purchase your dream home with financial confidence.
5. Request a pay increase
It may be a little daunting for you to ask your manager for this. Still, you may have been working a long time in your company, contributed valuable insights, or even recently been promoted. Any of these factors should not stop you from asking for a pay increase.
The best way to set yourself up for success is to time your salary conversation correctly. For instance, do not do this when your team is busy with a project or time is of the essence. The best time to ask for a raise is during a performance assessment, but the weeks following the completion of a major project are also ideal.
Never go into a salary negotiation unprepared. Describe how busy you have been and collect specific performance data and outcomes from projects you’ve worked on.
Check job posting sites and salary comparison websites to see if you earn the same as employees in similar roles. If you see that your pay is below the industry average, consider using your findings to leverage to request a salary increase or inquire about a promotion.
5. See what other employment opportunities are available
If you have been working in the same career and industry but have not seen a significant salary increase or cannot move forward, perhaps it’s time to switch careers and look for higher-paying jobs that you qualify for. Another route you can take is taking side hustles or monetizing your hobbies.
6. Purchase with caution
While real estate is an excellent investment, you must still treat it with caution. When it comes to buying anything, it is important not to buy more than you can afford, hence the adage, “do not bite more than you can chew.”
While what constitutes “affordable” varies from buyer to buyer, lenders recommend that you buy a home for around 2.5 times your annual salary. The total cost of housing must include not only the mortgage but also expenses such as maintenance and homeowner association fees.
7. Obtain pre-approval
It is recommended that you get pre-approved by a lender before you begin house hunting. When you’re ready to purchase your home, you’ll be taken more seriously because they’ll know you’re ready to close the deal.
The Bottom Line
Saving enough money to invest in property can seem impossible. However, with a solid savings plan, you can be ready to buy your new home with confidence and reap the advantages of a safe and financially stable future.
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Author: Michael Hill