With student debts high and wages still relatively stagnant, saving for a home may seem like an unrealistic goal for many young people. For millennials who are determined to enter the real estate market, however, there are still ways to make the dream a reality.
5 Tips for Young People Saving for a Home
- Prioritize paying off debt: If you are paying high interest rates on credit card debt or student loans, you might want to forgo some savings to take care of this problem. The return you’re getting on your savings investments may not exceed those nasty interest rates. Consider finding a second source of income and focusing it entirely on eliminating debts. This can help put you in a financial position where home ownership is more realistic.
- Find ways to turn spending into savings: Many young people are good about watching essential costs like rent and utilities, but some don’t realize how much they spend on extra things such as restaurants or drinks. Build a plan to reallocate small discretionary spending towards savings for a home.
- Consider getting rid of your car: Depending on your domestic situation and the city where you live, a car might not be a necessity. Having that large auto loan or those big insurance expenses can make paying a mortgage tougher. If you have a spouse with a vehicle or you live in a city with good public transportation, you might want to sell your car to help pay for your home.
- Be realistic about wedding expenses: Many dream of their wedding for their entire life, but there might be some benefits to having a smaller celebration. Try discussing financial priorities with your future spouse before diving into planning. You may end up deciding that a down payment for a marital home is more important to your marriage than a luxurious wedding day.
- Live with friends or family: One of the best ways to save for a home is to cut your current living expenses. Try living with friends or roommates to cut your monthly spending. If possible, you might even want to temporarily stay with a family member while you accumulate funds for your down payment.
Buying a home is the largest purchase that most Americans ever make. The journey can take patience and hard work. Hopefully these tips will help you get started with your own savings plan.