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Money Saving Tips for Soon-to-be Homeowners in Pennsylvania
For many people, a time comes when it’s time to stop renting. Perhaps they’re starting a family and feel the urge to set down solid roots. Or maybe they are simply eager to secure a space to call their own. Or, for some, home-ownership feels like a solid financial choice. Whatever the reason, if you feel like the time is right to become a homeowner — congratulations! It’s an exciting move and can mean newfound security and stability.
Of course, after making the decision to buy, the next question is: how are you going to pay for it? Unless you’ve been steadily growing a fund over years, it may take you a while to come up with a down payment. However, with some careful planning, self-discipline, and money saving knowledge, you’ll have everything you need to become a bona fide homeowner.
To help get you into the inside lane, here are four practical money saving tips that will get you on the right track to owning your first home.
Understand All the Expenses That Come With Owning a Home
In order to effectively save money, you first need to know how much you need to save. The down payment and monthly mortgage are two obvious things to budget for. But do you know about other “hidden” costs that come with being a homeowner?
Maintenance fees, repair costs, property taxes, insurance premiums, and damage from termites, mold, and “acts of God” — if you’re not aware of some of these costs, they can sneak up and throw your financial plans off track. As such, it is important to factor in both up front and future costs into your budget. By being proactive in your saving, you will ensure that you’re never caught off guard with a hefty repairs bill that comes out of the blue.
Start a Homeowner Fund
If you haven’t started saving for a home, set up a specific savings account now. Be sure to choose an account with a good return, which will help the fund grow. And if you don’t foresee yourself withdrawing from this fund until it’s time to purchase the home, a good option is high-yielding certificates of deposit that allow you to choose from various maturity periods, giving you flexibility.
We understand that locking away money isn’t a reasonable option for everyone — sometimes unexpected costs can occur. If that’s the case for you, consider an account that lets you withdraw whenever you need to. Keep in mind that some savings accounts that allow you to withdraw money flexibly only award you low interest rates, so it’s important that you seek out a high-yield savings account so that you get the best of both worlds.
Trim the Fat off Your Expenses
Even if you think you’re doing a great job of staying on top of your expenses, there are usually extra ways to save that won’t have a drastic impact on your quality of life. Naturally, these opportunities differ from person to person, but a few ways to save even more include having friends over for dinner instead of eating out, taking public transport instead of an hire car, and reconsidering your need for your cable package.
Of course, the best way for you to identify areas in your life where you can trim the fat is by closely analyzing your own daily habits and routine. Being creative can help you find ways to cut back on unnecessary spending while still enjoying life.
Learn About the Psychology of Saving
On paper, saving money seems like the easiest thing in the world. Advisors recommend that every month, right after your paycheck comes in, you take a predetermined amount out and put it into a separate savings account. Despite this, a 2017 survey revealed that 57% of Americans have less than $1,000 in their savings accounts, with 39% having no savings entirely.
As two professors from Harvard Business School and Wharton noted, most people have a present bias, whereby they prioritize short-term needs over long-term ones — for example, not saving for retirement. We underestimate expenses for special occasions, and we are sometimes simply too preoccupied with our daily lives to take action.
The good news is you can use psychology to make savings easier. One proven method is to set up an automatic direct deposit into your account right after your paycheck comes in. Taking the pressure off of yourself by making this an automated process means you never have to think about it. You’ll be surprised at just how easy it is to start growing your down payment early on, setting you up for later success.
If you still have trouble saving money for your home, Citadel can help. Schedule a free financial planning consultation and we will work with you toward reaching your savings goals.