Buying your first home can be one of the most exciting milestones one can reach in life. But unfortunately, many people who believe that they are ready to be home owners find themselves faced with the challenges of being able to afford it and not having enough cash saved up for the down payment.
Mentally, we all know we shouldn’t spend more than we earn. It’s one of the common sense “rules” that we try to live by, but maybe let slip a little too often. These slip ups may have caused us to fall in a pit of debt that we can’t seem to find a way out of. It’s time to move forward and take the necessary steps to reduce your debt.
We’re going to first change how you manage your money, making it easier to save money for a down payment on a home
Here are some tips and advice that can put you in the best position to be a home owner.
Where Does Your Money Go?
Have you ever heard of the “Debt Snowball”? Create a list of all the places your money goes every month; including rent, credit cards, utilities, food, car payments, gas, insurance, charity, Starbucks, etc.
Then, split the list into two, separate lists.
The first list includes items that you’ll always have to pay (e.g. utilities). The second list includes debts you can pay off like your Sears credit card. That goes on the second list.
For the second list, reorganize the order of the items by largest account balance (Debt Snowball).
The Snowball method will help you to rapidly reduce the number of debts you owe.
First, make the minimum payment for every bill.
Then, make an extra payment for the one item that is on the top of your list. Repeat monthly until the item on the top of your list is paid in full.
After you’ve paid off the first item, take the money you were using to pay if off and now apply it to the second item on the list. Knock off each #1 item every month until all balances are paid off in full.
Image the encouragement you’ll receive once you start knocking off those payments each month!
Cut Your Expenses
So, if you are already in debt, how can you expect to pay anything extra to the bill at the top or your list? Just like a well-crafted movie: clever editing. If you spend $100 a week on groceries, try to spend $5 fewer dollars.
Other Ways To Cut Your Expenses:
Get Rid Of Unused Subscriptions! We all have good intentions to fully use that gym membership but if you aren’t using the gym, there is no reason to keep paying for it. Take up running or walking (free) or buy some used free weights on Craigslist (cheap).
You get the idea. Whatever you can cut out of your weekly spending, you can add to the payment to the top item on your Snowball or Avalanche list.
Create An Emergency Fund
Set aside some money you save from cutting your expenses and stash it into a special savings account that is created just for this purpose. That way when tough times arrive, you’ll be ready. The emergency fund can be used instead of pulling out your credit card.
Set Incremental Goals (And Reward Yourself For Reaching Them)
Give yourself incremental milestones ($500, $1000, $1500, etc.) and reward yourself with something fun. If this reward costs money, then set aside a little cash each month to save for this very purpose. There is no sense adding to your debt due to your celebration of reducing it. Keep the reward under $100.
Being prepared financially to purchase a home isn’t something we hear about often but can be the best advice you’ve heard in a long time. Buying your first home does not have to be a fairy tale, but a dream worth dreaming. It just may take dedication and self-control to make it happen. Find an appraiser in your area: Alpharetta|Brookhaven|Buckhead|Cobb County|Dekalb County|Dunwoody|Fulton County|Gwinnett County|Marietta|Sandy Springs