Building an Investment Plan to Buy a House

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Building an Investment Plan to Buy a House
A home is a place to make your own and perhaps
raise a family. It can provide security, both
financial and emotional. And as the saying goes,
renting means youre paying someone elses
mortgage.
Even though a fair amount of people aspire to own
a home, not everyone is able to make that dream
come true. The homeownership rate among Americans
is 64, down from close to 70 before the 2008
recession. Purchasing a house is one of the
biggest expenses youll have in your life, and
itll take some careful planning. Thats
compounded by the fact that housing prices are on
the rise in many parts of the country.
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Building an Investment Plan to Buy a House
Saving enough for a down payment can seem
intimidating, especially when you might have to
balance that with student loans, retirement
planning, and other financial commitments. But
being a homeowner is possible if you think ahead
and make the right savings and investment plan to
buy a house. How To Save For a House? Here are
the best tips for how to save for a house and
make your homeownership dreams a reality 1.
Track Your Spending To start saving for a home,
youll first have to get your finances in order.
Spend at least one month tracking your expenses,
along with your partner if youre planning to buy
a house together. There are plenty of apps that
can help with this, but a spreadsheet also works
well.
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Building an Investment Plan to Buy a House
2. Make a Budget Now that you understand your
monthly expenses, its time to make a budget. As
you make your budget, dont just copy the numbers
you tracked. With each category, ask yourself Is
there a way I could cut expenses here?
Start with fixed expenses, such as rent, loan and
insurance payments, and utilities. Could you
downsize to a smaller apartment, get a roommate,
or move in with family? Would refinancing your
student loans lower your monthly payment or
interest rate? Can you get a better deal from a
different insurance or internet provider, or do
away with your cable subscription?
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Building an Investment Plan to Buy a House
Next, turn to your variable expenses, where
theres usually a lot more room to trim. Can you
jog outdoors instead of paying for expensive
fitness classes? Or having a potluck with your
friends instead of going out to restaurants every
week? Once youve trimmed what you can, develop a
reasonable budget for yourself noting how much
you will spend monthly on each category. Track
your expenses on an ongoing basis in an app or
spreadsheet to make sure you stick to the
plan. 3. Consider Ways to Boost Your
Income When you subtract your monthly budget
from your monthly income, there should be some
money left over for saving. If there isnt much,
or anything at all, left over, youll need to
grow your income so you can put that money away
for a home. Its always a good bet to start by
asking for a raise in your current role.
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Building an Investment Plan to Buy a House
If youve hit a ceiling in your existing
position, consider applying for new jobs to try
and boost your salary. Another option is to get a
side hustle going, perhaps one that offers
passive income. Options include renting your room
or apartment, renting out your car or wrapping it
in ads, or creating an online course. 4. Figure
out How Much You Can Save
Once you have a budget and have maximized your
income, calculate how much you have left over
every month. Before you put all of that cash into
a house fund, make sure you have taken care of
some other financial basics first.
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Building an Investment Plan to Buy a House
If you have any credit card balances, or other
high-interest debt, your priority should be using
all your extra money to pay that off first. Once
youve done that, if you dont already have one,
use your extra cash to build up an emergency fund
with three-to-six months of living expenses.
Next, you want to make sure youve started saving
for retirement, since your money will need time
to grow. 5. Set a Timeline Get familiar with
how much a house is likely to cost based on the
type of home you want and your desired location.
Then consider what percentage of the total cost
youd like to save for the down payment. Many
people try to save 20 as a down payment in order
to avoid having to get private mortgage insurance
(PMI), which can cost up to 1 of the loan
annually, adding to your monthly expenses once
youre a homeowner.
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Building an Investment Plan to Buy a House
6. Invest Your Savings If your timeline for
purchasing a house is less than one or two years,
you may be fine keeping your funds in a cash
management account like SoFi Money. If your
timeline is longer than that, investing your
money and giving it the chance to grow could be
the best way to save for a house.
When you open an invest account, financial
advisors can help you figure out an investment
strategy that works for your financial goals.
With financial institutions, you can invest in a
portfolio of Exchange-Traded Funds, or ETFs, that
aim to reduce some of your risk by investing
across many assets while keeping costs low.
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