Budget for a Home: Top 3 Tips and Tricks to Save Money Fast
There are many ways to budget and save money for buying a home. However, many prospective homebuyers find budgeting for a home daunting. After all, it’s not just saving a few hundred dollars for a new home, it’s saving THOUSANDS of dollars! Don’t let that discourage you, though. We see people do it every day!
Here are a few tips and tricks you can do to save money fast for buying a home.
Track Your Spending
In my opinion, this is the most important thing you can do with your finances. I was introduced to this concept by a book I read when I was in high school called “The 4 Laws of Financial Prosperity” by David Blaine. I still recommend this book to those who are looking to save money and get out of debt. Law #1 in this book is to track your spending. What you track, you can measure; what you measure, you can improve. Tracking every penny is time-consuming, but it works!
Home Budget Tip #1: Track Your Spending
Here are three ways tracking your spending can help you reach your goal:
Gain Perspective
I’m a HUGE advocate for having a written budget, as it provides a guide to manage your income and expenses. However, if you don’t have a written budget yet, tracking your spending can be a good place to start. Most people have a general idea of their regular expenses items such as rent, mortgage, utilities, transportation, etc. Tracking shows you what you spend day-to-day.
It can be an eye-opening experience when you first start tracking what you spend. Generally, people spend more than they think they do. By tracking your spending, you can see how much you are spending on frivolous items — therefore, allowing you to easily see what you can cut to save money.
Cut the Fat
If you track EVERYTHING for a few months, you will see where your hard-earned money is going, and what might be wasteful or unnecessary. Remember, these little purchases add up. It’s equivalent to a leaky hose. Even a small leak over an extended amount of time can cause a flood. Start by flagging spending that you either don’t need any more or wouldn’t be missed if you cut them out of your life. Food, entertainment, impulsive purchases (i.e., kiosks near checkout counters), and clothes are common items to cut. While you may find some big-ticket items to eliminate, I’m willing to bet you’ll find that cutting many small items will make a huge impact.
Change Behavior
This is the part where I tell you that I do practice what I preach. I’ve found that I spend less when I’m tracking my spending because it makes me think twice about every penny I spend. I have even put things back at a store because I didn’t want to take the time to write it down and track it when I got home. To take this one step further, stop paying for things with a debit card or credit card and carry cash only. Studies have shown that the act of physically handing over money for an item creates an emotional transaction.
Tracking your spending is a great first step when it comes to reigning in your budget. Although it takes a bit of dedication to track everything, it’s not something you have to do forever. With that said, I find it useful to implement this several times a year for a month just to make sure I’m keeping in line with my budget goals.
Gifts from Uncle Sam
Ok, so these aren’t necessarily gifts and include tax refunds and stimulus checks. Tax refunds are how much you overpaid the government in taxes. Stimulus checks help those in need of income they may have been without due to unusual times and circumstances. Keep in mind this money all comes from the government, so it’s essentially some of your tax dollars come back to you. People either forget these items or can’t budget for them because the amount is usually unknown too far in advance.
Home Budget Tip #2: Take Advantage of Tax Refunds
Tax Refunds
Tax season lasts until May 17th this year, so it’s currently tax season at the time this article is published. Many Americans do end up getting tax refunds. In fact, last year 74% of all filers received a refund. I’ve seen dozens of buyers save this money and use it towards a down payment and/or closing cost when purchasing a home. In my opinion, this is a great way to spend that money.
Stimulus Checks
While historically this hasn’t been a factor, we are currently over a year into the Covid-19 pandemic and many American families in 2020 and beginning of 2021 received stimulus checks. If you have the ability and there are more in the future, put them in savings to go toward your next home.
If you receive either a tax refund or stimulus check, you might as well put it towards something useful like buying a home for your family. I feel like sometimes people see this as bonus money and use it to “reward” themselves with something nice like a new toy or fancy vacation. While I’m a fan of those things, I’m a bigger fan of having a nice home that I live in every day.
Sell Things
They are only things after all! Odds are you have things lying around that you no longer use. So, sell them! This has two big benefits: 1. You can take the money and put it in savings. 2. You don’t have to move that item when you move into your new home. It’s win-win. A few common items that come to mind are unused exercise equipment, clothes, furniture, vehicles, or things with a motor/engine are all common items you can sell.
Home Budget Tip #3: Sell Items You No Longer Use
Endowment Effect
Letting go of things is tough for many people. In Psychology this is referred to as the Endowment Effect. Simply put, people are more likely to hold onto something they own rather than purchasing a similar item at equal value. Most humans today are consumers. Unfortunately, studies on the endowment effect show that once we buy stuff it’s hard for us to let it go.
If you find yourself in this train of thought, here is a quick exercise you can do when evaluating items to sell. Ask yourself a few quick questions about some of your things to determine if it’s worth selling:
Do I really need it?
Have I used it in the past year?
Does the item still bring me joy?
Does the item have enough value to make it worth the time selling? If not, consider donating it and taking the tax write off.
If I didn’t own this item already, would I buy it again?
Where to Sell
There are many ways to sell items today. It’s much easier than it has ever been before thanks to technology. Many folks still do garage sales, newspaper ads and consignment stores, but with the internet there many websites and apps that help. Craigslist is a website many folks use, but different social media platforms are becoming more and more popular as well. My personal favorite is Facebook Marketplace. I’ve also had some success on nextdoor.com.
If you need more tips on getting rid of items, I highly recommend the book “Unstuffed-Decluttering your Home, Mind & Soul” by Ruth Soukup.
Bottom Line
These are just a few tips to help you save, earn, and accumulate more money to purchase your next home. There are countless other ways to do this, though; so get creative and start working on it today if you’re thinking of buying a home in the near future. You can also schedule a meeting with one of our Real Estate agents to chat through things and gain tailored advice. We love helping folks with all aspects of Real Estate, and many times budgets and finances is a big part of those conversations.
Since 2000, the Blythe Real Estate Team has helped families and individuals buy, build and sell residential homes in the Omaha area. From new construction and existing homes to commercial real estate, we have the expertise to assist our clients with their real estate needs!
Chad Blythe
402-578-9822 | chad@blythe-team.com
