6 Simple Steps to Building a Savings For Your First Home
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So you’re looking to buy your first home, where do you even begin? When we started preparing to invest in our first home years ago, we were STUMPED. It’s such a huge purchase, not to mention there is so much financial preparation to go through before diving in. At the time, what we did know is that credit and substantial savings would go very far. In today’s post, we’re sharing six simple tips to improve your credit score and create a solid savings account.
1. Understanding Your Personal Finances
The first step in this process is doing a deep dive into your personal financial background. Knowing exactly what you make a month, your bills, and your credit score is an excellent place to start. If this all sounds a bit overwhelming, don’t let it deter you from your goal. You can always consult a professional such as Lexington Law Firm, to walk you through the credit repair process. Having this support can give peace of mind knowing legal professionals are going to fight for your rights.
Once you find out your expenditures and if any credit repair actions are needed, you can take appropriate steps forward.
2. How to Address Your Credit Score
Understanding your credit score is crucial when it comes to your personal financial history. Credit is something that sticks with you and, in some cases, can haunt you if not handled properly. When we first started thinking about buying a home, I was in the process of raising my score. Due to a few regretful college decisions on a credit card, I paid the price of rebuilding and repairing my score.
I was lucky enough to realize my younger financial mistakes and deemed what I thought was right at the time by paying off the debt and ripping up the card. THIS was a no-no, and in fact, hurt my score rather than improving it. Instead of ripping up the card and closing the account, I should have kept the account open. Technically I was still in good standing, and maintaining the account would have helped me establish a more substantial credit history today. While I won’t let my past mistakes haunt me, I realized that this was going to take time.
You honestly cannot improve your score overnight, just like most things in life it takes time. The great thing about this process is that the credit repair industry has grown tenfold in recent years! Lexington Law can navigate your credit repair process by sharing their knowledge and the law to fight for their clients’ rights to excellent credit and future financial successes.
3. How to Start A Home Savings Account
Listen, we all have financial obligations and monthly budgets to adhere to, but if you’re able to start a savings account, DO IT. This is especially true when it comes to your home purchase. Without a down payment, you may find yourself underwater or treading water, and this is a situation you don’t want to be in. Not to mention you’d also be adding PMI (Private mortgage insurance) to your monthly mortgage payment.
Once you’ve done your due diligence to understand your finances, you can begin to build a money map and calculate your monthly expenses. Understand the difference between fixed expenses and variable expenses. A quick way to differentiate the two is their names. Fixed expenses are just that, and vital to your daily life. An example of this may be your car payment or utility bills. Variable expenses are varied and can change based on your lifestyle or spending habits.
If you find yourself deterred to contributing to your savings, consider having it taken out at the time of payment. Contribute a certain percentage of your paycheck to your savings account. Having it deposited into savings vs. a checking account may help you avoid spending this allocated money. One of the best ways to fund a savings account is to find money in your budget to save.
4. How to Curb Unnecessary Spending
Practicing a frugal lifestyle doesn’t mean you have to give up the things you love. It does mean that if you are serious about buying a home that you’ll need to think smart about your spending. Living in San Francisco, we loved trying new restaurants. It was something we’d do several times a week, and our finances reflected this. When it came time to finding ways to save, this was one of the first things we scaled back on. Suppose you can figure your spending habits out and find ways to curb them, it's more money in your pocket and towards your home savings account.
Simple yet effective ways to save money come from things we do every day. You may or may not realize that your spending habits are costing you more than you think. Consider the cost of a coffee at a café or what you spend on entertainment, the gym, and even groceries. These are all variable expenses that can be adjusted to save more and pay less without much thought. Set into action a plan to track your monthly spending! Most online banking sites have services that do this for you. You can visually see your monthly expenses and adjust from there.
5. Know Your Partners Finances - Secrets are no fun.
Whether you find yourself buying a home solo or with a partner/spouse laying out some general ground rules for creating a home savings account is vital. Marriage means teamwork, and to plan and prepare to purchase your first home, clarity, and honesty are needed on all fronts. Finances can be stressful and often uncomfortable to speak about, but if you can’t be honest with your partner, it may create significant problems. If you plan on purchasing a home with a partner or spouse, it’s essential to have an open dialogue about finances.
Each person should understand their personal financial situation (as discussed above) and also shared finances as a couple. (This could be a moot point if you already have a great, open dialogue about finances.) Having an open discussion about expenses will only help you in saving and planning for your future home.
6. Set Financial Home Saving Goals
Setting goals is something that should be part of your financial plan. Having a game plan for building your nest egg for a future home can be exciting and rewarding. It takes time and responsibility but can put you at a tremendous financial advantage when it comes time to look for your first home. Don’t lose momentum if you find yourself hitting an unexpected bump in the road.
Buying a home is a big decision that shouldn’t be made light of, and if saving or improving your credit takes longer than expected, it's OK! Let Lexington Law Firm get you started on the right track. As the oldest and most respected name in credit repair, and the only player in the category with the legal experience they drive results for consumers. With these goals in mind, are you ready to make the leap to start saving for your home?
