If you’re a first time homebuyer, or a previous homeowner – you know budgeting is the key to affording your home. It can feel overwhelming to add to your pile of bills, but if you organize your budget – the process can be more efficient. So how can YOU budget?
1— Understanding your income
First, make a monthly budget. Make a spreadsheet, buy a desk calendar, or just get some paper. Keep track of what you make and what you have to pay. The difference will show you what you can pay monthly toward a home. Don’t just track bills, but also groceries, gas, and leisure spending. Save the excess! Your down payment will thank you!
Have realistic expectations based on your income, and if you have different expectations change the way you save.
2— Making Home-owning a priority through saving
The best budgeting is done by prioritizing. Since a home is one of the biggest purchases most people make it is a priority. That means savings are collected with a home in mind.
What’s your goal?
When you think about budgeting – realize big strides are made up of small steps. That means saving your change or a dollar every day. It could also mean eating out less, using coupons when you go out, or carpooling. There are small, every day ways to cut spending. Evaluate your spending and how you could start saving better.
3 – Paying off debt + asking the right questions
Now that you have a system in place – it’s time to shrink that debt!
Ask yourself, “What debts are going to grow the most and hinder me from buying a home?” “Can I set up a lower payment plan or consolidate?” “How can I prevent this debt in the future?” “Is this debt from a necessity?”
Paying off large debts and taking care of high interest is something that needs to be done before you buy your first home. No one expects you to pay off all your debt – though if you can – GO AHEAD! The idea is that now that you understand your income and you have reevaluated spending by making your home a priority – you’re ready to budget well!