How to (Actually) Save Up Enough for a House 🏡

Lot’s of people say, if you want to buy a home, just stop eating avocado toast! Now, we all know that’s absurd, and not the reason why most Americans feel they can’t afford a home. So what changes between the 1950’s and now?
Home owning was much more achievable in the 1950's then it is now.

Home Prices Have Doubled 😮

Median home prices in the US have nearly doubled, adjusted for inflation. That means that for the same income, people in the 1950’s were paying 2 times less for a house. Why has this happened? There’s like a whole bunch of reasons, but a big one is that we all want to live in the same neighborhoods. Urban dwellers used to be about 64% of the population, now it’s a whopping 83%! The growing demand and lack of space is contributing to these prices. So how do you set yourself up to ACTUALLY buy a home in the near future?

The Median Home Price in the US has increased drastically.

5 Ways to Save More Dollars for a Home

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1. Cut out Big Expenses 💳

This sounds tough, and it is. If you want to make a real dent in your spending, you’ll have to figure out how to reduce the big expenses, namely rent, food, and transportation. That might mean downsizing your living space, moving to a cheaper neighborhood, or gasp, living with your family. Buy wholesale at Costco or from vegetable stands, not chain grocery stores. Get commuter benefits from work and take public transport. It’s tough to be frugal, but if you want a lot of cash, this might be necessary.

2. Start a Side Hustle 🏃

I know, I make this sound soooo easy when it can actually be a fuss to get started and actually see it go anywhere. Here’s a list of awesome side hustles you can try out. An extra $500 in your pocket every month, on top of you normal savings, could bring you years closer to buying a home.

3. Take Advantage of Retirement Benefits 💸

The conventional wisdom is that you should not withdraw your retirement funds until you 59.5 years of age, so you don’t incur the penalty. I would agree with that, BUT, there are ways to take money out of the account WIHOUT penalties before retirement.

  1. You can borrow up to $50k or half the value of the account, whichever is less from your 401k. You will owe yourself back with interest, but at least you’re paying yourself and the rate isn’t too high.
  2. You can withdraw up to $10k from your IRA as a first time homebuyer without penalties, interest-free.

These approaches have some downsides which I would read about here, but they’re not terrible options.

4. Buy Smarter/Cheaper 💡

Look for a cheaper house. Now, you might say, “I don’t want to live in a crappy house or a in a bad neighborhood”, and we get that. You don’t have to! Research to find a home you believe you can rent out easily (and charge more than the mortgage payments + other monthly costs). You can use the extra income to pay your rent in the place you actually live in, plus you now have equity in a home you can later sell. Et voila! Now, I made this sound really simple, but this will require a good amount of research about rental prices, location, housing market, cost analysis, etc. Here’s a good place to start to learn more.

5. Pay off Debt 👏

Unfortunately, it will be very difficult to afford a home if you are still paying off your other debt, mainly because the mortgage rates may be high. Pay off high-interest debt and focus on reducing your overall debt load. This will make it easier to secure a mortgage and get a better interest rate when you're ready to buy.

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