6 ways to save money for a house

Now that you have an idea of how much you might need to save for a house—or at least for the down payment—you can come up with a plan to set money aside for this big future goal. Here are some ideas.

1. Build your budget

Creating a budget is one of the most important steps when setting a financial goal. It helps you see where your money is coming from and going so you can better divvy up your funds.

With a budget, you can:

• Set purchase limits
• Eliminate wasteful spending
• Earmark funds for various goals (including a future home)

Once you know how much you can afford to save each month, you can also automate those savings with transfers into a dedicated account. This is known as a sinking fund, where you consistently save money for one-off or irregular expenses.

2. Downsize your expenses

Once you have a budget in place, you can identify areas where you may be able to trim the fat. By reallocating those funds toward your home savings, you may be able to purchase a property even sooner.

Some ways to reduce expenses include:

• Buying items at a discount or in bulk
• Limiting “fun” spending such as eating out at restaurants or buying new clothes (remember: it’s just temporary)
• Sharing certain resources and products with family (such as subscriptions)
• Taking advantage of free services and products (such as downloading free ebooks from your community library instead of buying the newest titles)
• Negotiating down recurring expenses (think: calling your cable, internet, and insurance providers to see what discounts or lower-cost plans may be available)

Cutting your spending is rarely fun, but it can help you save hundreds of dollars a month if done properly. This can go a long way toward your homebuying plans.

3. Pay off debt

Debt can be expensive and hold you back from other financial goals. “Paying off high-interest debt should be a top priority,” says Jamie Curtis, a global real estate advisor at Sotheby’s International Realty. This is especially important for high-interest debts such as credit cards, which can have interest rates well into the double digits.

If a chunk of your monthly income is going to high-interest debt, consider focusing on paying down your balances first. By refinancing or eliminating these debts, you can potentially save thousands per year, which you can then allocate toward your home savings.

You can also reduce or eliminate the interest charges on your existing debt by:

• Moving credit card balances to a card with a 0% APR balance transfer offer
• Refinancing auto, personal, or private student loans to a lower interest rate
• Taking out a personal loan to consolidate higher-interest debts

4. Increase the income from your main job

Sometimes, cutting your household expenses isn’t enough. Or it might not be realistic. Finding ways to make more money is also helpful, and there are a few ways to go about it.

First, consider asking for a raise. If you’ve been in your position for a while without an increase in pay, and you can make a good case (maybe you recently reached a big milestone or helped the company save money), this may be the most effective route. You might also consider asking for a promotion if you’re willing to take on additional responsibilities or roles in exchange for higher pay.

If your employer denies your request or there isn’t room in the budget for a pay increase, you might want to look for a new job that pays more. The Pew Research Center found that 63% of U.S. employees who left their jobs in 2021 did so because of the pay. And 60% of workers who changed employers between April 2021 and May 2022 experienced an increase in wages.

5. Look for other ways to earn

Aside from your day job, there are also ways to amplify your earnings (and boost your savings efforts) on the side.

Taking on a side hustle has grown in popularity in recent years. About 10% of workers today say that they have a side gig in addition to their primary job. To earn extra cash, consider taking on an additional part-time job, doing freelance work, monetizing your hobby, or even renting out your car or a room in your home. Just be sure that whatever you choose wouldn’t present a conflict of interest or breach any noncompete agreements you signed with your current employer.

6. Plan for the extras

Aside from your down payment, you’ll need to plan for a few other expenses involved with buying a home. Some out-of-pocket expenses to expect include:

• Closing costs: These are the administrative costs associated with getting a mortgage, including origination fees, title searches and insurance, taxes, and other miscellaneous fees, which typically run about 2%–5% of the total loan amount. They can often be rolled into your mortgage principal if you don’t have the cash on hand, but that will increase the size (and cost) of your loan.
• Moving expenses: Relocating from your current place to your new home will likely require hiring some professional help, as well as spending money on boxes, bubble wrap, etc. Plus, you may need to perform some initial home repairs or upgrades to make your new home move-in ready.
• New furnishings and appliances: You might also need to invest in things like a new couch, dining table, refrigerator, or bedroom set, especially if your new home is bigger than the last. Be sure to account for expenses that help make your house more comfortable and livable.

Planning for each of these expenses is important, as is finding the right balance between saving enough money and timing your purchase so it works for your family.