Ways to Save For a House While Renting

Feb 28, 2022

Ways to Save For a House While Renting

Your dream house is waiting for you - it’s out there with your name printed on it. You just need to chase after it. If you are asking yourself how, since you have a stack of other bills sitting on your desk including the rent for your current residence, utilities, and more, we are here to help.
There are ways you can save for a down payment on your own home, even while paying rent. Let’s dive into some tips to jump start your future and bring those dreams of homeownership to reality. It may not happen overnight, but the journey ahead of you is worth it.

What You Can Do To Start Saving for a House

Once you have the magic number for your savings goal, implement your plan to start saving. Let’s look at some tips we think will help you to save towards a house.

Invest in the LifeGoal HOM ETF

The LifeGoal Home Down Payment Investment ETF is a way for you to begin saving for a home down payment. This low cost, diversified ETF is designed so that you know exactly how much money has been designated for a down payment. You can manage your funds all while allowing us to invest that money professionally.
This method can help you to meet your goals by using favorable bonds and stocks to your advantage.

Open a Savings Account Dedicated to Your Down Payment

A savings account is a simple solution. Search for a high-interest or high-yield savings accounts to stash those dollars. Or, see if your state offers a first-time home buyer savings account (FHSA).
These accounts help future home buyers purchase their homes on a tax-advantaged basis. The catch? You are required to show proof of using the funds for approved purchases by filing a form with the state.
Set up automatic transfers to a savings account to take the thought out of the process and limit the chances of money being spent elsewhere. Not sure how to set them up? Contact your payroll department or financial institution to assist.
Instead of directly depositing your paycheck 100% into a checking account through payroll, they can deposit a set amount or a percentage each pay cycle to a savings account.
Do you get a tax refund each year? Save it! It is tempting to use it towards that 70” television you’ve always wanted, but won’t that TV look better on the wall of the home you want to buy?

Learning to Budget: 101

If you have a budget, great! You are already ahead of the game. If you don’t have one, build it out now. A budget keeps you on track, helping you reach your savings goal. You may even be surprised at how much you spend when you pay attention to your cash flow.
Skip The Extras
If you are serious about buying a home, you need to discipline yourself and cut out expenses that are not a necessity. Simple cuts can make a difference in your bottom line.
For example, how many video streaming services do you pay for each month? Do you watch them all? If not, can you pause a few subscriptions and move those monthly payments to your savings account instead?
Before you head out to the coffee shop, calculate the impact. Making your own cup of coffee at home takes the stress out of your wallet and shortens the time it’ll take to sign the deed on your new home.

Find Ways to Save on Rent

There are ways to save on rent or reduce your amount. No, your landlord will not adjust the monthly rate, but there are alternatives.
Some may cost you more upfront, but you could be saving money to re-invest it in your dream home in the long term.
Down-size or Find a Cheaper Rent
Moving is stressful, yes, and we know this may sound contradictory, but you could easily save hundreds of dollars each month by moving into a new rental before buying a home. Think about it; fewer square feet means that utility bills decrease. Depending on location, it could mean a shorter commute to work if you plan it out correctly.
Sure, it may be a tight space, but if you are willing to make it work temporarily, you could quickly put money aside to reach our savings goal.
Subsidize Rent - Find A Roommate
Finding a different place to rent may not be the best option for everyone. So, if you have an extra bedroom, how about finding a roommate? A roommate shares the bills, becoming responsible for their portion of the rent, utilities, etc.
That’s some significant savings when you think about it. Depending on the terms you agree on, you could cut your monthly expense in half!
Take the time to advertise for the right roommate. Interview them and screen them before accepting their inquiry to move in.

Have Time? Get a Side Job

If there is added time in your day, getting a side job could get you extra cash towards your new home. Don’t jump to conclusions. We know that not everyone can hustle two full-time positions and are not recommending that you do that. Instead, think of ways you may be able to add a little more to that savings account.
Here are a few suggestions:
  • Like to drive and provide service to people? Look into Uber, Doordash, or any delivery services in your local area. You control your schedule and hours - no added pressure.
  • Have a lot of unused treasures lying around? Dust them off and re-sell them through local websites such as eBay, Facebook marketplace, etc. This takes the load off you when you are ready to move and puts you closer to your savings goal.
  • Have a hidden talent? Use it! Perhaps you love to knit or crochet and can sell your product on local websites, or if you love animals, sign up for Rover and become friends with many fur babies.

Eliminate Existing Debt

Don’t be embarrassed when it comes to debt. You aren’t alone. Having a handful of credit cards, loans, and other types of debt is common. Disposing of the debt is one way to free up your wallet and put money away for a home.
Lay your credit cards, car payments, loan payments, and any other type of debt that is an interest bearing out on the table (or in an excel document). It’s valuable to visually see the numbers, allowing you to identify which one you want to start chipping away first.
There are different methods to consider when paying off debt, such as the debt avalanche or snowball effect. One focuses on higher interest cards first, the other on the smallest debt. Both methods work, but you need to be persistent and not incur debt during the process.

Does Your Landlord Offer a Rent to Own Option?

If you love the house you are renting or find a rental you would love to own, consult with the landlord. Ask them if they have or would consider a rent-to-own agreement.
Rent-to-own simply means that you would commit to a lease for a predetermined number of years with the option to purchase it. This doesn’t mean you don’t need to save for a down payment, but it does give you a morale boost and incentive to make the home yours.

How Much Should You Save To Buy a House?

Have you thought about the type of house you want to purchase? Homes are sold with a diverse price range depending on where they are located, the square footage, and the amount of land. The answer to this question rests upon your lifestyle, annual income, spending habits, budget, and the type of home on your wish list.
To determine how much you need to save, begin by identifying the price you can afford for a home, also known as your borrowing capacity. Be honest and realistic here. You’ll need to put money aside for:
  • A down payment - mortgage lenders want you to put 20% down. This alleviates the need for private mortgage insurance (PMI). 6% - 12% should be a minimum target, but it all depends on your personal situation. Special loans such as FHA, USDA, and VA require $0 to 3% down, which you may qualify for.
  • Closing costs
  • Moving costs
  • Renovation costs - this may or may not apply to you, but you should set some funds aside for a rainy day, or a repair or two around the house.
  • Emergency fund - It’s smart to buffer in an emergency cushion too, just in case.

The Bottom Line

If you have a dream of being a homeowner, make it a reality. Even while residing in a rental, you can put money aside to save. Sure, it won’t be an overnight process, but if you build a budget, a savings goal, and a financial plan and stick to it, you’ll be lounging on the couch in your dream home in no time.
One of the largest challenges you may face is being strict on your wallet, but it’s worth it if you get to scratch an item off your bucket list at the end of the road.
LifeGoal Investments is here to help you understand the importance of investing and is ready to help you strategically build a financial portfolio so that you can focus on today and be prepared for the future.
Determine your down payment | Consumer Finance
How to Save a Down Payment for a House | Ramsey Solutions
Tackle the Impossible: Save Money for a House While Renting | Build Beautiful | Toll Brothers
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