3 Secrets to Supercharge Saving for a House

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3 WAYS TO FAST-TRACK SAVING FOR A HOUSE

It’s been one year since my husband, Cory, and I moved to El Salvador - an incredible experience full of fun and hardship and, thinking back on what made this move possible for us, was buying a home here.

If "buy a home" is on your to-do list, I think you're headed in the right direction. There’s nothing like having your own space in which to create a home. The memories you make, the experiences you have, and the magic that’s created - there’s no other feeling that can replace it.

Having bought 3 homes, I’d say the hardest part (especially for your first home purchase) is coming up with the lump sum you have to pay upfront for your down payment.

Lucky for you, that’s what we’re talking about… specifically, 3 secrets to supercharge saving for a house.

Before we dive in, it’s important to remember that putting down a larger down payment can help lower your monthly payment once you move into your new home. It can also help reduce the time you’ll be paying your loan, saving you tens or hundreds of thousands of dollars over the lifetime of the loan.

That means it’s well worth your time to take saving for your down payment seriously and to figure out how to beef up those savings as much as possible.

Let’s discuss 3 ways to do that.

1) GET ORGANIZED

The first secret that will super-charge your savings for a house is simple but powerful… and that’s to get organized.

This will help you easily see how much you can afford to save each month and what kind of home you can afford, which will then give you an indication of how much of a down payment you need to save up - in other words: your goal.

The way that I get organized and I’ve seen many clients successfully use is to build out a financial dashboard, more commonly known as a budget. This is your single source of truth when it comes to your finances.

Here’s what you’ll want to do to get organized by building a budget.

First, list out your recurring monthly expenses… everything you’re paying every single month like your rent, electric bill, water bill, Netflix, etc.

Next, assign values to all of them. Your fixed expenses, which remain the same every month, will be pretty easy, but your variable expenses, which change monthly, will be a bit more work.

I suggest, in any case possible, logging in to your portals so you can see historical usage and get an average. For example, you can log into your electric provider’s website and look at your usage for the last year… you’ll be able to see the average or calculate the average by adding up the values from all the months, then dividing the sum by the number of months.

A lot of people skip this part, but I encourage you not to be one of them! Remember, you’ll want your data to be as accurate as possible so you can get an accurate estimate of how much you can afford to save and how much of a down payment you’ll need.

Last, include an estimate for other things you must pay each month, like car fuel and groceries. You can look back at your card statement to get an estimate of what you spend on each in a month.

Once you’ve got your list of all the expenses you have to pay each month, add all of them together to get a total and subtract it from the amount of money that’s deposited into your account each month.

For example, say you have $10K deposited into your account per month and, after adding up your expenses, your total monthly expenses are $8K. Subtract $8K from $10K; you have $2K left. That’s how much you can afford to save each month.

You can also use this information to determine what type of house you can afford, and what type of down payment you need to be saving, which we’ll talk about at the end. But, for now, what’s important is the maximum amount you can afford to save each month.

2) STRATEGICALLY STORE YOUR MONEY

The second secret to super-charge your savings for a house is to strategically store your money.

Saving money is great, but strategic saving is better… and that means storing your savings in places that can give you more money back than others. You’ve got some options here and your choice will ultimately depend on your risk tolerance and your timeline to buy a home.

But here’s the first thing to know: keeping your savings in a traditional bank savings account is almost certainly a bad choice. Why? Because many big-name banks are only offering a .01%* return on your money. Let me explain.

As an incentive to hold your money with them, institutions may offer you a percentage of the amount you hold in their accounts, so the more money you hold with them, the more money they’ll give you back each year.

The reason for this is larger than the scope of this episode, but in short: they use your money to invest and make money for themselves… that’s how they can afford to “pay” you to keep money with them. In any case, there are other places you can keep your money that offer much higher returns… 400x higher.

If you decide to move your savings from your traditional bank account at a big-name bank offering only a .01% return into a High Yield Savings Account (HYSA) offering a 4%* return, you’ll make 400x more money, guaranteed.

That alone is a HUGE improvement, right? And that’s just going from .01% to 4%. But what if I told you there was somewhere else that performed, on average, at 10%*? That would be 1,000x more than .01%. Do you know what place I’m talking about? It’s the stock market.

But, here’s where risk tolerance and timeline come into play: with a HYSA, you’re guaranteed the 4% (or whatever the rate is that they’re offering you). With the stock market, while it’s true that the historical average performance is 10%, it’s not guaranteed… you’re at the mercy of the market prices.

So if you prefer smaller growth at a guaranteed rate, maybe a HYSA is the best move for you. But if your timeline for buying a home is flexible and you’re comfortable and willing to ride the wave of market price increases and decreases to potentially take advantage of a higher return, maybe the stock market is for you.

Or you can do what I did and do both… that way, you’re getting some guaranteed growth at a smaller rate, and also keeping yourself open to the opportunity of taking advantage of larger growth.

The idea is this: when it comes to super-charging your savings, you need to shift your mindset to constantly be thinking, "Where can I store this money so it will grow faster than if I store it somewhere else?"

So now you know the maximum amount you can currently afford to save each month and you know there are certain places you can strategically store those savings where you could potentially make more money than others. The last step would be to start saving.

3) AUTOMATE YOUR SAVINGS

The third secret super-charge your savings for a house is not just to start saving, but to automate your savings.

Let’s be honest… we’re all busy. There are never enough hours in the day to do all the things we want and need to do and automation can be a powerful tool to make sure things get done…

Especially something as critical as saving.

In my experience in my own life and in watching clients, those who automate their savings hit their goals faster than those who do not.

So when you’re done reading this: take action! Or, if you’re not in a position right this second to take action, block time on your calendar to do so.

Because there are 3 things you need to do to fast-track saving for a house:

Get organized so you see the absolute maximum amount you can afford to save each month
Decide where you’re going to keep your savings
Set up a monthly auto-draft for your maximum amount into your chosen location

THE BIG PICTURE

You cannot save quickly unless you know how much maximum you can afford to save each month.

You cannot save quickly if you keep your money in a bank account that, as defined in its terms, is guaranteed to make you less money than if you kept your money in another with a higher return rate.

You cannot save quickly if you forget to do the actual part where you move your money into your designated savings location.

Each of these 3 secrets comes with a bit of work, but the beautiful thing is, once you do it, it’s done!

Once you do the third step of automating your savings, you’re good to go until you hit your goal and it’s time to start house hunting!

In the meantime, I have 3 resources to help you.

NEXT STEPS

First, I have a free Fill-in-the-Blank Budget Template that will make creating your financial dashboard a breeze. It’s the same tool I’ve used for a decade and I have no doubt you’ll find it insanely helpful.

Second, if you’re curious about exploring the stock market as a way to grow your money faster but it seems overwhelming - don’t worry. You do not need to know how to pick stocks to start investing in the stock market. All you need to know is what a fiduciary is and how to pick one. They can even help you set specific investment goals like buying a house tailored to your unique timeline and risk tolerance.

You can learn about fiduciaries in The Goodbye July Podcast Episode #28: “You Don’t Need to Know How to Pick Stocks to Invest (But You Do Need to Know These 3 Things!)”.

And third, once you get everything set up and automated, you’ll need to know when you hit your down payment goal so you can buy your house! This raises the question… how do you know what kind of house you can afford and what the down payment will be?

Check out my 9-Point Home-Buying Checklist that walks you through your home affordability calculations and 8 other things to do before buying a house.

Buying a home, especially for the first time, can be one of the most exciting times of your life! I am thrilled for you and am honored to be a part of your journey.

I hope you feel empowered and inspired to take action! It’s in your hands now… you’ve got the 3 secrets to super-charge saving for a house.

All that’s left to do is to take the steps and watch your life transform as you buy a house and make it a home.