Your dream house is so real you can almost touch it. You envision the state-of-the-art kitchen, the cozy den and the spacious backyard. Someday, you will build the house that now exists only in your imagination, but first, you need to save the money to construct it. With good planning and careful saving, your dream house may become reality sooner than you think. Start by calculating how much you’ll need for a down payment and go from there.
Down Payment and Home-Building Fund
Decide on your goal for a down payment. For best results, try to make a down payment of 20 percent. That’s a lot of money, but that large of a down payment saves you the expense of private mortgage insurance when you do complete construction.
Open a savings or money market account for your home-building fund at a bank or credit union and search for the highest possible yield. Even if interest rates aren’t that high, every little bit counts. While it’s crucial to establish a savings plan, put any windfall into the fund to help it grow, such as a tax refund, raise, commission or cash gifts.
Increase Your Savings
Go over your current monthly budget and trim the fat as much as possible. The money you save goes into your home-building fund. Cancel the gym membership and start walking, jogging or exercising at home. Bring your lunch to work every day instead of going out or ordering out. Cut the cable TV cord and watch programs online instead. Examine every aspect of your expenses and determine what you can do without and how much you can put away.
If possible, find a part-time job or investigate freelancing gigs. The money you earn from those endeavors should go right into your house fund. Make an extra $1,000 a month after taxes, and you’re putting $12,000 into your fund annually.
If you’re currently paying a relatively high amount of rent for your home, try to find a cheaper place to live while you bulk up your home-building account. Remember that it’s only temporary and keep your eye on your goal. If your former apartment cost $1,500 a month to rent and your newer, smaller space is just $1,100, squirrel away that extra $400 a month in savings.
Look for Construction Savings
As you scrimp and save for your house, you should also figure out ways to save when the time to build arrives. Are you handy? You can save money by doing some of the work yourself, even if it is just painting or cleanup. Look for recycled materials you can use for your new home. Some perfectly good materials are less than cheap – they are free. Search out sales on flooring, fixtures and appliances. Factor energy efficiency into the home to save money in the long run while helping the environment.
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.