How to save money to buy a home: practical and effective tips

How to save money to buy a home

Define a clear financial goal

To achieve any goal, it needs to be specific. Start by researching the average cost of homes that interest you, including related expenses like closing costs, taxes, and potential renovations.

Once you have this information, set a precise amount and a timeframe for reaching it—whether it’s one, two, or five years. With a clear goal, you’ll be better able to plan your path toward buying a home. Setting a specific savings target also motivates you to stay consistent in saving money to buy a home.

Define a monthly savings amount

Setting aside a fixed monthly savings amount is essential. Calculate a reasonable amount that fits within your budget, so you can save each month without compromising essential expenses. Ideally, aim to save around 20% of your monthly income, but adapt this percentage to your financial situation.

If saving is challenging at first, start with smaller amounts and gradually increase them to reach your ideal monthly goal. The key is to build a consistent saving habit, and over time, your accumulated savings will be a pleasant surprise.

Automate your savings

Automating your savings is one of the most effective ways to ensure consistent contributions. Set up an automatic transfer to a separate account at the beginning of each month. Selecting an account that offers interest can also help grow your savings over time.

Automation helps you avoid the temptation to spend the money on other things and ensures that savings happen effortlessly. Many people find greater savings success by using dedicated accounts for specific goals, particularly those that earn interest.

Cut unnecessary expenses

Although it sounds basic, avoiding unnecessary and impulsive expenses is essential to save enough to buy your dream home.

Identify discretionary expenses that can be eliminated, such as unused subscription services, dining out, or impulse buys. A helpful tip is to try a 30-day challenge, where, for a month, you limit your spending to essentials only. Additionally, reduce expenditures like food delivery services or other conveniences that add up over time.

Also, cut out habits or hobbies that often represent excessive monthly costs.

Create a family budget

To track and limit expenses while saving, you need a clear overview of your family budget. Review your bank statements, organize your expenses by category and frequency, and distinguish between fixed costs and extras. Group these into housing, subscriptions, entertainment, clothing, and so forth.

A simple Excel sheet or a budgeting app can make this process easier to manage.

Look for additional income sources

Even after cutting unnecessary expenses, you may find that you need extra income to keep your savings on track. Consider freelance work, depending on your professional field and available time, or try selling items online.

You could even monetize a hobby; for instance, culinary skills can lead to selling homemade dishes or sharing content online. Crafting, small repairs, or creating artwork can also generate additional funds.

Invest wisely and securely

An essential factor for success in saving money to buy a home is avoiding risks that compromise all your savings. Consider low-risk options with steady returns, such as fixed deposits, conservative mutual funds, or savings products from your bank. Seek advice from a trusted financial advisor or bank representative.

It’s essential to choose investments that align with your risk profile, as the extra income from interest or dividends can make a valuable contribution to your savings goal.

Request a raise or explore new job opportunities

Stay informed about job market trends and salaries in your field when you begin saving. You might discover you’re earning below the industry average for your role.

Start by requesting a raise, supporting your request with relevant salary data. If a raise isn’t possible, consider updating your CV and networking to find a more lucrative position, which could boost your savings capacity.

At Engel & Völkers, we believe that saving money to buy a home requires discipline, commitment, and a carefully defined, realistic plan. With a clear objective, regular savings, and the elimination of unnecessary expenses, you’re building the path to achieving your dream. Remember, each small step brings you closer to your goal, and persistence is one of the most critical keys to financial success.