How to save to buy a home?
You can follow the steps given below to ensure savings to buy your dream home:
Don’t let credit card debt suck you dry
If you have a large amount of debt then there is no point trying to save money as the interest you’ll be paying on your loans will far outweigh any return you will see on any savings. You need to get rid of your accumulated debt first.
Also, before you take a home loan, you should put yourself in a position where you do not have any other debt to service. Not only will that free up cash to service your loan but you will be able to take a higher loan simply because you are not bogged down by other such payments.
So the first step is to clear your personal loans and credit card debt.
Start saving with your very next paycheck
You can start investing in an equity fund if you plan to take loan years after some years. Start a systematic investment plan (SIP) where a small amount gets channelized every month towards an equity mutual fund. If you do not have a long way to go, opt for debt mutual funds and select that type of debt fund which matches your time horizon and risk appetite.
Stop the outflow of expenses
Curb your expenses and you will be surprised at how the small savings add up. You can start by eating at home. Reduce your eating out budget and you will see what a big saver that is. Not to mention much healthier. Cut down on cigarettes and alcohol too. Not only will you be healthier but even richer. Cancel unnecessary magazine subscriptions. All these small moves will impact your bank balance positively.
Act on a definite plan
Do you have an idea how much the house is going to cost you? For instance, if you plan to buy a home that costs around Rs 50 lakh, then you will have to ensure that you have Rs 10 lakh as a down payment. So work with definite figures or else your savings may fall way below the actual amount that you need.
Also, work with a time frame. Do you need that amount within a year or within five years? Once you determine that, the actual investment avenue can be determined.