Once you know how much you can afford to spend on your home purchase, it is time to start saving. The best option for most people is to save a portion of their paycheck automatically.
You can choose a fixed amount or percentage of each paycheck to get directly deposited from either your paycheck or from your checking account into an appropriate account, such as a cash savings account. Save as much as you can so you can quickly build up your balance and make your purchase as soon as you are ready. Having that money come out of your check automatically will help you to stay on track.
Investing to achieve your savings goal can help you reach your goal faster than a cash savings account because you can usually expect higher returns from investing.Please talk to a qualified person to help you decide if investing is right for you. Typically you need to plan to save for more than 5 years to reduce the invest risk.
For example, if you’re starting at zero and planning to buy a house using a $44,000 down payment, you could save $675 per month in a money market account, Federal Deposit Insurance Corporation (FDIC) insured, that might pay 0.29% annually. And you could save your down payment in five years.
Keep in mind by then, your needs—and the housing market and mortgage rates—will likely have changed. Therefore iinvesting could help you achieve that goal faster.
In addition to your automatic savings, do not forget to save any one-time income—which can further speed up your purchasing timeline. If you get an annual bonus, tax refund, large gift, or side income earnings, put all of that money directly into your savings account and save as much as possible to build up your savings even faster.
Check in next week for part 4 of 4.
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