Elevate Your Pay Check

#21: The How To: of Saving for Your First Home

December 29, 2022 Carolyn
Elevate Your Pay Check
#21: The How To: of Saving for Your First Home
Show Notes Transcript

For the final episode of 2022, I am sharing the exact step by step process we took to save for our first home.

It wasn't an easy journey. It was filled with determination, discipline, and some out of the box thinking to get us there, but we got there, and so can you!

But of course we are going to give you a jump start  to your savings journey.  The Financial Moment is launching a 21 day Savings Challenge!!

Click here to sign up and be a part of this exciting 21 day journey filled with prizes, resources and tools to start of 2023 with money in your pocket!!

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#21: The How to of Saving for your First Home

[00:00:00] Hello everyone. My name is Carolyn. Welcome to the saving for your first home podcast. I am the CEO of the financial moment. We offer money coaching for those who are ready and willing to make financial changes in their lives. For the most of us, there comes a point in time where we think to ourselves, it will be really nice to own property, but it sometimes can feel like a pipe dream, and not very easily obtainable. So I created this podcast to give you all the information and tools you need to take the steps forward toward home ownership. Take it from me, my husband and I started our lives together, working part-time jobs with a young child, fast forward through many hiccups and failures. We stepped our feet into our very first home. 

For us it was a pile of dirt, but eventually our family home was built on that dirt. Now we are in the midst of growing our investment property portfolio. I created the savings for your first home podcast to give you easy, [00:01:00] actionable tools for you to do the same. If you have that same gut feeling that I did and want to create a life for yourself and your growing family, but don't know where to start.

You are in the right place. Let's do this. 

Welcome back to The Saving For Your First Home podcast. This will be the final recording for 2022. It's a wrap. , can you believe we got here? Anyway let's jump right into it today. I actually thought about all the episodes that we've released and for the most part, a lot of them were theoretical. I had some really good interviews as well, but I really haven't touched on exactly how to save for your first.

you know, it's important to create a budget and have goals and all these things that we've talked about, but how did we actually do it all? So I thought I'd go through my personal story and tell you how we went about saving for this first [00:02:00] big purchase. You know, the word saving is an interesting word because it kind of brings up or triggers some feelings.

Like a synonym for saving is words like reduction, to cut, to decrease, to economize, to be frugal, to be thrifty, and none of those things sound fun, . So how do we go about making change in our life and planning for the future if it's so difficult to. practice saving. The way I like to think of it is saving is just having more money in your pocket.

And with any change, you know, it is a little painful in the beginning, but once you have a routine, once you've set it in motion, it really isn't a big deal. So I like to start with how we began this process. After my husband and I got married, we rented out a basement apartment [00:03:00] and we had a young child and the apartment was close to where we worked, so it was fairly convenient.

You know, my son went to daycare and we were close. It was all within 10 minute driving distance, and there was a good setup and we were there for at least three years. Then we start to think about the future. Our son was getting older. We needed to have a good neighborhood for him to go to school, and we wanted to own property, so how could we make this happen?

 At this point, we really didn't have any savings. All of our savings kind of went to our wedding, and so. We decided to take one year, designate one year to put all of the extra money towards a down payment for our house, and we knew our spending habits. So this would definitely mean a change in our lifestyle.

And we knew if we put it into a typical bank account that we would end up drawing it for some reason or another . So for us, what we did is we put it into a guaranteed [00:04:00] savings which was secured. So the money would go in, but the money couldn't come out until it designated time. And that was perfect for us because it really forced us to be disciplined.

We weren't able to take it out. We continuously put the money aside, locked it away. And eventually , saw the money grow. So this is important to recognize what your spending habits are, because if you know that you tend to take it out. Once you put it away, then find a vehicle that locks in your funds.

Savings doesn't have to be in a typical bank account. It can be in an investment account, it can be in a mutual fund. It can be in so many different avenues these days. So find the vehicle that works for you where you're not gonna touch it for a period of time. The second thing we had to do was look at our income and our expenses and see how much of that we can actually put in towards savings.

So I've talked about different budgeting styles. One of the [00:05:00] easy ones is the 50 30 20 rule. This is where 50% of your take home pay goes towards your needs. So your rent and other bills that you may have, and then 30% is allocated towards your wants. And the final, the 20% goes towards your savings.

Now this is where you may need to switch it up a bit because perhaps you need to reduce the amount that's going to your wants from 30% to maybe 20%, and that's gonna give you a little bit of buffer. That's gonna boost those saving. . So for example, you know that you get maybe a yearly increase as your income goes up.

You're gonna take that amount, the difference and put it towards your savings instead of towards your wants. So this will keep the ratio lower in the want section and higher in your savings section. As your income goes up, your savings goes up. So I was fortunate enough. to get a new job shortly after we got married [00:06:00] and the pay amount was a bit higher and so exactly that, we took that money and put it towards our savings instead of letting lifestyle inflation.

creep up on us. So the third thing we had to do is really look at our expenses. Where was a our money going? We were a young family. We didn't know how to cook very much. And so, yeah, probably our takeout bills were a little bit high. Our entertainment costs were probably a little higher than they should have been.

So this is where sacrifice comes in. You know, you have to kind of scale back in order to fund your real goal. It's a sacrifice, but in the end it's going to get you what you really want anyways. The extra takeout meal is really not gonna get you there . It may put on a few pounds for you, but it's not gonna get you into that new home.

The next thing is the side hustle. Now, they didn't call it that back then, but we were always into thinking about entrepreneurship. My husband and I tried [00:07:00] so many different adventures. One of them was a gumball machine. We placed it in a couple restaurants and people would, put their change in, get a gumball out and it was a cash business.

Not bad eh?, so all think outside the box. You know, anything to boost your income that doesn't take a lot of time, but gives you a little bit of extra in your pocket not to spend, but to add to that savings bucket. Then another thing we did was we looked into company savings plans at the time.

We were able to make a deduction off our payroll, to put into a government bond, and it would come due in one year, and you'd have this additional cash amount that was deducted without it going through your hands. Perfect way to save. So look into some automatic savings plans. It could come from your employer.

It can be done through your bank and these funds can be invested and you can forget about them for a period of time. So once all of this was in [00:08:00] place we had to monitor and tweak our expenses weekly because it's not a set it and forget it. You really need a monitoring system to be able to ensure that you're staying on track.

So I would advise getting an app. We used a spreadsheet, but anything that's really going to help you to keep those expenses in check and we have lots of tools, just give us a shout and we will send you a free tool that's going to help you to do that kind of monitoring. The next thing to avoid when you're in the period of saving is to avoid holiday debt.

Now I know it's just passed over the holidays and we're headed into a new year. . So if you did end up in a little bit of debt over the last holiday season, it's a good idea to kind of recap and write down all of the, your current debts and create a plan in order to pay them back. In episode 13 of the podcast, we talked a lot about debts.

So if you haven't listened to that episode yet [00:09:00] head back and listen to that one to analyze the debt that you have in creating a plan to pay it off because you don't want the debt to overpower your plan to purchase a home. Cuz it can impact credit scores, it can impact the way the bank sees you.

So you really need to address that before you continue on in this journey. And finally, we really needed to be financially educated. And I can't stress how important this is because you really need to look at your own upbringing. Some parents do a great job and teach their kids about money when they're young, but others are so busy trying to provide for the family that they forget about teaching their kids about money.

So it's important to look at your own money story and any financial hangups and triggers that you might have. I created this podcast to help to educate people and teach them on how to manage their money so that they [00:10:00] can reach those ambitious goals. So share this with a friend. So many of us grew up without this type of information, and what a blessing it would be, for you to share with someone that could be struggling or that just has ambitious goals like you.

And the final thing to leave you with is being prepared for the unexpected. And I can't stress this enough. Our savings is not only for our financial goals, but it's for the things that we can't predict. These bumps in the roads have a big impact on our financial lives. They can cause a setback, they can change our projectory, and they can actually cause discord in your relationships.

So what better reason to provide yourself with a nest egg or a cushion, that when those unexpected things happen, you are ready, you're prepared, and you can just continue on with your savings goals and your future plans, and [00:11:00] that was it. After a year or so, we had enough money to put as a down payment for our home.

With saving a little bit of hustle and investments, we were able to make it into our first home. So are you ready to start that? I've got a challenge for you. Let's take part in a challenge for January. If any of you have siblings, you know that a challenge is one of the techniques that our parents would use.

They would say, who can clean up their toys the fastest? And sure enough, the two kids would run out and be putting away their toys as fast as ever, just so they could beat their sibling. And it's a win-win for the mom. The house is cleaned. So when it comes to our finances, sometimes a little challenge is all we need to get those goals nailed down. So here it is, the no spend challenge and it's super fun it's gonna help you to get your spending habits under control. And the [00:12:00] best part, it's not gonna feel like a chore as you prepare for it and go through with a challenge, you're gonna learn, you spend most of your money and how to curtail some of those impulses as well.

Okay, so what's the challenge? A no spend challenge is where you go for a set period of time without spending any money, right? So taking a break from spending money, it has a lot of benefits. Not only are you going to save, but you're gonna realize who you are. Are you impulsive? Do you tend to spend money on things that are not necessary?

Learning about these habits will help you change them after the challenge is finished. Okay? So it is going to be for a one month period, which may take some discipline and planning, but in the end, you're gonna save. More money, and if we do it for 31 days, it's going to establish lifelong changes to our financial behavior.

Okay? So we need some rules. What is allowed Now, obviously [00:13:00] we need to put gas in our cars, we have to pay our bills like electricity, mortgage, rent, and we need internet and phone. So those are the allowed. Now what is not allowed? This is more important. Take out buying new clothes online, shopping, entertainment, getting your hair and nails done, any of those type of expenditures, they are on the not allowed list.

Then I would like you to figure out why you wanna do this challenge. What is your gonna be, your motivation? Do you wanna save money to purchase a home? Do you wanna pay off your debt? Do you want to start an emergency savings fund. What is your why? We need to understand what that why is so that it's gonna drive you in times when you really wanna go out and just get a coffee.

Then the next thing is we gotta be prepared. So the first thing is, stock up on some groceries and stacks to avoid the takeout. . You know, on the Friday [00:14:00] evening when you're done cooking for the entire week, you're gonna wanna take out. So make sure you have something in your freezer that is just easy that you can pull out and have on your Friday nights or whatever day is a crazy super day that you normally take out on.

The next thing you wanna do is communicate this with your family. Telling your kids what you're on this challenge and that you're doing this together is gonna make it 10 times easier for everyone. And again, it's gonna be a great learning opportunity for your kids too. Better thing to do during this challenge is try and actually earn some money while you're going through the four weeks, do a cleanup around your house.

There could be items that are worth something to somebody else that you can sell online and make a little extra cash. Okay, so are you in? Are you with me on this one? I want you to head to the link in our show notes to download the full guide, and I want you to share this with one friend. It is gonna be so super fun.

I'm going to post some stuff on social media as I'm going [00:15:00] through it, and I hope that you two will share with others and we are going to have a great January. All right. Take care guys, and it has been a pleasure serving you over 2022 and let's level up together in 2023. Take care guys.