Can you splurge while saving for your first home?

So, you’ve decided that you are ready to buy your first home and are hoping to save for your first down payment. This is amazing news, but now you may be wondering what sacrifices you must make to ensure you don’t lose your way as well as your down payment. If you’re reading this, chances are you have one answer you want, and one answer you’re terrified is right. The good news is that although any big financial decision requires sacrifice, it doesn’t have to be as black and white as our fear-addled minds often make it out to be.

Putting together that down payment doesn’t mean you have to live a limited lifestyle with a diet that consists of nothing more than beans and rice. The key to getting, and more importantly keeping, that down payment is knowing how to make strategic sacrifices rather than compromising your quality of life. 

Decide what is a “necessity”

This is the first question you need to ask when making a budget. There are obvious, primary necessities, like food, shelter, heat, and power. These are the things that you need to maintain your health and compromises on them can severely impact your life.  Compromises on primary necessities can be made but should be well thought out.

Food, outside of rice, beans, and water, is the easiest of these three to navigate. Be choosy when grocery shopping. If you have to hit up three different grocery stores to get every item on your list at the cheapest price (and the cost isn’t canceled out by travel expenses!), then do it. Another way to save on food is to buy in bulk with friends or family. This way you are getting a bargain with the bulk price and by splitting that price with your friend. This method doesn’t only ensure that you save as much money as possible, but it also ensures you aren’t throwing out your money when the groceries spoil.

Some things are more important than others…

Housing is by far the hardest necessity to make compromises on. Are you locked in a lease? If the answer is yes, then you have two options; a) see if there is a legal, affordable way to terminate your lease without your landlord becoming a terrible reference, or b) stay where you are and skip the next paragraph. The following tips will be better suited for you.

If option A is viable for you, then downsizing to a cheaper rental property, or even moving in with your parents or in-laws (if the option is available) can channel possibly hundreds of dollars that would otherwise be spent on rent to a savings account to where you can accrue interest on top of your savings. This can make that down payment much easier to build, and much less tempting to use. Changing where you live, or moving back home, is a major decision to make. If you decide to downsize, be sure to account for everything. Will moving be expensive? Are you adding to your commute? If you’re moving in with family and paying little-to-no-rent, will you be okay living under someone else’s roof? Take your time and consider every factor involved before relocating.

Now that we’ve tackled the most dramatic of the primary necessities, the only ones you have left to worry about are heat and power. These are easier in some respects than food and shelter. Heat can always be turned down (within reason) and many environmental tips will also save you money.

What about “secondary necessities”?

Secondary necessities are what you need to live well, but not to survive. Some of these can be classified as wants, rather than needs. This is where it is reasonable to cut corners. However, secondary necessities are easily blurred with luxuries. It can be easy to confuse a luxury for a secondary necessity and vice versa. This is where you have to be strategic. You might consider coffee a necessity; many of us do. Cutting coffee completely might not be as dramatic as down-sizing your living space, but it certainly has the potential to make things more difficult, and frankly make people like you less. The solution here is easy. Pour some coffee into a travel mug and to the relief or your coworkers, you have your morning coffee.

Other examples of secondary necessities may include things such as cosmetics. It would be easy to go cheaper, buy larger quantities less often, or take advantage of free samples when possible. Do you need stationery supplies such as post-its, agendas, pens, and notebooks to organize your own life or your children’s?

A compromise might be worth it

These could be necessities, but unless work or the school is demanding specific materials (sadly this happens), buy all these at the dollar store or in bulk. You can even cut back on the post-its and create your own planner with a plain notebook. If it is possible for you to ditch the stationery completely and go digital, both the environment and your savings will thank you.

If you are thinking of things you do that cost money, most of these are just luxuries. Instead of going to the bar for date night, go for a romantic walk in the park. Free alternatives for single, couple and family outings are all around you. If you live in a major city, check out museum free days or other possible free events. No matter where you are, the closest library is likely to have free events and classes for you to take advantage of!

A portion of the money you save by cutting out or downsizing any of these aspects of your life should go toward any debt you have. It will take you longer to build that down payment, but your credit will thank you.

So… about that Starbucks latte?

Yes, you can buy your latte and your first home. It’s best that you make your coffee or latte at home before shelling out the cash for the name brand options, but you can do it. Moderation is key, and compromise can help you get ahead sooner. Learn what your necessities and luxuries are, be completely honest with yourself, and plan your budget accordingly.

If you’re looking for advice to prepare for getting a mortgage on your first home, you can give me a call at (705) 333-4338 or get in touch with me here!