In my last post in the Buying Our First Home series, I mentioned that G and I are saving 50% or more of our income for our future first house. A reader e-mailed me and asked me how to save money for a house, so I thought I’d fill you in on how G and I got to a place where we can put 50% of our income into our house savings.
First things first, there are some major reasons why we are able to save so much of our income:
- We opened up an Ally Bank Online Savings account. Having an online savings account helps us from spending that money and they offer better interest rates than most offline accounts.
- We became debt-free a couple years ago, paying off about $60,000 in debt (mostly student loans, a car loan, and a minimal amount of credit card debt)
- Although, I have been a victim of some sort of lifestyle inflation since I became debt-free (mostly in the form of freer spending), we still live quite modestly. Our fixed monthly expenses (rent, phones, utilities, gym membership) account for less than 15% of our take-home pay. It definitely helps that I’m not a fashionista and I’m not into many expensive habits. 🙂
- After being in the corporate business world for 6 years (both of us), our income is more than double what it was when we were entry-level. Had we tried to buy a house right out of college, it would not have been pretty.
As I mentioned above, I have fallen victim to a bit of lifestyle inflation since I became debt-free. I haven’t started spending like a mad woman though, as evidenced by my still-debt-free status and my ability to save a good chunk of money each month. But I have noticed that I shop at more expensive grocery stores because they’re more convenient, I don’t bother myself with looking for deals on groceries as much (which is GOING to change), and I’ve become much more generous in gift-giving (still working on increasing my charitable donations, though). The gift-giving thing is FUN. My younger brother is still in college, and it makes me all giddy to send him a $25 Visa gift card during finals. I also love giving more expensive shower and wedding gifts now that I’m debt-free. So, although I still consider it lifestyle inflation, it’s good lifestyle inflation.
Still, although I’m spending more on some things, many of my old frugality habits still remain:
- I hardly ever shop for clothes. I went shopping for some new clothes for our honeymoon and afterwards I felt torn between wanting to buy more and feeling guilty for spending money on clothes. Luckily, I didn’t have a chance to shop again after that since the wedding madness immediately followed.
- I don’t have any expensive habits or hobbies. If anything, this blog is my most costly habit, but it also generates a small amount of income. Plus, it brings me a great deal of happiness, so I’d probably blog no matter how much it cost me. My other hobbies are free or fixed expenses: I can get books from the library, I can run outside or at the gym, I can visit with friend for free (or at the pool!), and so on. I know some people have regular hobbies or interests that cost quite a lot, so I’m happy I’m interested in things that don’t cost much.
- On that note, sometimes I think you have to learn to like things that don’t cost much. Or, put another way, discover some new interests that don’t cost much or are free (especially if you’re trying to pay off debt!).
- As Gretchen Rubin puts it in the Money chapter of The Happiness Project, I’m an under-buyer. I hate buying things with one use or that I can use another item for (like her, I HATE buying Kleenexes! Hellooo, toilet paper accomplishes the SAME thing). Although I always feel like I’m missing something at home, I don’t buy a lot of useless things or one-use items.
- As far as entertainment goes, G and I don’t go to movies anymore. We got sick of paying so much – movie prices are rising like crazy! We’ve limited ourselves to one or two per year. The last time we saw a movie was around Christmas. Now we Netflix everything.
- Overall, the only “extras” we spend money on are eating out and that’s definitely our biggest budget buster.
Since we combined finances (right after we returned from our honeymoon), we’ve been extra sensitive to spending, too. Not only are we figuring out each other’s spending habits, we’re also really trying to pinch pennies even more since we’re going to seriously start house-hunting in the fall.
How do you save money for a home? is a very personal question that varies with every situation. For us, becoming debt-free and minimizing our “extra” expenses as much as possible has been extremely helpful.
How do you save money for major expenses, like a home, a vacation or a car?
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P.S. Your comments on Friday’s post — How Do YOU Define Balance? — were amazing! They were so helpful to me and I can’t wait to use them for inspiration in the future! If you haven’t commented yet, please check out the post here!