How I’m Saving for a House Before 30
This morning I woke up and thought about how long I have before I turn 30 years old.
After counting the months on my fingers, it hit me that I only have four months until my birthday.
After I realized the short amount of time I had before 30, I started to think about what I’ve accomplished financially thus far. There are a couple of big things that I’m proud of, like being debt-free and having a paid-off car, but there is still one BIG goal that I have on my list: buying a house.
Right now, at the top of my personal finance goals list is buying a house, but I know that I won’t be able to do that in four months.
I actually don’t think I’m ready to commit to owning a home just yet. But, I want to have the funds available for when I feel ready to look for and buy a home.
So for now, given my current financial situation and self-imposed deadline, my #1 personal finance goal is to save up at least 25% of my down payment goal.
Read on to learn more about my financial plan in place to help me get there.
My #1 Personal Finance Goal to Accomplish Before Age 30
Goal: Save at least 25% of my down payment goal for a house.
So admittedly, this is kind of a goal within a goal, haha.
Dave Ramsey taught me how to reach goals by creating “baby steps” or mini-goals in his book The Total Money Makeover. Creating these baby steps or mini-goals helps me tremendously by being able to track progress and gain forward momentum.
If you are currently a financial mess or want to learn more about getting out of debt and handling your money, I highly recommend Dave Ramsey’s book mentioned above.
Figuring Out My Target Goal Amount
To find out what the target goal amount is (the amount of money I need to save), I need to work backward from my budget for a house.
The budget I chose for a house fund is $400k-500k.
This amount of money will afford me a nice home in a safe South Florida neighborhood.
Ideally, I want to have a 20% down payment of my house budget saved before I look for a home loan and tour houses. The reason I chose to save for a 20% down payment is because that amount will allow me to avoid paying for PMI insurance.
Private mortgage insurance (PMI) is basically a fee added to your mortgage if your down payment is less than 20% when buying a house.
What is PMI? – Dave Ramsey
Basically, paying for PMI insurance is like throwing money away.
My Target Goal Amount
So, what does my target goal amount look like, dollar-wise?
Well, my goal is to save up to 25% of the down payment.
Here’s the math on what the down payment (20%) looks like on a $400k to $500k house budget…
A 20% down payment for the house:
20% of $400k is $80,000
20% of $500k is $100k
Now that we have the down payment amount, we can figure out what 25% of that is. Since my goal is to cover at least 25% of the down payment, we can crunch the numbers like this…
25% of the down payment:
25% of $80,000 is $20,000
25% of $100k is $25,000
So, now we can see that the range I need to hit to meet my goal amounts to $20,000 – $25,000.
I hope that’s not too confusing. This is a goal within a goal, remember?
My Plan to Reach $20,000 – $25,000
From my observations and readings, people who succeed at reaching their goals (be it physical, financial, or whatever) reach them because they calculate what’s needed to reach their goals, and then set up a plan to track their progress until their goal is met.
Now, before I continue, keep in mind that I didn’t just wake up and decide to commit to this goal without having any savings.
I’ve been squirreling away money into my house fund, not really knowing what the target dollar amount was. So, I’ve got some funds to work with that make this goal doable in four months.
The $25,000 Plan
Right now, on May 1st, my starting point is $13,300. That means I’ll need to save $11,700 to reach the high-end of my goal of $20,000 – $25,000.
If I break up the remaining $11,700 and split it into four (because I have four months left until my birthday), then that equates to a little under $3,000 per month. Or about $1,500 per paycheck.
Fortunately, my low-cost lifestyle and income allow me to do just that.
Right now, I’m planning on saving $1,500 from every paycheck and funneling it into my house/down payment fund.
If I stay disciplined and don’t incur any unexpected costs that my emergency fund can’t handle, then I should be on track to save the full amount of $25,000 by the time I hit age 30.
On a personal note, because this is personal finance, right?
I am not writing any of this to brag or show off. Many of my peers are doing loads better than I am. Some friends already have houses, are married, and have a dog and/or kids – the whole nine yards. And some of my peers are still trying to figure it out.
The point of this post and this blog, in general, is to normalize talking openly about personal finance.
My experiences in the education system didn’t really prepare me for this, and growing up it was not appropriate to talk about finances.
I really wish that wasn’t the case.
In my opinion, if we all talked more freely about personal finance, there would be fewer people in debt and more people investing their time into people, places, and things that are actually worth it.
So, take this post for what you will.
If anything, I hope that it might spark a conversation within yourself to reflect and think about your own goals, and how much time we have to reach them.
Thanks for reading.
All the best,