Owning a home has long been hailed as the American Dream, but it's one that comes as a result of hard work and sacrifice -- namely, in the form of saving for that down payment. There are plenty of benefits to owning a home, from tax breaks to the stability that comes with not having to answer to a landlord. Unfortunately, a large chunk of younger Americans think homeownership is out of reach. In a new NerdWallet study, 21% of recent grads don't think homeownership is in their future.
That sentiment is understandable. Right now, there's a limited number of starter homes on the market, which means much of the inventory out there is expensive and seemingly unattainable on an entry-level salary. Furthermore, many graduates leave college saddled with debt, making saving for a down payment next to impossible.
That said, if your desire is to own a home, and you don't want to wait until your 30s or 40s to do it, there are a number of steps you can take to increase your chances of meeting that goal. Here are a few to start with.
1. Live at home after college
It may seem ironic that in order to buy your own home, you first need to go back to the one you were raised in. But if you're really eager to own shortly after graduating college, then moving back home is a smart option to pursue. Assuming your parents don't charge you for the privilege of living under their roof, moving back home means avoiding a rent payment and utility bills -- expenses that can quickly add up. Not having those costs to contend with will allow you to allocate more of your early paychecks to savings, thus shortening the amount of time it takes for you to amass that down payment.
2. Follow a budget
If you're looking to save up for a home down payment, one of the most important things you can do is track your spending, and to that effect, you'll need a budget to know where your money is going. Creating a budget is easy -- simply list your existing monthly expenses, factor in one-time expenses, and compare that total to what your paychecks give you. The difference will, conceivably, represent the amount you're able to save each month for a down payment (keeping in mind that you should establish an emergency fund before saving for other goals). If you're not pleased with that amount, then you'll need to cut corners to raise it, which leads to our next point.
3. Live below your means
Maybe living at home after college isn't an option. Or maybe you can live at home, but still have bills of your own to cover. Either way, you'll be helping your savings efforts by always erring on the side of spending less, even if your paychecks can cover more. This way, you'll have money left over to put in the bank, which can eventually turn into your down payment.
Imagine you can swing a $1,200 monthly rent payment in your neighborhood of choice. If living several blocks away from that prime spot saves you $300 a month, you'll bank an extra $3,600 a year by compromising. The same holds true for your car payment -- there's no reason not to purchase or lease a cheaper vehicle if it does the job of getting you from point A to point B. Remember, every dollar you save gets you one step closer to your goal of owning a home, so if it's really important to you, make compromises along the way.
4. Get a side hustle
Being a recent college grad means you're probably earning an entry-level salary that isn't the most generous. If you're looking to boost your savings rate to buy that home faster, you might consider a side hustle, which will allow you to generate extra income. Of the 44 million Americans who currently hold down a second gig, 36% earn over $500 a month as a result. Hit that mark, and you'll have an extra $6,000 to work with in just a year's time.
Though the idea of buying a home might seem almost laughable when you're new to the workforce, if you're serious about owning, there are ways to get there. You may need to make some lifestyle adjustments and push yourself to work harder, but you'll be rewarded with a place to call your own, and well ahead of your peers at that.
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