Saving for a Home

The transition from renting an apartment to owning a house can be too wide for many people. For first-time buyers, the biggest problem is saving for a down payment. It can be too much for their current savings and drastic measures need to be taken most of the time.

Financial experts are expecting home prices to rise every year and it’s forecasted to do so annually. Saving for your home down payment becomes more challenging and you might not even know where to start or what options you have. Here are some things to help you save for your new home.

Create a Budget Timeline

For starters, you can break down your intended down payment amount into yearly or monthly goals. Let’s use the scenario wherein you need to come up with $20,000 as a down payment in 2 years time. In 24 months you need to save at least $833 per month.

You can use this budget timeline to monitor your progress if you’re right on track with your savings or if you need to catch up. It’s advisable that you create a separate account just for this. It will be easier to track and it won’t be too confusing to distinguish which money is for your down payment and which is for your daily expenses.

Modify Your Current Accommodation

To move out of your apartment into a house, you need to slash down one of the biggest expense right now: your rent. Transfer from your current apartment into a smaller one if possible. You don’t need to live in a big apartment when you’re trying to save for a house down payment. It might involve sacrificing your comfort, but your main goal is to save money at this point. Just by changing your apartment you can save as much as 30% from your current expenses.

Another area where you can earn money using your apartment is to rent out a free room. If you have a spare room, rent it out to someone else to help defray expenses like rent and utilities. You can put the savings you get from this into your bank account towards your home down payment.

Downgrade

For radical measures, you can even downgrade some of your gadgets or your car to a cheaper version. In the case of downgrading your car, don’t trade it for a car that easily breaks down. The last thing you need is to spend money for repairing or just maintaining your car. Large trade-offs like these are what you should consider if you want to aggressively save money. Think of it like a couple of last options if you find yourself falling behind on the saving timeline.

Create a Budget

If you haven’t done it yet, create a budget for your savings. A budget will give you a good overview where your money is going and if you can do anything to reduce that. From your budget, you can find some expenses that are easier to cut down. For example, your cable subscription might cost a lot for channels you didn’t even know existed. If you’re tied up with work, then a high-end cable subscription isn’t a very feasible idea. The same applies to your internet plan. If you’re using to browse simple websites or just to check your emails then you don’t need the fastest internet plan out there. You can cut back on these areas and save money. You can apply this line of thinking to other miscellaneous expenditures like entertainment and gym memberships.

If you’re already slashing your expenses left and right to squeeze the most savings out of your budget, then you should start asking yourself whether you need this expense or if you just want it. Minimize your usage of credit cards and shop using cash instead. Shop in physical shops instead of online stores where you can simply use your credit card to pay for your purchases.

While you’re minimizing these expenses, don’t deprive yourself from all forms of enjoyment as well. You can still include entertainment or miscellaneous expenses in your budget; just don’t make them very frequent. Continue to eat out or go on a night out with your friends – just have these appointments once or twice a week. There are plenty of other inexpensive ways to have fun with your peers without draining too much from your budget, just be creative.

Tap into Your Retirement Savings

You may have already started contributing to your 401k plan. If you’ve already done so, try to reduce the amount you contribute into this. Redirect these funds instead to your house down payment to speed things up a bit. If this is your first home, the early withdrawal penalty will be waived as you and your spouse withdraw $10,000 each from your IRA fund.

You should consider getting money from your retirement savings only when you need it. The main reason why you’re saving for your retirement as early as now is to take advantage of compound interest. If your money is reduced, then it won’t be able to fully grow as it should be. You’re significantly reducing the money you will get when you retire just to pay off a new house. Weigh these options first before withdrawing from your IRA.

Know Where to Put Your Money

Since you’re creating a separate account for your house down payment, put your money in a low-risk investment like a high-yield savings account. Compare interest rates between online banks and credit unions since they offer higher rates than traditional banks.

There are a couple of distinct differences between credit unions and banks which you should be aware of before transacting with them. Credit unions are generally a group of people who pool their money together and accept additional investments from outsiders or they can let non-members borrow their money at a modest interest rate. This is how they generate profits. Since they’re a smaller group, they can provide better service and tailored terms for you. However, don’t expect service 24 hours a day, 7 days a week. As mentioned, they’re a smaller business so they are usually open just on weekdays at office hours.

If you’re going to go with an investment with a higher return, always keep in mind that a high-paying investment has a big risk to lose money. Regarding the return rate of your money, it’s not that important compared to having it available when you need to withdraw it. Just make sure that it’s in a safe place regardless of growth and you should be fine.

These financial tips for saving for a home can also be applied for any other financial goals or obligations you may have. The important thing is to maintain a level of discipline and if you’re going to do an aggressive saving plan, be sure to stick with it. It won’t make sense if you try to save for your home down payment but give up halfway just because you’re tired of saving or you’re too far behind your budget timeline. Always motivate yourself with your end goal in mind. It might be difficult now, but when you make that down payment, it’ll all be worth it.

Categories: Finance

Basics in Budgeting

When you think about budget, you immediately think that you should save as much as you can while minimizing expense to zero if possible. That’s a very idealistic way of thinking and is impossible to achieve. This is because there will always be expenses, major or minor, wherever you are. Living expenses will always be present and unless you’re a hermit, you can’t do away with this. The key to budget is finding the right balance for your income and expenses. Here are some things you need to be aware regarding budgeting and what you can do about them.

Income and Expense

Income is defined as something that puts money in your hands. It can be from any source: your allowance, a regular income, cash gifts, and even assets. There are many kinds of income out there, but as long as it increases your savings account or your net worth, then it’s defined as an income. This is what you’ll be using to pay off your monthly expenses, daily living costs, and what you’ll use for savings or investments.

Next up is expenses. These are opposite to income in the sense that they take money from your account. This can be in the form of utility bills, credit card payments, taxes, meal expenses, and your living costs. From the many types of expenses, the most important for now are fixed expenses. These fixed expenses are your monthly financial obligations. You can’t do away with these; it only fluctuates depending on your usage. Examples of fixed expenses are your rent, utility bills, and tax payments.

Wants and Needs

When mapping out a budget plan for your income and expenses, it’s very important to realize the difference between a need and a want. A need is something that you definitely can’t live without, like education, food, clothing, and shelter. On the other hand, a want is one which you don’t need to survive like, designer clothing, vacations, the latest car, and expensive gadgets out there.

Recognize which among your expenses is a need or a want, then consider reducing it. For example, that designer clothing looks good and is all the rage right now, but you don’t need it to function properly. Even hand-me-downs or clothing items you already have in your closet will do. Once you realize which among your expenses are luxury items can make things easier for you to replace them with something more economical.

As you define which among your expenses are needed and which ones are not, you’re slowly developing your prioritization skills. When you’re faced with important decisions regarding your finances in the future, it’ll be easier to make frugal choices at that time.

Do Your Own Work

A specific area where many people waste a lot of money is in the services you pay for. It feels very nice to have someone clean your house and mow your lawn every once a while. However, if you avail of these services regularly, you could be throwing away money you could have easily saved and used for other purposes. Instead of putting this money into your savings or other investments, you’re wasting it on frivolous expenses. The long-term result is you’ll end up paying for your retirement and investments longer than needed.

While you’re still earning, learn to do your own work and live within your means. You don’t really need to live in a 4-bedroom house if you’re still a bachelor and you’re not planning to settle down soon. Live frugally and use your money instead of something worthwhile like a mutual fund or your 401k plan. When the time comes for you to use that money you won’t be in a panic or in a rush to put money into your retirement funds.

Manage Your Wants

Earlier we talked about separating your needs and wants. It’s impossible to do away with your wants for good. The best that you can do in this situation is to manage it accordingly and make sure that you won’t break the bank every time you choose to “reward” yourself.

It’s a part of our human nature that we’re not satisfied with what we have and we always desire something much better and more expensive than what we have now. For example, you think that you want a faster internet subscription so you try out different internet service providers until you found the right match for your wants. That’s okay and understandable, but if you’re just using that to check your emails and some minor browsing, then that’s definitely a waste of money. This holds true for many other subscriptions or purchases out there.

To manage your wants effectively, set limits to your luxury purchases before you even step into a store. Think about how much you can spend on an item and the space in your home. It won’t make sense if you buy a trampoline, but you don’t even have a backyard to place it. It’s even a good idea to include your luxury expenses in your savings allocation. Set aside a sizable portion of your paycheck for these purchases. It’ll give you time to think if you really want it and you won’t be burdened too much when you do buy it.

Set Realistic Goals

Part of creating your budget is to also make your short-term and long-term goals. These will guide your savings and will motivate you when you’re not sure if you feel tired with all the savings and budgeting. Short-term goals could include that gadget you’ve been eyeing for some time or a new TV set. For long-term goals, it can be your emergency savings, or your retirement plan.

Whatever your goals may be, give yourself a realistic time frame when you want to finish it. Consider your current budget and how much you can set aside for these goals. If you choose a shorter time frame to spur yourself then it might backfire as you frantically save and you might even end up sacrificing your other savings just to make that purchase. Give yourself ample time to save for that goal and stick with your budget accordingly.

Don’t Falter

Each time you make a mistake with your budgeting or spend too much, don’t just throw the towel in and call it a day. Everyone makes mistakes, and you are no exception. Especially when it comes to personal finances, it doesn’t come easy or naturally for everyone. Take time to assess your mistakes and learn from it. It doesn’t matter that you have a clean record or you are able to follow your budget to the dot. In fact, it’s better to make financial mistakes when you’re still starting out so you won’t make them again when you are already handling big investments or huge amounts of money.

These tips regarding basic budgeting can be applied to most situations whether rich or poor. The only thing that matters is you have a serious mindset about managing your money and you’re thinking about the future.

Categories: Finance

The Ultimate Guide to Budget Travel

There are so many reasons why people want to travel. Some want to unwind and relax, while others just want some quiet time away from the city and their work. There are a few who travel because it is their passion and it gives them some excitement. There are various reasons for wanting to travel, but one common reason why people cannot go on with their trips is lack of money. Traveling does not have to be a burden on your finances though. You can enjoy and have a wonderful trip without breaking your wallet. That’s what budget travel is all about.

Plan Ahead

The best way to enjoy your travel is to plan ahead. You need to be sure about the kind of trip that you want. Before trying to search and book online for the best and cheapest destinations you can find, make sure you really know where you want to go. You can ask your family, friends, or a help from a travel agents about the places that you want to visit. They can give you insights about the places or probably can give you a better option.

Planning is very crucial, a perfect getaway sometimes need to be planned for months. But generally 2-4 months of preparation can be practical enough. Check your passport, make sure it is valid and not expired. Some countries require travel visas; make sure you do your research about that.

Economically, the best time to travel is during off-season. Airfares are definitely lower, and accommodation is quite cheaper. You can enjoy the places and the views because there are not any crowds, plus you can meet more natives than tourists during off-season. You can check online for the website of the local tourism of the place you want to go to and check when will be the start of their off-season.

Best Time to Buy Tickets

When buying a ticket you need to be patient. A little effort can save you a lot. The perfect time to buy your plane ticket online is every Tuesdays at 3pm EST. Because most of the airline companies post their sales on Monday night and by 3pm of the next day, those changes in fare are reflected on their websites. Always keep in mind that prices are adjusted yearly, so tickets will certainly be more expensive next year. So if you plan to travel early next year, buy your tickets before January 1 for a lesser price. You can also book your travel during mid-week to save. Do not be scared to get a refund. If you become aware that the tickets you bought have gone down in price, you can call the ticketing office or the airline and ask for the difference.

Travel Light

Bring only what you need, this will save you money and worries. You cannot bring your whole wardrobe. If you plan to explore your destination mostly by walking, backpacking can suit you. You can have suitcases if you can leave it at your hotel. Aside from your main luggage, make sure you have your everyday pack, it can be a backpack or courier bag that you can use while exploring.

For clothes, make sure you check the current weather of your destination. There are some mobile applications you can download at your phone that can give you a weekly weather forecast. From the result, you can prepare what clothes to bring. For most of the countries, it is ideal to have you packed some rain and warm jacket. Good pair of sturdy shoes, or boots and socks are also a must. If there is still enough space, you can add an outfit of your choice aside from the basic t-shirt and jeans. If you plan to spend time at some religious or cultural places, then you must have a pair of clothing other than shorts, crop tops, muscle tees, or sleeveless to show respect.

Dealing with Accommodations

You can check online for hotels within the area of your destination. If you are able to book online, do so. Hotels offer cheaper price online as compared to walk-ins. Most of the hotels say that their best deals are the ones posted in their websites, but sometimes giving a call will make a big difference. Do not be afraid to call the hotel of your choice and ask for more discounts on top of the one they have posted in their websites.

Food for Less

Instead of eating at the restaurants in your hotel, try local bars and restaurants. They will definitely offer lower prices and you can surely taste the culture of the place. You can also try free tasting at some local market. A small bites can surely accommodate you for an hour or two. Eat with the season. Try to ask your local waiters what foods are in season, it’s cheaper compared to other foods that are on the menu.

Stay on Your Budget

The cost of each travel varies greatly depending on your destination. Before leaving, try to have some time to compute a practicable daily budget for your needs. Instead of availing package accommodation that offers free breakfast or dinner, try not to. Often, people think they can actually save money for package deals but most of the time that’s not the case. Remember that it is still hotel price, food at the hotel are quite expensive compared to the local restaurants. If your room has a kitchenette, make use of it. Cook your food and buy ingredients at the local market or grocery stores rather than eating out to save more money.

Use All Things That Are for Free

Get free flights. There are so many ways how you can earn your free flights. You can sign up for a travel card, earn your miles, and fly for free. Most of the travel credit cards offer a variety of bonuses upon signing which can give you up to 30,000 points that you can use immediately. Watch out for great deals. Some airline companies can give you an extra miles or even free 1,000 miles just by watching some promotional videos on their websites. Shop at stores where they have promotional deals. Most of the airlines have some good offers with all the major stores, shopping at those stores will surely earn you some miles per dollar you spend.

If you are adventurous enough, you can try couch-surfing. This service offers travelers with free accommodation with locals. Sometimes you are lucky to have a room of your own, but more often than not you can get a couch or a mattress, but it will be always free and that’s a great way to know the local culture.

Local maps are a must and make sure you know how to read one. Instead of always getting a taxi to be at one place to another, you can go walking. Aside from saving money by walking, it will also give you a better chance to explore the place. You can also hitchhike, for some countries especially in Central America, Australia, and Eastern Europe hitchhiking is a common tradition. You can also take a bus or railway rather than take taxis which can be expensive.

Categories: Budget Travel

Best Budget Travel Destinations

Are you thinking about traveling this year? It is always a good idea to consider the budget for the destination that you have in mind. While some places are obvious choices for travel destinations, you might want to try out the less visited locations. These are the places that might give you more for your money. We have listed here some of the best budget travel destinations that you can check out. These destinations were noted mostly for the very competitive prices that they offer to the traveller this year.

South Africa

The country was in the headlines recently because of the passing of Nelson Mandela. The country that he helped to make free for everyone is actually one of the best budget travel destinations in the world today. One of the major reasons why it is such a great budget travel destination is because hotel rates are down all over the country. The rates have gone down by as much as 8%. That means you can find excellent accommodations there for low prices. You can visit the penguins at Boulders Beach at Cape Town, check the wild animals at Kruger National Park and enjoy the beaches. You can also visit Johannesburg to get a feel of the city’s long and colorful history. You should also sample the local cuisine there.

Venice

Are you surprised that Venice would be included on a list of budget travel destinations? The good news is that hotel rates in Venice have gone down now, so you should take advantage of that for this year because that’s not going to stay that way. The hotel rates in one of the most famed cities in Europe are down by 7% as compared from last year. So go ahead and include floating down on a gondola along one of the canals of Venice as one of your tourist aims for this year. You can also visit some of the great historical landmarks in the city such as the Sansovino Library and the Ducal Palace. You can also visit Murano where you can see traditional glass blowing. Keep in mind though that you might end up buying fancy glass after the tour.

Dominican Republic

The Dominican Republic has been gaining in popularity as a tourist destination in the past couple of years and the fact that the hotel rates there have gone down is another reason why you should visit it. The Majestic Colonial Beach Resort which can be found in Punta Cana is amazingly affordable. You can get accommodations for two people at just $212 every night. You can also check out the Los Haitises National Park where you can explore the virgin forest and the lagoons there.

Buenos Aires

Known as the Paris of South America, Buenos Aires is heavy on culture. It is filled with museums, historical places and has a very lively nightlife. The city has a very cosmopolitan feel to it and the great news for travellers like you is that the hotel rates in the city are 8% lower than they were in 2013. There is so much waiting for you in Buenos Aires. You can take a stroll down Corrientes Avenue where you can find some good food, books and even some dance clubs where you can take tango lessons. If you like the arts then you can check out the Museum of Latin American Art of Buenos Aires, where the works of the most prominent South American visual artists can be found. You can also check the Recoleta Cemetery where the well to do Argentinians are buried. If you are after some theatrical performances then you should check out Teatro Colon which can be found in downtown Buenos Aires.

Orlando

Everyone gets the same idea when they hear of Orlando as a travel destination. They think about the excellent theme parks that could be found there. But when you add the fact that the hotel rates in the city are lower by 7% as compared from last year, then you should really think about including it as a destination. The big three theme parks in the city all have new rides set to open which makes visiting them really interesting. You would have no lack of options when it comes to eating when you are staying in the city as there are plenty of excellent restaurants there that you can check out.

Philadelphia

One of the most historic cities in the United States offers you some great choices when you pick it as a travel destination. One of the interesting things about Philadelphia is the art scene that can be found in the city. The Barnes Foundation collection is now in a new downtown location where you can appreciate it like never before. The City of Brotherly Love has always been known as an excellent place for traveling on a budget. There are plenty of museums in the city as well as excellent restaurants that can cater to any kind of taste for food. Don’t forget the usual things to do when you visit Philadelphia such as running the Rocky steps on the Philadelphia Museum of Art, looking at the Liberty Bell and visiting Independence Hall.

Warsaw

When you are looking for some real discount in hotel accommodations then Warsaw would be hard to beat. The hotel accommodations in the Polish capital have gone down by as much as 20% from last year. If you are interested in the history of Europe then this is an excellent opportunity that you should never let pass by you. The oldest part of the city was largely demolished in the historic fighting in World War Two, but efforts are underway in order to restore it back to its old glory. The city is filled with cafes and galleries and historic places that would satisfy any curious traveller.

Seoul

The capital of South Korea, Seoul is a teeming modern city waiting to be discovered and explored. If you enjoy K-Pop then what better way to enjoy than to visit where it all comes from? The good news is that hotel rates are down by more than 9% for this year. But Seoul has more than just pop music to offer. It is also an ancient city where structures have been built centuries ago. You can visit some of those structures that are being built and learn about Korean history in the process as well. Geongbok Place for example was destroyed several times and has been rebuilt. You can see the National Folk Museum and the National Palace Museum. You can also take some breath-taking tour around the city through the Bugaksan Mountain Trails.

Riga

You might not be aware where this city is located, but you can bet that it is the next hot destination that’s waiting to be discovered. You should jump ahead of the crowd and visit Riga now while the hotel rates there are comparatively low. Riga is in Latvia and it is a city that is rich in culture and the arts. In fact the EU will be dubbing it the European Capital of Culture and once that happens you can be sure that the crowds will be coming down to Riga.

These are just a few of the great budget travel destinations today.

Categories: Budget Travel