Millennials, that rather maligned generation of people born sometime between 1980 and 1995, are often the butt of jokes for being the “boomerang generation .” You know, because they seem to leave the comfort of their parent’s homes only to return again when they realize they can’t find a job or pay the bills in post-collegiate life.
And sure, many young people do indeed return to the welcome embrace of mom and dad, but it may not be because they want to. In fact, most would rather be living the American dream of owning their own home.
According to 2017 data from Apartment List , 80% of millennials want to buy a home one day. However, if you’re wondering, “How long does it take to save for a house?” there are a few things you should know.
Most of those same millennials noted in their responses that economic hardship (thanks to mounting student loan debt , low wages , and an unstable economic environment) will likely delay their homeowner dreams. And for many, it comes down to the fact that they can’t seem to save enough for that dreaded 20% down payment.
As the data additionally showed, 68% of millennials have less than $1,000 for a down payment in an account right now. Another 44% said they have not saved anything for a down payment at all. And 39% said they aren’t saving for a down payment on a monthly basis.
But, if buying a home is a top priority for you, there are ways to make that happen. Here’s how to save for a house while you’re still renting.
5 Tips to Save for a Home While You’re Still Renting
Pay Down Your Debt First
In order to save for a house, it’s imperative that you figure out a plan to pay down your existing debt. And for 30% of millennials , that means paying off more than $30,000 in student loans. And though that may seem like a monumental amount of money to pay off, there are ways to do it.
First, if you’re a full-time employee, reach out to your company’s HR department to learn more about student debt repayment assistance. Though Inc reported just 3% of companies in the U.S. currently have this type of assistance, it’s still worth a try.
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As a more drastic measure, you could always think about going into a profession that offers partial or total student loan forgiveness (such as teaching in certain public schools), or moving to a state that will also help pay off your student loan debt just for moving there (including Alaska, Wyoming, Washington State, Florida , and more).
For a much easier fix, you could always think about looking into student loan refinancing. If your current interest rate seems unreasonably high, check out SoFi’s student loan refinancing options. By dropping your interest rates, you could significantly reduce both your payments and the length of time you’ll be making them. Which in turn could help you save for a house even while getting out of student loan debt.
Create a Budget That Will Help You Spend Less and Save More
Look, we’re not saying eating avocado toast at brunch on Sundays is really breaking the bank, but indulging in luxurious habits day after day can really add up. Creating and sticking to a realistic budget can help you spend less while saving for a house. To get there, all you need to do is follow these simple steps.
Gather your data: Figure out how much you’re earning each month (after tax), along with how much you’re currently spending. Add it all up including cell phone bills, insurance, grocery bills, rent, utilities, your coffee habit, the dog walker, gym membership, etc. Don’t miss a dime.
List your current savings: Are you currently putting money into an IRA, 401(k), or other savings plan? List it, so you can see what you’ve already got in the bank.
Really dig in and be harsh about your spending: Can you cut back anywhere? How about on that gym membership? Maybe it’s time to join 24 Hour Fitness over Equinox. How’s your takeout habit? If you really want to save for a house, you may need to learn to cook. And next time you go shopping for new clothes, make sure to clean out your closet first to ensure you actually need to buy new dress shirts.
This, admittedly, is the worst step in the budgeting process, but it’s crucial to be honest with yourself about your spending. Look on the bright side, all that hard work could help you get a new home years sooner.
Finally, remember to check in on your budget every so often and adjust as needed. For example, if you land a new job, get a promotion, or are given an annual raise, perhaps you can be adding that money to your savings account, or put it toward paying off your loans. Whichever one feels more important to you is OK, so long as that extra cash isn’t going toward more weekly lattes .
Invest With a Wealth Management Account
If you’ve paid off your debt, set realistic budgeting goals, and are raking in some dough to add to a savings account, you’re already on the right track. Now all you need to do is put your money to work for you. To make that happen, consider opening a SoFi Invest account.
With an online investment account, you can set targeted goals that are personalized for you. In this case, your goal would likely be to purchase a home within a set number of years, and SoFi can help you figure out an investment plan accordingly.
After setting a few targeted goals, you can work with a real-life financial advisor who will walk you through how to strategically invest your money so that it works for you. And we will never push you to take more risk than you want to—tell us what your risk tolerance is, and we’ll work with it. Our financial advisors will cost you $0, so no need to budget extra for that.
Automate as Much of Your Finances as Possible
This is a lot of information to process, but once you get through all the work upfront, you can start automating as much as possible. For example, have a portion of your paycheck automatically go into your savings account each month.
Then, automate a certain dollar amount to head to your SoFi Invest® account. The rest can then go into your checking account and be divvied up at will. This means less stress for you and more time designing your dream home on Pinterest. Just remember to invite us to your housewarming party when it all comes together.
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This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
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