#1. Make it a goal, not a dream. Now you  might be thinking, that’s super cliche. Yeah it is. But it’s important that I point this out because they’re not the same thing. A goal has concrete steps. A step-by-step action plan to realize the goal. Dreams without goals are just wishes. So you need to have a goal. For my wife and me, we started with an 8 year action plan to reach our goal, but it ended up taking 5 because some things went better than expected along the way.

#2. If you have a significant other, get on the same page. This’ll mean an honest sit-down. Before doing anything, there needs to be an agreement, a mutual agreement to set an actionable goal of owning a home. What this doesn’t mean is just sitting and day-dreaming together. It means going a step further by agreeing that you’ll create an actionable plan you can execute. and both of you will stick to, until you reach the goal. If you don’t have a significant other. Then you have it way easier, because you’re the only one stopping you. No one’s affecting you. You have complete freedom to decide you’re going to make it an actionable goal.

#3. This ties in with #2. If you’re a couple, there needs to be some compromise. For the spender, it’ll mean spending your money on the things you value most; you have to be selective. you can’t spend everything you’re making, and you have to be realistic; not actively saving consistently towards a goal like buying a house, is not a realistic goal. It won’t just some day happen. So what this means is you can’t spend all your monthly household income on consumption items and at the same time increasing your monthly fixed expenses (i.e. leasing an expensive car). For the frugal, you’re already frugal, so it’ll mean continuing to be frugal; but for it to be a realistic plan, you have to have some compromises with your significant other. Now, this might mean it’ll take you longer to reach your goal; since the more compromises you have the less you’re going to save, but it’s more important that it’s a realistic goal that both can mutually agree upon.

#4. The numbers have to work out. I know I know. This sounds like a no-brainer, but it needs to be said. Look at what your take home pay is, and look at where your money is going. If you living pay check to pay check, you absolutely need to work up a budget to see exactly what’s coming in and what’s going out. Because you need to know a literal end point (which is the amount you’ll need, for example a 20% down payment – an actual dollar figure, if you’re living here in the US). And how much you’re going to save per month. Note that I didn’t say how much you’re “able to save” per month. I’m talking about how “how much you’re going to save per month. It needs to be a literal amount. Knowing this will tell you exactly how long it’ll take you to arrive at your destination. Again, make sure you’re not fudging the numbers here.  You need to know exactly how much you can afford to save per month, which will translate to how long it’ll take. You may want to have some potential revision versions ready that might project any potential changes in your income. For example getting a raise every year and how that’ll affect your time horizon. Of if you’re current car is getting old and so there might be a potential need to finance a car purchase within the next year or two, that will increase your fixed monthly expenses for 3-6 years. which will significantly change your timeline saving for the house.

#5. If you did an honest assessment right now and the math tells you that it’ll take you 10 years to get there. That’s your literal timeline to completion (as of now – with no additional changes). But keep in mind, you can expedite this by doing a host of things. You can cut expenses, in order to save more. That’ll shorten the time frame. Or you can generate more income to get you there faster. Or do both. In today’s gig economy there’s a ton of things you can do to generate additional side income. For me and my wife, we made a decision to save more money by continuing to rent a single room in a house rather than getting our own apartment. To this day, I know of no other couple (personally) that rented out a single room rather than getting their own apartment once they got married. But we purposefully made this decision early on because we had a goal. And so, renting a room rather than getting our own apartment allowed us to easily double what we were saving at the time. Keep in mind, we could’ve still done it without being so spartan, but we purposefully did it to shorten the time horizon. We ended up staying there 3 years. A total of 6 years for me, because I lived there even before I was married.

#6. If your time horizon is long. you might want to consider putting your money into something that yields something more than what a CD or savings account. For us, it was the stock market. Keep in mind though that the stock market can be volatile. And so even if you aren’t stock picking, and you buy the entire market using some sort of total stock market mutual fund, index fund, or ETF of some sort, you can lose money for a while, before it comes back up. Of if you’re stock picking, you can lose everything. So just keep that in mind. There’s risk there. But for us, we allocated our savings into different buckets. For example, I allocated a certain amount towards my 401K and personal Roth IRA which is for me to get to my goal of financial independence. And a certain amount was allocated to a taxable account (this is just a normal non-tax-sheltered account) to save for a down payment on a house. I suggest having different accounts or different buckets, so that you can keep yourself honest and working towards very specific goals. Again for me, I had two different goals that I was working towards. One was a house, and one was retirement. I didn’t mix the two. And one was in a taxable account, where I can sell the stocks and pay capital gains tax, and one was done in a tax-sheltered account which I wouldn’t be touching for many decades until retirement (or personally for me, I call it financial independence – maybe I’ll do another post touching on that at a future date). And again, in my personal situation, my timeline was 8 years. but it was shortened to 5 years because one of the primary drivers was the stock market growth between 2009 and 2013. My home down payment bucket benefited quite a bit during that time period, so it helped to expedite us in reaching our goal for a down payment.

#7. Save ALL windfalls. Most people define windfalls as only things that happen very rarely or once in a lifetime. Like winning a lottery, or an inheritance. But I’m talking about things that are more common. Things like your annual tax return refund from the IRS. Or quarterly or annual bonuses at your work. Or any big side projects that you land, that you didn’t anticipate. Those are kind of like windfalls too. because it wasn’t forecasted in your plan. So anything like this where it’s bonus money, you need to bank as much of it as possible so that it’ll expedite your timeline for you to reach your goal. For me, I saved all my quarterly and annual performance bonuses, along with income from my side gigs, so that I could reach my two goals faster.

#8. Lastly, borrowing money from relatives. Personally, and this is my opinion. I think borrowing money from family should be limited as much as possible. And here’s why I say that. If you can’t afford something using your own ability, the chances are, it’ll be hard to maintain unless you continue to receive help going forward. Note that I said “chances are”, it might not be that case with you. If you’re already a hard worker and make enough money, but could use the help to expedite your situation, then yeah I can see it not having any harmful effects. But overall I’m a little old school like that. It happens with any type of wind fall. Small and big. Research shows, even on a bigger scale, like lottery winnings. Most people lose all of it fairly shortly; because it’s not self-generated. Now this isn’t exactly the same thing, but it has similar concepts. I’ve also heard of horror stories where parents buy their children homes, and the kids couldn’t even afford the property tax and HOA fees with their own incomes. That’s not a good long-term strategy. I read a quote somewhere, “You can’t reap what you haven’t sown.”