How to Afford Your Dream Home

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It’s natural to spend at least some time daydreaming about a luxury house in your distant future. Maybe you’ve even spent time on a real estate website looking through pictures of amazing homes in your area.

But can you make that distant future and those farfetched dreams a reality?

The Course to Your Dream Home

The general course to affording your dream home unfolds in three main areas:

  • Make more money. This should be obvious. Making more money will eventually give you access to bigger and more luxurious homes. At the upper echelons of earnings, you can hypothetically buy almost any home.
  • Budget and save. Making a lot of money isn’t a sure shot to affording a dream home, however. You’ll also need to budget and save – utilizing the money you earn as efficiently as possible.
  • Improve your credit score. It’s also a good idea to improve your credit score. Even with ample savings, you’ll likely need (or want) to take out a loan to buy your dream home – and that means you’ll need to have a good credit score in place.

How to Make More Money

Step one is making more money.

Here are some of the best ways to do it:

  • Education and career improvements. Assuming you have a career path already, you can increase your salary by investing in your own education, certifications, and capabilities. For example, if you’re in the accounting field, you can take the CPA exam and become certified as a CPA. Every certification or new skill you learn will make you more valuable to your employer – and open up possibilities for higher earnings in the future. And if you feel like your career field doesn’t have much long-term potential, this is your chance to start over with a new round of education and preparation.
  • Side gigs and secondary sources. Sometimes, your main, full-time career isn’t enough to give you the lifestyle you want. That’s why many people turn to side gigs and secondary sources to make extra money. Driving for a ridesharing service, walking dogs, and freelance photography are just a handful of the options available to you here – and if you build a full business around your gig, you can multiply your salary.
  • Investments. You can also use your money to make even more money, thanks to the power of investing. The average annual return of the S&P 500 is over 10 percent; while that’s not a guarantee, and you’ll need a diversified portfolio to secure even gains, even a more modest return will work in your favor.

Budgeting and Saving

How are you going to manage the money you make? You need to plan intelligently if you’re going to make your money work for you.

These are some of the ways to do it:

  • Live below your means. The best financial advice you can get here is to live below your means. Essentially, that means living a lifestyle with a spending level lower than what you could reasonably afford. So if you make $80,000 per year, live like you only make $60,000, or even $50,000. Choose a smaller house, a used car, and more modest spending decisions; it will be much easier to save money.
  • Set strict savings goals. Next, set strict savings goals for yourself. How much money will you need for a down payment on your dream house? How much will you need to save each year to get there?
  • Break goals down to guide daily decisions. Break down your long-term financial goals into short-term goals. What can you do in the next month to set yourself up for a home purchase years in the future? What can you do in the next week? The next day?

How to Improve Your Credit Score

Next, you’ll want to work on improving your credit score. This is a process that takes a long time, so it’s important to get started as soon as possible. The best thing you can do is pay all your bills on time, every time; even a single late payment or missed payment can hurt your score. You’ll also want to pay down your debts, avoid opening new lines of credit unnecessarily, and avoid taking on too much new debt (especially in the years leading up to your home purchase).

The Distant Time Horizon

If you’re in a precarious financial position, you probably won’t be able to afford your dream home in the next year. If you’re dreaming about a $10 million mega-mansion, you may never be able to afford it at all. But if you just want something big, modern, and luxurious, that should be well within your reach – as long as you’re willing to be patient, make sacrifices, and work for many years to get there.