Saving for a house

     We have enjoyed our house for a year now. I am grateful to my family to have acceded in the "struggle" to save up for it and I am specially grateful for all the celestial stars to line up to the day we bought our first house. It was definitely not a piece of cake but a determined, disciplined slow march that ended up with more responsibility on our shoulders than we started with. But now, instead of throwing money away as rent; we pay towards building an equity. I know that a house in the US is not much of an equity but think of all the 30 years of rent you'd pay otherwise. Rent money in such a long time totally equals or beats the price of a home.

     Let me say that operating capital of a home is more than any rental place because now you not only have the monthly expenses but also have charges that recur on a quarter, semi-annual and annual basis. A home will also need TLC to keep it in a running condition structurally and aesthetically. The trick is to anticipate these in advance. Let's get started on how to start owning a home first.
   

Step 1: Set up a goal     

     Research the areas in your city. Get a good feel of what the houses are priced for. The range of these houses can be scattered across the spectrum. In that case, go look around and get a good feel of what type of houses you'd enjoy both in terms of living in one and paying for it. I personally recommend you try to keep these around 30% of your monthly income to be comfortable. If the sum of recurring charges given below is greater then one of your bi-monthly paychecks; you will be penny-pinching pretty soon.

Recurring (monthly) charges = energy bills + mortgage + gas money for commute

     Now calculate the amount of money you need to cough up just to start living there.

Goal money = down payment (7%-20%) + closing costs (3.5%) + move-in costs (moving + necessary fixtures and appliances)

     You have a goal in mind. Congratulations!

Step 2: De-clutter and access your spendings 

     Calculate where your mullah comes from and where it goes. Categorize all your spendings. Get a Mint.com account or any other budgetary tool where you can monitor your expenses at all times. You are not done till each dollar is accounted for.

     Once you've successfully de-cluttered your monetary inputs and outputs, start listing down all frivolous charges and spendings. Magically, you now know where to stop spending.

Step 3: Action

     This is an ongoing and slow process involving rigorous determination, re-assessment and sometimes, change in plans.

     You'll find all sorts of information on the inter-webs on how to save money. Here's a couple of tricks under my sleeve:

• Prepare your meals at home. Minimize stored food in the pantry and the fridge in order to minimize amount of stale food that you have to throw away every now and then.
• Never buy drinks: alcohol/coffee/soda at retail price. Either buy them in wholesale and/or make them at home. Explore the art of making cocktails.
• Don't chase coupons. It is an utter waste of time considering you may buy things because they are cheap and not because you need them. You may be doing something more useful or enjoyable.
• Always get things you DEFINITELY NEED and not because you MAY need them.
• Create a budget for anything and everything you WANT. Ignoring your "wants" is not recommended either. Your goal is not to be a miser but to consciously manage your expenses.
• Always use a credit card to take advantage of rewards program(s) but undo the damage on a daily basis. Essentially; don't spend more than what you have in your checking account. 
• Perform a weekly audit and revisit step 2 so that nothing takes you by surprise.

     Your overarching goal should be to maximise your savings. Talking of which; you should have at least 2 accounts based on amount of money you want to save:

1. Minor: For short-term expenses like a trip or fancy boots or electronics or special occasions like birthdays and/or anniversaries. This account can also double up as your emergency fund.   
2. Major: To fulfill your goal set up in Step 1. You'll need a budget for this account too.

    Whenever you get paid, here's the order of emptying out your pay-check:

1. Major savings account
2. Minor savings account
3. Bills and loans
4. Living costs

Step 4: Profit

     In fact, whatever you manage to save IS your profit on whatever services you offer to make a living.