Building a new house of your dreams may require a lot of planning and preparation. You have to prepare yourself and decide whether you want to build a house instead of buying a house. If you decide to build a house, then you have to figure out the cost of construction. And accordingly, you can start saving money to build the house of your dreams. If you are planning to build your dream home, and you are unsure about how to save money to build a house, then read on. As today, I am sharing everything you need to know about how to save money to build a house.
Constructing a house is a huge financial commitment. Even if you opt for a home construction loan, you still have to save money to build a house. With careful financial planning and saving, you can save enough money to build your dream home. But, first off you have to find out the tentative construction cost, so that you can start saving money accordingly.
Try these simple tricks to save money to build your dream home.
Amount of money you need to save
Saving becomes easier when you know how much money you need and by when. First of all, prepare a rough estimate of construction. A professional Architect Now that you know your construction budget, aim to save at least 20-30 per cent of the total construction budget. Because, even if you are planning to avail of a house construction loan, the bank is not going to finance 100 per cent of the construction cost. They want to see your commitment before approving and processing your loan application form. And therefore, you have to save money for the down payment.
How much money you need to cover the initial construction cost may depend on the total home construction cost. But, whatever the total construction cost may be, you should aim to save as much as you can. This will help you ensure you don’t have to borrow a lot of money from the bank. So, look to save anywhere between 20-30 per cent of the total construction cost. However, if you can save more, then that will be even better for you.
Open a savings bank account
Open a savings bank account and consider it as a home-building fund account. You may already have a savings bank account. But still, it’s highly recommended to open a separate bank account and use it to save money for home construction.
This home fund account is going to be used as the main account to save money to build a house. Deposit any surplus money like a bonus, tax refund, commission, and salary raise etc to this account.
Save and invest to get higher returns
Invest the money wisely from this account to get better returns and yields. Consider different investment options like equity and mutual fund investment. They are known to offer better returns than the usual fixed deposit, recurring deposit and saving bank accounts.
If you opt to invest in a mutual fund or other market-linked schemes like equity, then be very careful in choosing the funds and scripts. For the best returns, analyze the past performance of the instrument. Also, check for reviews and comments by experts. Understand the financials of the companies/funds, and then make your best judgment.
However, if you are unsure, it is best to talk to an expert financial planner. A financial planner can help you get a better return out of your investment as per your financial goals.
Cut your expenses
There can be two effective ways to save money for building a house, buying a home or an apartment. Or to meet any of your other present and future financial goals. One is to cut down your present expenses and the other is to increase your earning.
How can you cut present expenses?
Note down all your expenses big or small on a daily basis. Analyze your expenses and you can easily find a few cost heads that can be tweaked and adjusted. Get rid of any cost heads that do not add value and make a huge difference in your life. This will help you bring down your monthly expenses and you will end up saving some extra cash every month. Put this extra cash into your home saving fund and then invest it wisely to get a handsome return.
For instance, if you are going out every weekend for dinner, then you may like to change the frequency of dining out. Instead of dining out every weekend, you may like to go out once every month. Instead of dining out every week, if you eat out just once a month, you can save a substantial amount of money every month.
Similarly, you can get rid of a few of the subscriptions like DTH, and instead watch shows online. Get rid of newspapers and other periodicals and you can read online news. Look for recurring expenses and check out which cost heads can be adjusted to cut your monthly expenses down.
It may appear like a small saving. But, when you seriously want to save money to build a house, every penny you save will help you realize your dream of building a house faster.
Increase your income
As I said, when you want to save money for building a house or to meet any other short or long-term financial goals, you have to save and invest money wisely. Now, if you are able to increase your monthly or quarterly savings even by 10-15 per cent, it will help realize your financial goal much faster.
How do you increase your income?
You have to put in extra effort and build some sort of passive income. Apart from your day-to-day job, find ways to earn a little extra every month. You may consider starting a side hustle because starting a side business is not as difficult in today’s time when you have free tools and apps to take care of your operation. For instance, you can use Canva for designs, Zintego to generate business receipts, Google Calendar for scheduling tasks and so on.
Today we are living in a creative economy where anyone can monetize their skill. So look for a new opportunity where you can monetize your time and skill. Here are a few options you may like to try.
- Look for a part-time job opportunity
- Teaching a few hours on online platforms
- Starting a blog and publishing posts every week
- Take up some freelance assignments as per your expertise
- Start a video blog on YouTube to generate extra income
Do whatever you can to increase your income, even if it’s just a few thousand every month. By investing this extra income wisely, you’ll be able to reach your financial goal faster.
Cut the cost of construction
As a future homeowner, you only know the efforts it takes to build a corpus for new home construction. The sweat, efforts and sacrifices you have made should not be wasted and thus you should look for ways to keep the cost of construction under control.
The process of building a house has changed a lot over the years and there is so much that can be added while building a house. From fancy tiles and marbles to ultra-modern home automation systems, there is much to do.
But, you should not get carried away and look for the features that can add real value to your home. Get your priorities right and accordingly plan for the construction and this will help you build your dream home without getting over budget.
You should also consider hiring a professional architect who can help design the house and estimate the budget for construction. Hiring an architect does not cost much and there are many architects who offer flexible rates as per the level of engagement. Having a professional by your side has many advantages and you must consider this option.
Final thoughts on saving money to build a house
Choosing to build a house on your own land is a big financial and emotional commitment. If you have decided to construct a house, you are actually gearing up towards a long, exciting and overwhelming journey. As it involves a lot of money, it requires a foolproof financial plan and savings. From saving money to manage initial construction expenses to arranging housing loans and getting a house plan in place, this journey is going to be super exciting.
However, saving money to cover 20-30 per cent of total home construction cost is not going to be easy, especially when you do not start saving money early on. I have shared a few simple and easy money-saving tricks that’ll help you to save for home construction. If you follow these simple saving tips and hacks, you will be able to manage the funds much more effectively.
What else do you think can help save money to build a new house? Share your money-saving tips and tricks by commenting below.