How I Could Afford My Dream Home
This week I was tasked with designing my personal financial plan as to how I am going to afford my dream home. However, before I begin, I need to actually have a dream home. A dream home is something I have not put much thought into, as I am a young college student who at this point in time is still unsure of exactly what my major will be. That being said, I will describe my dream home and subsequent financial plan as such:
My dream home might as well be ambitious, that is the whole point of a “dream.” Since this is a dream scenario, I will say that the house is going to be a $900,000.00 house in the suburbs. Since I will most likely not become a millionaire straight out of college, this goal will require multiple steps until I am ready to make the purchase. I would prefer to avoid mortgaging the house altogether, but if I had to I would want at least 75% of the down payment covered.
This dream home will not be achievable any time soon. However, with enough patience and discipline I can turn this dream into a reality. My plan would include maximizing my saving capabilities by lowering expenses. Some expenses I would try to minimize are car expenses, food, and living options. Buying a used car and avoiding car loans is crucial in allowing me to save more money. Falling into debt becomes a huge obstacle for people trying to save money, as they first have to focus all of their attention on paying off the debt before they start saving for what they want. These things will enable me to save my money to its fullest extent. As my favorite financial expert Dave Ramsey famously said, “ The key to saving money is how you spend it, not how much you make.” This quote gives hope to people who are not professional athletes that they can still become wealthy even though they are not bringing in large quantities of cash.
In order for this dream to become a reality, I would need a strong source of passive income in addition to whatever I am making for my job. Most kinds of passive income require a somewhat large starting amount, so this would be a mini-goal I would need to reach before moving on to the ultimate goal of the dream house. Although there are various methods to earn passive income, a good option is to buy a house or apartment complex and rent it out. This is a somewhat low-risk option that will be crucial in allowing me to put more money aside for the ultimate dream. However, this will require lots of time and planning to acquire.
Other long term methods of building wealth are investments. A few ways to invest are in stocks, bonds, and mutual funds. This is slightly different than owning an asset such as a house or apartment complex because these are more long term methods which take your current cash and grows it over time using interest. A mutual fund seems like it might be the most helpful way for me to grow my wealth over time. I am no expert, but mutual funds are often put together by experts who select a variety of stocks which lower the risk on investments.
Another tool which will help make the dream home a reality is to make a budget for everything and sticking to it. Small habits such as this are something I can start now that will make it easier for me in the future. A sinking fund is also a great way to set aside money for long term purchases. For this dream to become a reality, I need to make sinking funds a regular habit for large purchases so that when I start saving more and more money I already have these habits in place.
In summation, my $900,000.00 house will be achievable through patience, discipline, and additional sources of income. Having these disciplined money habits will take me far, even if my yearly income is not far above average.
“Nothing happens without focus. Don’t try to do everything at once. Take it one step at a time.” -Dave Ramsey
