Budgeting to Buy a Home

As the holiday season begins to peak, we’re reminded of the expenses that come with gifting and giving. It’s easy to let money slip through the cracks when it means bringing your loved ones joy. Letting money slip is not the best idea when you’re in the market for a home. Buying a home is one of the largest purchases you will make in your lifetime. So, it’s time to get on board with budgeting as the new year is upon us.

Finance guru and businessman, Dave Ramsey, created a full-proof way to kickstart your savings and prosper financially. Here are just a few of Dave’s suggestions when being in financial distress is no longer an option. Not only is saving an important aspect of buying a home, but having a general grasp on your finances is the best situation you can be in to stay out of debt.

Monthly Plan

The essence of saving money is being disciplined and intentional. In order to slowly save toward your big goal of owning a home, it’s important you put checks and balances in place each month to stay on track. Staying on track means writing up a monthly budget at the start of the month. Looking at last year’s financial statements is a great way to get an idea of what you spend each month. Ramsey suggests using a zero-based budget. This means giving every dollar a purpose in your budget. Your monthly income should be equal to your monthly expenses, which can include a chunk of money that acts as a buffer to stay under budget.

Categorize

Ramsey’s method of categorizing is using envelopes to divide up the month’s budget. Once your budget is written for the month, create an envelope for each category and put the correct amount of cash in each. Now is the perfect time to use a categorizing method as you finish up spending money on gifts for family and friends. By using this system you can ensure you don’t overspend in a certain category. This will help you pinpoint those areas that you may overindulge. Using this system will keep you financially sound from month to month so you can ensure your budget is working out. By controlling your monthly budget in this precise manner, you are putting yourself in a better financial state of mind that makes the idea of buying a house, apartment or condo more reasonable.

Emergency Fund

If you don’t already have money set aside for emergencies, Ramsey suggests getting started as quick as possible. This emergency fund should be a separate account from your savings. It’s not for buying a new flatscreen TV or splurging on Christmas gifts you cannot afford. He suggests the emergency fund be used only in the case of an emergency. This is for those times when your car breaks down. It’s for the events you can expect to happen at unexpected times, which ultimately hit your usual savings account hard without backup. The emergency fund is your backup. Put $1,000 in a low-risk, money market mutual fund as quick as possible and eventually set aside 3-6 months of expenses.

Fighting Debt

Finding yourself in debt is not ideal when it comes time to move. Whether it’s credit card debit or you’re late paying the bills, it is essential you start getting ahead. Do away with lump sum payments. The debt snowball method is Ramsey’s strategic technique to begin seeing the light at the end of the tunnel. Continue to pay minimums while addressing your smallest debt first. Once you pay off the smallest debt, use that money to pay off your next smallest debt until you tackle all the debts in your way of saving to buy a home. In the perfect world, you will be able to buy your next home free of unnecessary debt.


Finances may not be the ideal topic of conversation around this time of year, but it’s important you take control of them if you plan on purchasing a new home heading into the new year. By trying out a few of Ramsey’s tips toward being financially responsible, money won’t be as big of an issue when you take that big step. Take back your finances and you’re already on your way to finding the home you’ve always wanted!