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8 tips to live the dream

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Do you dream of owning a vacation home? What is your ideal configuration? A quiet place in the serene mountains, a cabin by the lake or a house on the beach?

Owning a holiday home allows you to escape the madness of the city to relax, without the hassle of finding and booking accommodation. When you decide to retire, you can sell your primary residence and move to your vacation spot.

However, a vacation home may seem like a fantasy to many Americans. Most people face paying their existing mortgage in their family's house or apartment. The idea of ​​taking a second mortgage for a family home can make you wonder how you could afford to find the money for this lifestyle improvement.

It may surprise you to know that you may already be able to pay for a vacation home. Every year, we spend thousands of dollars on unnecessary items that we don't need. By readjusting your finances and spending habits, you could have the down payment on a vacation home in less time than you think.

Save for big purchases

Read: How to save for large purchases: complete guide

These are the eight best ways to save for a vacation home. In a few months, you could be closing the deal in your new property.

1. Invest in a mutual fund

In some cases, it may take some years to save enough money to cover the down payment on your new vacation property. You can structure your savings and receive the best return on your money by investing in a mutual fund.

A mutual fund will raise money from multiple investors. An account manager has exclusive control over how the fund invests the money. The administrator then uses the funds to invest in a portfolio of stocks and bonds. Some mutual funds may also invest in other asset classes, such as currencies, commodities and property. However, for the most part, mutual funds prefer stocks and bonds as the main asset classes to build a portfolio.

He has no control over how the fund manager invests the money, and it is his job to make sure his money grows every year. Most mutual funds get a net return of between 6 and 11 percent annually, and this money grows exponentially whenever you leave it in your investment account with the company.

By grouping the money of investors into an account, the fund manager gets the advantage of increasing their purchasing power. This strategy minimizes risk while allowing the administrator to diversify the assets in the portfolio to further reduce the risk.

Investment funds

Read: What is a mutual fund? And should you invest in one?

2. Reduce your expenses

Where do you spend money and what do you spend your money on each month? Reviewing your financial behavior can lead to some surprises. Try to reduce unnecessary purchases and ask yourself if you want your holiday home or the item you have on hand in the payment line. If you save money whenever you can, it helps you reach your initial down payment target faster.

Examine your spending habits and reduce your expenses as much as possible. If you always have lunch at a local fast food restaurant, consider packing your lunch or skipping food. If you spend $ 10 on lunch every day, that's $ 300 per month or $ 3,600 per year.

With this example, it is easy to see how small amounts of money spent frequently add up to significant expenses during the year. Think about how much money you could save if you practiced the same strategy in other areas of your life.

Do you need that second or third Starbucks in the morning? Are you paying for two streaming services when you only use one most of the time? Eat less with the family, tell them that you are saving for a vacation home, and children will be happy to occasionally sit on pizza night.

Live under your means

Read: The complete guide to live below your means

3. Meet your monthly budget

Every American family must have a budget. A budget controls your cash flow and expenses during the month, and is a guide to ensure that you meet your financial goals. When you save for a vacation home, your budget is more critical than ever.

Sit with your partner and examine each area of ​​your budget. Cut as many expenses as you can until you have enough savings to start saving money for your vacation home. You must account for each dollar you spend during the month. Your budget can help you identify if you are on track to achieve your savings goals.

A budget is a useful tool to control your monthly expenses to achieve your financial goals. However, it is only as effective as its implementation. If you make a budget, keep it, regardless of the financial setbacks that occur in your daily life. If you remain diligent with your expenses and adhere to your budget, you will have the money for your down payment in no time.

How to make a budget

Read: How to make a budget: Complete beginner's guide

4. Reduce the size of your cars

What kind of car do you have? If you get behind the wheel of a drink of gasoline every morning, it costs you your holiday home. While oil prices are low and have been low for the past 4 years, rising geopolitical tensions could double the price of oil. Owning an SUV will end up tripling your gas bill if economic pressures begin to affect the price of oil.

A car is a status symbol in the United States, and many people are the best car they can afford. There is nothing wrong with having a new SUV; It looks great on the road and attracts attention. However, if your goal is to save for a vacation home, reconsider buying an expensive vehicle.

If you own an uneconomic vehicle such as an SUV, you are pouring money into your gas tank every time it is filled at the service station. Why use twice as much fuel when you can sell your car and lease something more affordable and consume less gasoline? If you implement this advice, you could save thousands of dollars on your gas bill for a year.

If your home has more than one car, consider selling the second car to increase your savings fund for vacation homes. If you don't use two vehicles very often, why pay the maintenance and gas bill for two cars? Consider sharing the trip with friends or colleagues to go to work and save the rental and fuel costs of using your vehicle.

Minimalist lifestyle

Read: The minimalist lifestyle: complete guide

5. Ask your insurer and bank to adjust their rates

If you own cars and a house, you are paying insurance premiums every month. If you have a long-standing relationship with your current insurance company, then you may be eligible for a discount on your monthly premiums.

Insurance companies will often reward old customers for their support by reducing their rates. If you remain without accidents for 5 years, most insurance companies will reduce your premiums to retain your business. If you are a good driver and your insurance company refuses to give in your premiums, look for other insurers.

If you start comparing budgets, you will probably find that you can get a cheaper policy from other companies. Saving a few hundred dollars on your insurance premiums adds up throughout the year, and puts it one step closer to buying your vacation home.

Another area where you can save money on fees is with your credit card company. If you have a good payment history with the lender and a good credit score, you can negotiate your current APR with the lender. Banks like to know that you are responsible with credit and can reduce your APR to maintain your business.

6. Earn more money

The best way to save for your new vacation home is to earn more money. As your income increases, your savings rate skyrockets and you will close that real estate property in no time. Parents with children do not want to spend too much time away from their family. If you have to work all day and then go on a night shift, you will never see your children.

When children do not have adults nearby to provide guidance in life, they begin to lose their way. Children without any adult may end up venturing into self-destructive behaviors such as drinking, smoking and using drugs. If you and your partner leave the children to go to work in the afternoon, it can end up costing them a lot.

Instead, use the Internet to obtain a secondary income. There are countless opportunities online to earn a few hundred dollars each month. Register at a site like Fiverr or Freelancer, and you'll find thousands of "concert economics" jobs available to you.

When working online, you can stay with your family and work from the comfort of your home. You can correct or write articles, edit videos or create designs. By earning more money, your dreams of a vacation home will materialize faster than you expect.

Make extra money

Read our Guides to earn money:

7. Check the equity in your home

You may already be able to pay for your vacation home and not realize that you have the money available. If you have a mortgage on your current property, then you may have available capital that you can borrow.

If you take a $ 300,000 mortgage at your primary residence and pay $ 50,000 during the first five years, then you now have $ 50,000 of capital in your home. Banks and mortgage lenders allow you to refinance this equity to a new term with a new interest rate.

Then you can take the $ 50,000 in capital and use them as an advance on your vacation home. The lender adjusts the term of your mortgage so that you do not experience any change in your monthly mortgage payments.

Buying a second piece of real estate is the best way to capitalize on your home and expand your property portfolio. Banks are more likely to approve their refinancing agreement if they tell them that they are using the money to buy another property. Refinancing transactions are available at numerous banks and private lenders, so look for the best offer you can find.

Some lenders may even offer you a lower APR on the new loan than you had with your previous mortgage. This reduction in the APR rate gives you more free cash flow at the end of the month to pay your new mortgage early.

What is a capital credit line?

8. Stay motivated

It could take a few years to save enough money to pay a down payment on your new vacation home. With your goal so far, it's easy to lose motivation as to why you are saving your money. The vacation home may seem like a good idea now, but six months after your savings goal, you may have a change of mind.

Stay motivated while saving towards your goal. Make some family trips to the places where you want to buy your home and take a look at the neighborhoods. Ask real estate agents to take you around the properties available in the area and take many photos.

Spend time with your family looking at the photos. Print them out and make a collage of your favorite vacation homes. Place the collage in the refrigerator and it will remind you what you are saving each month.

The last word: remember to include closing costs

Receiving your mortgage approval is an exciting experience. Most people are so overwhelmed by the deal that they forget about the other costs involved with real estate transactions.

When you sign the documentation of your vacation home, the lender requires you to cover the closing costs. These expenses could cost you between two and five percent of the value of the agreement.

Be sure to save enough money to cover the down payment and closing costs of your vacation home. It may take a few more months to reach your financial goal, but you won't have to compromise.

Establishing a cheaper house because you don't have the money to cover closing costs could crush your dreams.

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