As of September 2023, the average salary in the United States is $59,428 per year, according to Forbes. If you earn around this amount, it might feel like your income barely covers your everyday expenses, let alone saving up for a down payment on a house.
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Saving for a house on an average salary is undoubtedly challenging, but it’s far from impossible. With determination and smart financial choices, your dream of homeownership can become a reality, even on an average salary. Here’s how.
Create a Budget
Before you embark on your journey to save for a house, it’s essential to set clear, achievable goals. Determine how much you need for a down payment and establish a timeline for reaching this goal. This will provide you with a clear roadmap and motivation to stay on track.
Track your monthly income and expenses diligently, and identify areas where you can cut back. Allocate a specific portion of your income toward your down payment fund.Â
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Cut Unnecessary Expenses
“If you want to save for a house on an average salary, slash spending,” said David Bakke, housing expert at DollarSanity. “That means cutting costs at the grocery store, looking for ways to save on other monthly bills and cutting back on personal purchases. If you have the will to do it, it can be done.”
While you might not be able to control your salary, you can certainly control your spending habits. Analyze your monthly expenses and identify areas where you can reduce spending. This might involve canceling subscriptions, eating out less or finding more cost-effective alternatives for your regular purchases. These small sacrifices can add up over time and significantly boost your savings rate.
Temporarily Suspend Your Retirement Savings
“You can also cut back on retirement savings, although this is a dicey subject,” Bakke said. “If you do decide to go this route, make sure that you can get back on track with retirement savings as soon as you’ve purchased your home.”
Even if you maintain your retirement contributions, saving for a house should be a top priority in your budget. Treat it like any other essential expense, such as rent or utilities, and set up automatic transfers to your dedicated house fund each month. This approach ensures that you consistently contribute to your house fund and prevents the temptation to spend that money on other things.