Yahoo Finance How To Survive Financially If Your First Home Costs More Than You Expected
It’s harder than ever before to buy your first home.
Since 1963, home prices have risen 2.4 times faster than inflation, according to Clever. While home price growth has slowed since 2022, when the Federal Reserve went on an interest rate hiking spree, data from the Fed shows that median home prices remain near record highs.
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As a result, many first-time home buyers have found themselves strapped for cash. They put every spare penny into buying a home, only to find themselves living paycheck to paycheck.
How do you break that cycle?
If buying your first home left you more cash-crunched than expected, here are a few steps for you to try for breathing room.
Rent Out Part of Your Home
One quick and easy way to relieve the pressure involves turning a liability into an asset — or at least a liability that costs you less each month.
“If you’re struggling to afford your mortgage payment each month, look for ways to generate revenue with your home,” said Alexandra Alvarado, director of marketing and education at the American Apartment Owners Association. “Rent out a bedroom to a housemate. Or if that feels too permanent, rent out part of your home on Airbnb for a handful of nights each month.”
You may be able to rent out storage space in your garage, or a parking space, whether for a car, RV or boat. If you frequently spend weekends with family, friends or significant others, you could rent out your entire home on Airbnb while you’re not using it.
There’s a term for offsetting your mortgage payment with rental income from your home: house hacking. Get creative to find ways to house hack, and look up other people’s creative house hack ideas online.
Get Handy
Home repairs and maintenance get expensive quickly when you hire out every plumbing or paint job.
Instead of paying high hourly rates, look into doing this labor yourself. Do you have a leaky faucet? Look up YouTube videos on how to fix it. They call it YouTube University for a reason.
You may never master complex home repairs, but you can save thousands of dollars by learning how to perform simple ones yourself. Learn how to paint rooms with precision, fix basic plumbing problems, regrout tile and patch drywall, and hang towel racks on studs.
Trim the Fat From Your Budget
We all spend money on unnecessary purchases each month. The trick is to separate out the ones that truly make us happy from the ones that don’t.
Start with an audit of your subscriptions, and list out every one that you pay monthly or annually. Which ones do you use every single week? Which ones could you not possibly live without?
Cancel the others.
Then, look at your weekly routine. Do you really need that Dunkin Donuts coffee every morning? Can you take leftovers for lunch, instead of eating out? Put every expense under the microscope.
While one or two of these might make your week, the others are just routine that you do out of habit or minor convenience. Cut them out.
Pick Up a Side Hustle
You can grow your savings rate from two directions: spending less and earning more.
Switching to the income side of the equation, consider side hustles that could add some much-needed relief each month. This could mean something as simple as driving for ride-sharing services for a handful of hours each week.
Brian Meiggs, founder of My Millennial Guide, says most drivers earn an hourly rate of around $15, but savvier ones can earn more.
“I chatted up my Uber driver recently to ask how much he earned with it. He said he earns an extra $50,000 a year from driving, by working surge hours and near airports,” said Meiggs.
Meiggs also recommends exploring higher-skill side hustles to earn more.
“I’ve seen people earn huge amounts by flipping websites. On platforms like Flippa you can often sell sites for 32 times their monthly income. The trick is to buy an underperforming website and improve its revenue before selling,” he added.
Like every other type of work, the higher the barrier to entry, the greater the rewards. Explore side gig ideas that might require you to learn more in exchange for earning more.
Push for a Promotion
If you haven’t seen a pay raise recently, go ahead and negotiate for one solely on the basis of recent inflation. To earn a significant pay bump, though, you’ll probably need to take on more responsibility.
Sit down with your supervisor and tell them how much you like working for the company — and how you want to grow with it. Ask them how you can take on greater responsibilities in order to do so.
Many workers shy away from doing this; however, it shows your boss that you actually want to advance. They don’t necessarily know who has that fire in their belly to climb the ladder and who doesn’t.
You can prove to them that you do by simply opening the conversation.
Position Yourself for a New Position
Don’t think much of your current company or employer? Perhaps it’s time to search for greener pastures.
Rather than looking at similar positions to your current one, consider zooming out and pondering the bigger picture of your dream career. What kind of work do you truly want to do, and what does your dream job look like?
From this point, you can work backwards to plot a path toward it. Research what certifications, skills or work experiences you need to get to your goal. After planning your path, start walking it by taking the first step. Now is as good a time as any.
Final Thoughts
As you start earning more money, whether through your day job or your side hustle, avoid the temptation to spend it.
Most people succumb to lifestyle inflation: as soon as they earn more money, they find ways to spend it. That sometimes means more meals out, more vacations or a new car. It often means moving into a new home — perhaps leading to the very situation you find yourself in today.
Freeze your spending for now, no matter how much more you earn. Build your emergency fund, pay off your unsecured debts and save more for retirement. Once you feel plenty of breathing room, you can then consider adjusting your living expenses, but do so after setting an intentional savings rate and target date for reaching financial independence.
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