How to Save for a House on a Low Income: 4 Strategies - ToughNickel - Money
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How to Save for a House on a Low Income: 4 Strategies

Katy mentors and educates young professionals and helps those beginning their careers and financial journeys to make informed decisions.

Affording a house doesn't have to be an unreachable goal. Discover some tips for saving, even if your salary is low.

Affording a house doesn't have to be an unreachable goal. Discover some tips for saving, even if your salary is low.

Strategies for Saving for a House on a Low Salary

Don’t think that buying a home is out of reach if you have a small salary.

Buying a house with a low income is possible by using any of these strategies:

  1. Save for Longer
  2. Increase Your Salary
  3. Tighten Your Budget (Decrease Your Expenses)
  4. Purchase a Less Expensive House

Not all of these strategies are possible for every person. And certainly not of them are easy, or you would have done them already and be able to afford a home. A single mother is not likely going to be able to take a night job to increase her income. But she can probably find expenses to cut and commit to saving for a few more years.

Similarly, a construction worker probably can't move to a cheaper house outside of the city because he needs to live where there is work, but instead he can seek a promotion with a pay bump.

But the key is to be honest with yourself about what you are able to do. You can accomplish more than you think. Getting to home ownership is going to take creativity and a willingness to consider money-saving strategies you've previously avoided.

1. Take Longer to Save Before Buying

This strategy is listed first to show you that, even if you are doing everything you can to save up for a house, sometimes it just takes patience.

Your original plan might have been to buy a house within 2 years of finishing school, or before getting married, or by the time you start having kids.

But life doesn't work out the way we plan, and finances go along with that. With a low income (or a moderate income with high, unavoidable expenses), it doesn't take much to derail our plans.

There's nothing wrong with waiting longer to buy a house. You're putting aside what you can each month, so adding on another 1 or 2 years will make a huge difference in the down payment savings you have when you go house hunting.

Consider whether you could be earning more money in your job than you currently are.

Consider whether you could be earning more money in your job than you currently are.

2. Increase Your Salary

It isn't a shocking idea that in order to save up for a home faster, you could try making more money. But many people ignore this option because they assume it's not possible for them.

You're already busy and stressed, and 40 hours a week is hard enough. You don't have the time or money to go back to school. You've had the same job for years, and you can't do anything else.

Sound familiar?

We all have ways we rationalize staying with the safe and comfortable, but that means stagnating in your job—and your wages. Consider a few methods below of increasing the income you bring in every year. Like the strategies for saving for a house, they are not all going to work for you. But give each one an honest consideration, and before you say "I can't do that", ask yourself why.

Ask for a Raise

If you truly add value to your company, you are completely justified in asking for a raise, and in that case you might just get it. Present your manager or boss with facts about how you make your team more productive or how you helped the company earn more money. Use these ideas to justify an increase in salary.

Even if he/she says no initially, they'll know you're driven and interested in making more. Continue to ask how you can contribute more and how that would lead to an increase in pay.

Find a New Job

Regardless of whether you were able to secure a higher salary or not, think about looking elsewhere. Use a little bit of time outside of work to look around on job boards, apply to postings, and go to interviews.

See what sort of pay other companies are willing to offer. This doesn't have to be in a new role; it can be in the same position you're in now. But don't count out the possibility of a career change if it's something you want.

Build Your Qualifications

This is a more long-term solution to making more money, but it's definitely the most sustainable (you can't job hop continually, and there will be a limit to how much more your boss is willing to pay you).

Seek out more education or certifications that will help you land higher paying positions.

Try tightening your budget even more so you can set aside some money towards a future house.

Try tightening your budget even more so you can set aside some money towards a future house.

3. Tighten Your Budget

Folks that are living on a low income have already learned by necessity how to cut down on expenses.

Take a really good look at where your money is going. Making budget adjustments is most effective when you tackle the bigger ticket items: housing, cars, health care, child care.

Save Up for a Down Payment While Renting

The reason saving up for a first house is such a challenge for many people is they are paying high rents while trying to save for a down payment. Somehow any down payment savings seem to vanish when a financial emergency arises.

Consider a Lower Cost of Living Area

One solution if you can’t afford to buy in your area on a realistic timeline is to look at houses in a lower cost of living area. But what will help you even more is to move into an area where housing is cheaper while you’re still renting.

This serves two purposes. One is it forces you to adapt your lifestyle and maybe your career to accommodate the new location. It's a trial run to see if you can really commit to a house there.

The other purpose of downgrading your housing is it will allow to save more each month because your rent will be lower.

4. Purchase a Less Expensive House

This is the fourth and last strategy to come to if you are still just not able to save up for the down payment you need. In this case, you will need to lower the cost of a home you can buy.

You need to weigh this against the first strategy, which is to just save for longer before jumping into buying a house. Buying a cheaper house is just not possible for some situations. Large families need more room and the location of many jobs dictate that you live in higher cost of living areas.

But if it's possible, then a cheaper house means a lower mortgage payment and less money spent on interest and property taxes. This means your finances get some breathing room and you can save your money up for a secure financial future.

Bonus Tip: Avoid Comparison

No matter what strategy you employ to save for your first down payment keep in mind that comparing your financial situation to others will hold you back.

It’s easy to hear about someone’s success story and write them off by saying, “well of course he can afford real estate, he makes X thousands of dollars per year more than I do” or “she didn’t have student loans but I do so I can’t afford to save as aggressively.”

Remember this in not about your neighbor, your friends or your classmates, this is about you, your family and the budget that reflects your values. Keep your focus on improving your financial situation and you will see results.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2018 Katy Medium