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If you dream of owning a home in San Francisco, it can be daunting to think about how much you’ll need to save to get there. Like any major purchase, the key is to understand your budget and to then have a plan to reach it. Rather than hoping you’ll win the lottery, or sell your next big idea with a startup, there are some realistic ways to save and invest to help your money grow.
1. Understand your Budget
Knowing that you need to save is a first small step. Understanding precisely how much you need to save is a concrete move that can help you reach your financial goals. If you aren’t sure how much to budget, take a look at San Francisco home listings, speak to a financial planner, and talk to a real estate agent, all actions that can help you define how much you can afford and your buying options. Your budget will be a ballpark estimate that can help you understand how much your home will cost including closing transactions and home maintenance.
2. Set up Investments
One of the simplest ways to invest is by opening a savings account with your bank or credit union. This reliable and safe way to put money away may not give you the highest yield, but it can be a good way to start. For example, a high-yield savings account will have a higher interest rate than an average savings account. Setting aside a set amount from your paycheck every month is a small step that can lead to other savings options. With high yield accounts typically having a limit on the number of withdrawals each month, you’ll have built in security that limits you from spending the money that’s for your next home.
3. Boost your 401(k)
Your employee-supported retirement account or 401(k) is designed to put a percentage of your monthly paycheck directly into a savings account. Typically your contribution is matched by your employer and is limited so that you can’t withdraw from the account until almost age 60. However, you may be able to borrow against your 401(k) to buy a house. Keep in mind that this financial option will have interest and will be another monthly payment that you will need to consider. There’s no doubt though that adding more to your 401(k) is one clear path to boost your savings.
4. Consider Fintech and Stocks
In an era where technology has reached every aspect of our lives, fintech is another path to diversify your investments. Fintech investing and saving platforms working with robo-advisors can create and manage investment portfolios using automated data. However, people just starting out may prefer to work with a human for a customized investment plan. Online platforms also make investing in stocks more accessible, but if you want the peace of mind of knowing that your funds are safe, this may not be for you.
One of the best saving strategies is to be patient and to watch where you are putting your money. Saving to buy a home may not offer the instant gratification that a meal out can, but it can lead to a big payoff.