With all your current expenses and responsibilities, gathering enough funds for your dream vacation home might sound like a dream itself.
But guess what? We’ve compiled this list of the top six effective money-saving tips to change your dream into a reality. By the time you’re done reading, you’ll have a solid strategic plan to save for your dream vacation home effectively.
So without further ado, let’s get right into it.
Be Specific About Your Choices
If the sparkling pictures on Instagram are your idea of a dream vacation home, we’re afraid you might never be able to buy one. And that’s because it makes your budget boundaries vague. You wouldn’t know how much to save.
So the first thing you should do when trying to save for your dream vacation home is aim for a specific, real piece of property.
When looking for a suitable destination, you should consider the following factors:
- Distance from your home
- Ongoing appeal (i.e., would you like to visit the place again and again?)
- Potential investment value
- Potential rental value
- Maintenance needs
- Taxation
Once you have clarity about these factors and a definite figure for the overall investment required, saving for your dream vacation home will become a more practical venture.
Save a Certain Amount Everyday
Now that you have an idea of a definite figure, you can begin saving bit by bit. Divide the figure into smaller goals. You can do this by setting up a timeline over which you wish to save the amount.
For example, if your dream vacation house costs $100,000, you can divide the amount into 12 sections to save it over a year. It would mean $8333 per month. If you intend to save for your dream house over three years, it would mean $2777 per month.
Note that this is dummy data. The actual property costs are much higher and you must also budget for the hidden costs involved in buying a property. You can estimate the amount you will need upfront with Westpac.
Since an average household has an income of only about $5783 per month, it’s almost impossible to save such a big amount each month. For that reason, we suggest investing in mutual funds.
Invest in Mutual Funds
Mutual funds refer to a type of financial vehicle wherein multiple investors pool their money for investment purposes. You can invest in open-end funds or closed-end funds. Both are managed by professionals of a licensed asset management company.
The good thing about mutual funds is that you don’t have to stress over risky decisions. Investing professionals make these decisions for you in a way that your investment stays profitable. The profit percentage depends on the company you’ve chosen and the amount you’ve invested. Usually, it lies between 3 percent and 15 percent.
It might also be a good idea to split the savings costs between yourself and other earning members of your family.
Set up a Separate Bank Account for Saving
If you’ve been looking forward to a dream vacation house for a while, staying patient throughout the saving period will be a challenge. You might find yourself getting de-tracked and considering cheaper alternatives, such as a quick and refreshing trip to an island.
To keep this from happening, take precautions right when you begin your saving journey and arrange a separate bank account for it. It’s a good idea to share it with one other family member. This will allow both of you to hold one another accountable for any unnecessary expenditure from the saved amount.
Cut Down Your Expenses
You can also save for your dream vacation home by cutting down unnecessary expenses in your day-to-day life. You can begin with:
- Replacing expensive restaurant meals with healthy homemade food: It will save you approximately $100 per month.
- Brewing coffee at home: It can save you up to $1000 per month.
- Washing your car by yourself: It will save you $180-$360 annually.
- Walking to nearby places instead of driving: It will save you a considerable amount in fuel costs.
Moreover, keep a close eye on your electricity expenditure and switch off devices when not in use.
Expand Your Sources of Income
Saving with only one source of income might not work for many. You will have to expand your sources of income. If you’re already working full-time somewhere, consider taking up a side hustle on weekends. You can begin with creativity-based freelance services. Here’s a list of the best well-paid jobs for creative freelancers.
Since these jobs are led by your creative skills, they are easy and interesting. And the freelance nature lifts off the stress caused by time limitations and accountability associated with full-time employment. Plus, an average freelancer makes around $21 per hour. So, if you manage to work five hours on both Saturday and Sunday, you save approximately $850 each month.
Alternatively, you can take up small part-time jobs, such as housekeeping, English language teacher, caregiving, restaurant cashier, etc.
