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If you're engaged, you may be trying to save for a wedding and a house at the same time. Since the average cost of a wedding is $29,858 and the average down payment on a house for first-time homebuyers is about 7% of the home's purchase price, this can be an overwhelming endeavor.
The good news is that with a bit of planning and persistence, you can save for a wedding and a house at the same time and start your new life off on the right foot. Here's how.
1. Set Your Priorities
Before you begin saving for a wedding and a house at the same time, it's crucial to sit down with your partner and set priorities. Do you value the wedding more or is the house a greater priority? How much of your combined income do you have to save for these goals? Are you willing to make some sacrifices to make both goals a reality?
Once you've figured out what's most important to both of you, you'll need to determine how much house you can afford and calculate how much you can spend on the wedding.
2. Set a Realistic Budget
The next step is setting a budget for your wedding and house. This starts with determining how much extra income you have to set aside by creating a monthly budget if you haven't done so already.
Once you know how much you can set aside, it's time to figure out how you can make buying a home and paying for a wedding as affordable as possible. Here are some tips on how you can save money on these large expenses.
How to Save Money on a Wedding
With a bit of creativity, you can save big on a wedding. Rather than inviting all of your friends and acquaintances, consider trimming the guest list and only inviting your closest family members and friends.
You can also get married on a Sunday, Friday or other weekday, all of which are usually significantly less expensive than a Saturday, as is an off-season wedding in the winter or early spring. Having a brunch wedding instead of an evening affair, serving beer and wine instead of hard liquor, and opting for non-floral decor can all help cut costs as well.
Think about which aspects of a wedding are most important to you and cut the costs of the parts that don't really matter to you. For example, if you'd like a 10-person band but are indifferent about the venue, consider hosting your wedding in a backyard rather than an upscale hotel.
How to Save Money on a House
To save money on a house, your first step is determining what you can't live without in a home and where you might be able to cut back. Condominiums are typically less expensive than detached single-family homes, and the more bedrooms and bathrooms you want, the higher the price will rise. If you're handy and love a good project you can dig into, a fixer-upper can be a great way to save money. If you're not, it may be better to find a home that doesn't need major work that you can live in comfortably for now.
Increasing your credit score, getting quotes from multiple mortgage lenders and saving for a larger down payment can also help you save a significant amount of money on homeownership costs. Finally, don't overlook the importance of working with a local, experienced real estate agent. They can negotiate on your behalf and ensure you're getting the best deal on a home.
3. Start Saving
After you've set a realistic budget for your wedding and house, determine how much you should spend and save each month. Also look at your monthly expenses to see if there's anywhere you can cut back. Do you have monthly subscriptions you almost never use? Are you spending a big portion of your monthly income on eating out? Take a hard look at your discretionary income after necessities are paid and see where you can trim.
To stay organized and accountable, it's a good idea to open two separate savings accounts: one for your wedding and one for your house. Separate accounts can make it easier for you to consistently save money for both every month. Since you'll likely have many smaller wedding expenses that add up quickly, a separate account will make it easier for you to keep track of how much you've spent so far.
Once you decide the amounts you can set aside for each goal, have those amounts transferred automatically to your savings accounts on payday. That way you won't see the money in your checking account and won't be tempted to spend it.
4. Try to Avoid New Debt
The key to landing a favorable interest rate and terms on a mortgage is keeping your credit scores in tip-top shape. Therefore, avoid taking on personal loans and credit card debt when you're getting ready to buy a house, as new debt can take a toll on your credit score.
Anytime you're tempted to take on debt to pay for your wedding, just remember that poor credit scores can cost you thousands or even tens of thousands of dollars over the life of your mortgage. If you're planning to pay for a wedding and buy a home within a short time of each other, it's best to avoid taking out a loan to pay for your wedding. In addition to possibly lowering your credit scores, you'll also have to pay interest on the loan, which could be money you'd be able to put aside for a down payment on a house.
If you can see no other option than to take out a personal loan or use a credit card to fund wedding expenses, make sure you make timely payments so you can build a positive payment history. Payment history is the most important factor in your credit scores, which will be critical when you're applying for a mortgage.
5. Prepare Your Credit for a Mortgage
To get approved for the best possible terms on your mortgage, you'll need to prepare your credit. Begin by checking your credit reports and scores so you have an idea of where you stand. If you notice any inaccuracies or mistakes, make sure you dispute them.
Then, pay down any debt you have so that you can decrease your credit utilization ratio, which is the percentage of your total available credit that you're currently using. Your credit utilization plays a vital role in your credit score and the lower it is, the better your credit is likely to be.
You should also focus on paying all of your bills on time and limiting large purchases, especially if you need a credit card or personal loan to pay for them.
While saving for a wedding and a house at the same time is no walk in the park, it is possible. As long as you and your partner are on the same page and willing to put in the effort, you can work together to get the wedding and the home you desire.