How To Save For A House (And Decide If Buying Is Right For You)

Buying a house can be a great investment, but it’s not the right investment for everyone. The real cost of homeownership goes beyond a mortgage payment, and renting can often be the smarter financial choice. This guide breaks down how to save for a house, account for hidden costs, and decide whether buying or renting aligns with your Rich Life.

How to Save for a House with the Conscious Spending Plan

Most budgeting advice focuses on cutting out things you love, but the Conscious Spending Plan (CSP) takes a different approach. It helps you work toward a home purchase while still enjoying life. Instead of extreme frugality, the CSP divides your income into four categories: fixed costs, investments, savings, and guilt-free spending.

You can work toward a down payment while still enjoying life by allocating 20–35% of your income to savings and investments. This ensures that while you're putting money aside for a down payment, you're not depriving yourself of experiences that bring you joy. The goal isn’t just to buy a house—it’s to build a financial foundation that supports the life you actually want.

Cut back on unnecessary expenses

The fastest way to save for a house is to cut back on spending that doesn’t align with your goals. Start by reviewing your fixed costs: things like rent, utilities, and recurring bills. Can you negotiate a lower rate on services, cancel subscriptions you barely use, or even downsize to a more affordable living situation while you save?

Next, look at your guilt-free spending. You don’t have to cut it out entirely, but small adjustments can add up. If you typically dine out four times a week, try cutting back to twice a week, and then put the extra money into your home fund. The key is to be intentional—trimming expenses in areas that don’t bring you real value while still allowing room for the things you enjoy.

Boost your income with a side hustle

If cutting expenses alone isn't enough, increasing your income can speed up your home savings. A side hustle—whether freelancing, consulting, or starting an online business—can make a huge impact. Even an extra $500 a month adds up to thousands over time.

The key is to reinvest those earnings directly into your savings rather than upgrading your lifestyle. Avoiding lifestyle inflation ensures that your extra income actually accelerates your home-buying goal instead of just funding more discretionary spending.

Reduce debt to improve your credit

Reducing debt is one of the smartest moves you can make before buying a house. A lower debt-to-income ratio (DTI) not only improves your chances of qualifying for a mortgage but also helps you secure a better interest rate, potentially saving you tens of thousands of dollars over the life of the loan.

Start by tackling high-interest debt, such as credit cards, using either the avalanche method (paying off the highest-interest balances first) or the snowball method (paying off smaller debts first for quick wins).

As you chip away at your debt, your credit score will improve, which can make a significant difference in your mortgage terms. Even a small increase in your score could translate to lower monthly payments and major long-term savings.

Use this Debt Payoff Calculator to see how long it’ll take to become debt-free and make adjustments accordingly.

Automate your savings plan

Setting up automatic transfers to a dedicated house fund removes the need for willpower and keeps your savings on track. Using high-yield savings accounts or money market accounts can help grow your down payment even faster.

Automation ensures that saving happens consistently, even when motivation fluctuates. By treating your home savings like a non-negotiable bill, you can make steady progress without having to think about it constantly.

Prioritize your long-term goals

Buying a house is a major financial and lifestyle commitment, so it’s important to make sure it fits into your long-term goals for your Rich Life. If early retirement, frequent travel, or starting a business are bigger priorities, homeownership might not be the right move—at least not yet.

In some cases, renting while investing your money wisely can put you in a stronger financial position than rushing into a home purchase. A house isn’t just an asset; it comes with ongoing costs and responsibilities that could limit your flexibility.

The True Costs of Homeownership

In addition to a down payment—one of the biggest upfront costs when buying a home—there are other costs to be aware of as well:

How to calculate your down payment

While a 20% down payment helps you avoid private mortgage insurance (PMI) and secures better loan terms, government-backed loans like FHA and VA allow for lower down payments. However, these often come with added long-term costs.

One-time costs you might overlook

Many buyers also overlook closing costs, including loan origination fees, title insurance, and legal expenses, which can add 3–6% to the purchase price. Other upfront costs include utility setup fees and property inspections, which are smaller but necessary expenses. Some states require multiple inspections before closing, and buyers may need to cover these out of pocket.

Consider planning in advance for furnishing your home, too. Buying furniture, appliances, and home essentials after moving in is another expense that new homeowners often forget to include in their budget.

Other hidden costs

Homeownership comes with hidden expenses that can increase monthly costs by 50% or more. Property taxes vary widely by location and home value, sometimes costing tens of thousands annually. Maintenance and repairs also add up; expect to spend at least 1% of your home’s value each year on upkeep like plumbing, roofing, and HVAC servicing.

Homeowners insurance is another required expense, and premiums tend to increase over time, especially in high-risk areas. If your home is part of a community with homeowners association (HOA) fees, those can range from a small monthly charge to several hundred dollars.

A real-life example of phantom costs leading to regret

Jonathan and Shalom learned firsthand how the hidden costs of homeownership can be overwhelming:

[00:07:41] Ramit: All right. That’s a considerable jump. You went from 1,800 a month in rent, which was all in. That’s how much you paid. That was it. To now, 4,500 plus assorted phantom costs that haven’t even really been added. Let’s just say, I don’t know, four, 500 bucks extra a month. Ballpark. That’s a huge jump.

[00:08:03] Shalom: Mm-hmm.

[00:08:04] Ramit: More than double.

[00:08:06] Jonathan: When I put my head down my pillow at night, it’s like, okay, so even if all the numbers work fine, this seems like there’s this huge liability of the house hanging over my head. It’s just like those things, like flood, there’s mold. I mean, there could be a tornado hits the house. I mean, and it is one of those things where, um, I feel that weight.

Even though the numbers seemed fine on paper, Jonathan and Shalom felt the weight of unpredictable costs like flood risks, mold issues, and potential home repairs. The financial and mental burden of homeownership was much greater than they had anticipated.

Should You Buy or Rent?

Owning a home isn’t always the best financial move. Renting provides flexibility, fewer upfront costs, and no responsibility for maintenance. On the other hand, homeownership can offer long-term equity growth but comes with significant ongoing expenses.

To make the right decision, factor in total housing costs, not just the mortgage itself. Property taxes, insurance, repairs, and HOA fees can increase monthly costs by 50% or more. In some cases, renting while investing the difference in a diversified portfolio can be a smarter financial move than buying.

Still not sure? In my video below, I speak through my own experience as a multi-millionaire who doesn’t own or invest in property:

How to know if you’re ready to buy

Before committing to homeownership, ensure that total housing costs remain below 28% of your gross monthly income. A stable income and strong credit score help secure better mortgage rates, saving you thousands in interest.

Beyond the down payment and closing costs, have an emergency fund equal to at least six months of expenses. Also, consider your long-term plans: buying a home makes more sense if you plan to stay in the area for at least ten years. Selling too soon can result in financial losses due to transaction fees and market fluctuations.

Remember that homeownership requires maintenance, repairs, and long-term financial commitment. If flexibility is a priority, renting may be the better option.

3 Mistakes to Avoid When Saving for a House

Saving for a home is a major financial goal, but rushing into homeownership without careful planning can lead to costly mistakes. Avoid these oversights before committing:

1. Writing off renting for the wrong reasons

Many people believe renting is a waste of money, but that’s a myth. Renting offers flexibility, lower upfront costs, and freedom from maintenance expenses—benefits that can be crucial depending on your financial goals.

Homeownership isn’t automatically a wealth-building strategy; if you buy a home without considering the long-term costs and commitment, you could end up spending more than you would have by renting and investing the difference. In high-cost housing markets where property prices rise faster than salaries, renting while investing in a diversified portfolio can be a wise financial decision

If you’re unsure about job stability, potential relocations, or your personal goals, renting may be the better choice until you have a clearer picture of where you want to be.

2. Ignoring hidden homeownership costs

Don’t focus solely on mortgage payments; property taxes, insurance, and maintenance must be considered as well. These expenses can add thousands of dollars to annual housing costs. Unexpected repairs, like replacing a water heater or fixing a roof leak, can quickly strain your finances if you don’t have a home emergency fund.

HOA fees also vary widely and often increase over time, sometimes requiring additional assessments for community improvements. Regular upkeep expenses—including landscaping, pest control, and appliance maintenance—is another area that can catch homeowners off guard. Without a solid financial cushion, these hidden costs can create financial stress and make homeownership more expensive than expected.

3. Failing to consider your Rich Life goals

Buying a home is more than just a financial decision. It’s a long-term commitment that should align with your lifestyle and personal goals. If homeownership conflicts with other priorities like travel, career flexibility, or investing, it may not be the best move.

Many people rush into buying a house due to societal pressure, even when it doesn’t fit their vision for a fulfilling life. A home should support your financial strategy, not dictate it. If owning a house requires sacrificing things that genuinely bring you happiness, it’s probably worth reconsidering. Think about whether the stability of homeownership matches your lifestyle or if flexibility and financial liquidity are more important to you.

For the bigger picture, read my NYT Bestselling books, I Will Teach You to Be Rich and Money for Couples.