How to invest while saving for a house — 4 ways to continue to invest in stocks while trying to save for a house. Retirement savings, investing, margin account. I am not a licensed investment advisor and this article is not investment advice. This post may contain affiliate links.
I am thinking about buying a home or condo soon.
As such, I temporarily adjusted my budget to save money for a down payment.
The problem is that I still want to buy stocks. I am addicted to buying stocks. I want to continue to build my portfolio while saving for a house.
In this article, I will look at how to invest while saving for a house.
Let’s dive in.
How To Invest While Saving For A House
If you are trying to invest while saving for a home, it’s likely you are pursuing financial independence or early retirement. Either that or you really enjoy investing.
In my case, I am pursuing financial independence through investing. I am building up a portfolio of Canadian dividend paying stocks and USD growth stocks.
Although I want to own a property and stop paying rent, I also don’t want to take a step back on the progress my portfolio has made.
Consequently, I created a plan that would allow me to simultaneously invest and save for a house.
Below are my points on how to invest while saving for a house.
How To Invest While Saving For A House
Continue To Save For Retirement (15% of income)
Instead of saving as much as possible for investing, I am reverting back to the minimum retirement amount for the time being.
I will save 15% of my net income every pay for retirement while I save for a house.
Until I acquire a property of my own, my 15% allocation for retirement will be my investing money.
I won’t be able to make as much progress as I did last year, when I was saving between 35% to 60% of my income for investing. But I will still be able to make steady progress with my dividend income.
The main thing is I will avoid having to sell any stocks to buy a house. I can keep my portfolio in tact and continue to make progress.
As soon as I get a house or condo, I will go back to saving irresponsibly for dividend investing and retirement.
Save Any Excess Cash For A House
Any excess cash that is left over after my bills are paid and my 15% retirement savings is taken goes to a house.
It’s really that simple.
Save as much as you can beyond your expenses and minimum savings for retirement.
Set it aside in a savings account or another type of investment to keep it separate from your retirement or chequing account.
Invest Your House Savings In The Right Assets For Your Buying Time Frame
Simply put, invest your house savings according to your time frame.
If you plan to buy a house in six months, you should keep your housing savings in a high interest savings account.
If you plan to buy a house in two years, you may want to look at alternative options to cash to earn a higher interest rate. (see the link below)
Alternatively, if your time frame for buying is five to ten years, you may consider investing it more aggressively.
If you are saving for a down payment and wondering what to invest in, I would highly recommend checking out this video from Freedom 35 Blog: If you’re saving for a down payment, TRY THIS.
Consider Investing House Savings In A Margin Account
I mentioned earlier that I plan on cutting back my retirement savings to 15% of my income. Then I will save all the excess cash after my expenses and 15% savings for a house.
Well, there is one other option I am considering that would allow me to still invest more.
I could open a margin account and invest all the excess cash. Then I would still have the margin excess to withdraw from.
Essentially, I could leverage my stocks to borrow cash at a low interest rate for a down payment. Then I could have my dividend stocks pay off the loan.
This way, I can keep my assets and continue building my portfolio.
Instead of investing just 15%, I could save 50% or more for stocks.
Of course, this could involve some tax consequences for dividend income.
But at the end of the day it allows me to invest more, keep assets, and save for a down payment at the same time.
How To Invest While Saving For A House — Final Thoughts
Now you know my strategy for how to invest while saving for a house.
In short, save as much as you can for a house after expenses and a minimum retirement savings is subtracted from your income.
Furthermore, invest your house savings according to your time frame for buying a home. Check out this video by Freedom 35 Blog for investment ideas.
Otherwise, if you absolutely have to invest as much as possible, consider opening a margin account. This will allow you to invest all your house savings instead of saving it. When you are ready to buy a house, you can use the margin excess to fund a down payment.
Of course, make sure to check with your broker if this is possible and seek a licensed tax specialist to make sure you understand the tax complications.
Similar Investing Articles To Check Out
Should Dividend Investors Use Margin?
How To Save For a Down Payment On A House
How Much Should I Save To Move Out?
Should You Pay Your Mortgage Off Early? How Paying Off Your Mortgage Early Gives You Fewer Options
Homes For Financial Independence – The Best Home And Living Situations For Early Retirement
I am not a licensed investment or tax adviser. All opinions are my own. This post may contain advertisements by Monumetric. This post may also contain internal links, affiliate links to BizBudding, Amazon, Bluehost, and Questrade, links to trusted external sites, and links to RTC social media accounts.
Connect with RTC
Twitter: @Reversethecrush
Pinterest: @reversethecrushblog
Instagram: @reversethecrush_
Facebook: @reversethecrushblog
Email: graham@reversethecrush.com
Forward Dividend Income Forecast December 2021
