Tips on saving for a Down Payment
Home ownership is a goal that most people share. A common misconception about purchasing property is that you need a ton of money saved for the down payment, but that is not true! Many attainable loan options exist, especially for first time home buyers. Regardless of the situation you’re currently in, we want to help you save more money, so we’ve put together some tips to help get you started. If you follow all of our tips, you could save up to $20,000 in one year!
You may have heard that you need 20% down to buy a home- you don’t! Many options exist for as little as 3.5% and even as low as 1%. With that said, even coming up with that amount can seem intimidating. Get started with small changes to help you cut your spending. These changes don’t have to happen all at once, you can ease into each change and implement them over time until you reach your goal and find your home.
Stop wasting money on:
That daily (or twice-daily) Starbucks addiction is costing you. How much? At $5/day that quickly becomes $1,800/year you could have in savings.
Cut out 1 meal out every other week for 25 meals a year at a savings of $50/per which is another $1,250/year.
Stop impulse shopping and throwing out wasted food. Shop with recipes in hand and a plan for the week for your meals at home and you can easily cut another $25/week or $1,200/year out of your budget (which otherwise would have gone in the trash- literally)
Do you really need that $300/month car payment, $125/month insurance payment, and $150/month in gas bills to get around efficiently? Many urban dwellers actually stand to save significantly by using public transportation, walking, apps, and cabs to cut a significant chunk of this $575/month expense out of their budget. Let’s call it another $1,800/year saved.
Cut the cord on that $125/month cable package and do your brain and wallet a favor by watching less and saving more. App-based media services exist that provide access to the channels you want, but at a fraction of the cost. Look into these options and that’s another $500/year in savings additional.
Subscriptions & Memberships
Split streaming subscription costs with someone in your family, if you aren’t already. You could save $192 by closing your netflix account. $168 per year if you cut amazon prime. That monthly wine/survival-gear/makeup subscription you only sometimes love? That could be an extra $300-600/year. Your fancy gym membership that you barely use could be $1000/year in savings. No one is saying stop working out, but try a cheaper alternative for a year. It’s temporary.
Start putting more time and money into this instead:
Smart savings account
Set up recurring savings that transfer with each paycheck to limit spending on non essentials. If you don’t see it, you’ll be less inclined to spend it. Some people even set up checking and savings accounts at different banks in order to make it more difficult to dip into savings. Your savings are a measure of all the work you do on a daily basis. Make sure you ‘pay yourself first’, as they say.
Set bigger savings goals
Push yourself to save more. If you’re currently saving $100 each paycheck, increase it by $20 dollars each paycheck. The change doesn’t have to be drastic. Challenge yourself to cut out one of the unnecessary things we listed above with each paycheck. Review your monthly expenses and set your budget up in line with your goals. Within a few months, you’ll see the results.
If you aren’t already putting money into a 401K or similar retirement account, start now. The younger you start, the better! Many 401K plans allow you to withdraw a certain amount of money from your account for the purpose of buying your first home, at no penalty or fee. Many employers even match your contributions, meaning you’ll double your savings. If you put in $75 each check and your employer matches, that’s almost $4K saved in a year (and that’s not counting the returns you’re gaining with your investment portfolio)
Increase your income
If you work the normal 40 hours each week at your job, chances are you have some extra time on your hands. If you have the time to spare, find a side gig. Utilize a skill or hobby that you enjoy and use it to make some money. If you can make an extra $100/week that means an extra $5K per year you can save! Plus if you’re keeping busy, you’ll have less time to waste your hard-earned money on unnecessary things.
With some small, but significant, adjustments to your lifestyle you can save many thousands a year, which quickly adds up. If you commit to all the changes we recommended, you could save up to $20,000 in just one year. That’s 10% down on a $200,000 property! Some loans allow for a 5% down payment, meaning you can save the rest for repairs or buy some new furniture.
Interested in buying but need help saving? Contact us today.