Now that you know how much cash you need to buy a house, it’s time to start saving. Use this method to start saving for your future down payment.
Build a better budget
The 1st step in the saving process is to create a budget. If you don’t know where your money is going each month, diverting it to the down payment is impossible.
First, review your bank statements and credit card payments. See what you spend money on regularly. Write down how much you pay on necessities like rent, student loan payments, and utilities.
Next, consider how much you spend each month on non-essential things like entertainment, restaurants, etc.
After you classify your expenses, look for areas where you can cut back. Set a definite (but realistic) budget for each category and stick to it. Be sure to budget a certain amount of money for a monthly down payment.
Consider downsizing
A quick way to save money for a down payment is to downsize your home.
Downsizing is cutting expenses and living below your means while saving.
By downsizing your home, you lower the amount you pay for necessary expenses and divert that extra money into a savings account. Dollars rolled up with tape measure and house.
Moving to a smaller apartment, selling one of the family’s different vehicles, or moving to a more functional area are great ways to downsize.
Many people downsize while saving for a significant purchase.
You may find that you enjoy a simple life.
Reduce or eliminate a bad habit
- Cutting back or eliminating just one bad habit can help you save hundreds of dollars a year.
- Consider giving up these unhealthy habits and diverting the money to your down payment fund.
- Drive purchases.
- Order food to go.
- Ask for a salary increase.
- Calculate the time well.
- Come prepared.
- Be confident but grateful.
See what other employment options exist
Changing jobs and getting a higher salary can help you save money for a down payment.
Look at the job postings and salary comparison websites to see if you make as much money as others in similar roles.
If you find out that your salary is below average, consider using your findings as leverage to ask for an increase or a promotion at work.
If you’re not in love with your job or not getting a pay raise, consider looking into higher-paying positions for which you’re qualified.
Skipping vacations
Exploring a new destination can be an incredible experience.
Unfortunately, it is also often an expensive experience.
An average family of four spends about $4,500 on vacation, which is a lot of money.
Consider saving money for a down payment and enjoying a stay in your city instead. Here are some plans to get you started.
- Explore the historical places near you.
- Plan a spa day at home.
- Try local cooking or art class.
Pick up a side job
In the on-demand “work economy,” it’s easier than ever to make money on your own time with a lucrative side business. Here are some plans you can use to get started. Get some freelance work.
- Drive for a shared ride company.
- Take care of or walk the pets.
- Test apps and websites.
Reduce your debt
If you’re aiming to buy a house, diverting your extra income toward your debt may seem counterintuitive.
The more debt you have, the less rewarding you will be as a candidate; this may mean you’ll pay more interest and have a higher down payment requirement.
Take some time to minimize your debt before applying for a home loan. Analyze how much you owe on your credit cards, student loans, personal loans, and auto loans, and create a plan to deal with it.
Rent your spare room or your parking space
Do you have an additional space in your apartment? If so, consider posting it on a hospitality website like Airbnb. With Airbnb, you can control who uses your area and when.
You can approve dates and guests in advance and rent your spare room only when convenient. You can even block off dates when your rental is unavailable if you have a friend or family member visiting.
Ask for help
There’s no confusion in asking for help when you’re saving for something as big as a down payment on a house.
More and more house buyers are crowdsourcing their down payments through websites and apps.
You can ask your relatives and friends not to give you physical gifts instead of money at parties and special occasions. Asking for cash gifts is increasingly common at weddings and baby showers.
Learn about mortgage loan types and read the rules regarding gift money and down payments before accepting money for a down payment on your new home.
Automate your savings
If you tend to buy on impulse, you may want to consider automating your savings. Here’s how it works: First, you decide how much you want to save each month for a down payment.
This budgeting can be helpful for someone who is having trouble managing their money.
When you make your money less accessible, you may be less tempted to buy things you don’t need.
Remember to schedule your withdrawal on your payday, or you’ll have enough money when you know. Overdraft fees can dent your down payment fund.
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