Seven Creative Ways to Save for a Down Payment
Real estate and buying a home comes with a lot of uncertainty, advice, and general … fear. It will likely be the largest purchase and decision of your life, so those feelings are completely founded. You’ve probably heard most about the cost associated with becoming a homeowner – and just how large of a process (and seemingly impossible) it is to secure the down payment. I’m here to tell you it’s not impossible. Here are some creative ways to save for your forever home’s down payment.
1. Define Your Goal
Is 20 percent still the best practice? It will vary by buyers based on specific information and data such as income, mortgage insurance, and the amount of risk regarding a loan. It’s always better to work toward a goal with as much clarity as possible, so before you even start saving for a down payment, determine how much you’ll need to save so you can laser-focus on a set number. As a very general rule of thumb, your housing expense should not exceed 28 percent of your stable monthly income.
2. Workout at Home
What does fitness have to do with home ownership? It’s about the cost associated with a gym membership or the personal trainer you might have. The idea of substituting or outsourcing the things you’re already paying for works across the board, too. Review your expenses and see where you can logically cut costs including working out at home or finding a more reasonable workout facility. Lose your cable subscription and sign up for streaming instead. Reconsider your morning coffeehouse latte and learn how to froth at home.
3. Find a Side Hustle
If you’ve always dabbled in photography, deejaying, calligraphy … whatever your passion, now’s the time to charge for your skills. If you’re handy at making things, considering selling your art or products on Etsy or at shows or fairs. If you have time but not necessarily a talent, look into getting paid for your precious time. Check out sites like craigslist or TaskRabbit to see what people are seeking – dog walkers, household chores, errands, or even becoming an Uber driver!
4. Appreciate the Value of Your “Stuff”
If you’re storing things that have more than sentimental value, it might be time to parlay that into some serious cash in the name of your down payment. If you’re struggling with the decision to sell your collection or collectibles, think about the bigger picture. If what you’re storing or saving feels like a burden or “necessary”, you could benefit from off-loading. If what you have is important to you or you see it always being in your life (or new home!) keep thinking of other ways to find cash and hang onto your possessions.
5. Make Your Money Work Harder
Once your down payment fund starts to grow, it’s time to move it from its safe spot tucked away in an envelope or Mason jar. Carefully investing could include a high-yield savings account, CD, mutual funds, or peer lending. Because you’ll need access to the money sooner rather than later, ensure you’re investing it or trusting it to someone who shares your same vision.
6. Become a Savings Ninja
A lot of the money people spend is habitual. It’s common for individuals to become accustomed to brands, convenience, and traditions and spending money on those items and occasions without really thinking twice about it. Now is the time to buckle down and take a hard look at where your money is going – and to note any trends in your monthly budget. For example, when the groceries get low toward the weekends, do you tend to dine out more than usual? Do you use payday as an excuse to buy new clothes, music, or your favorite wine? If you’re co-saving with a partner so you can move into your home together, get on the same page as him or her so you can avoid or delay expenses together, say skipping a holiday or annual event in the name of your financial goal.
7. Be Unapologetic
I saved the best tip for last – saving for your future and buying your first home is a very big deal. Treating it as such will help you get there faster and smarter. If you’re continually getting harassed for skipping happy hour with co-workers or skimping on holiday gifts, tell your network why. If the people who love you and support you know that you have a lofty goal unrelated to them, they’ll take it much less personally and will probably help you along the way.