If the largest barrier between you and a new home is the down payment, don’t despair. Saving for a down payment on your dream home is possible - even on one income. Follow these tips to start making simple spending changes and practicing intentional savings. Say goodbye to your landlord for good.
Plan for success
First things first. Think of your dream home, determine the down payment, and build a spending plan around those factors. This will set the tone for how you spend (and save) your money in the months going forward.
How long will my savings journey be?
That depends on the amount you save each month and the amount needed for the down payment.
How much should you save for a down payment?
Get a gauge of requirements by referencing home prices in your ideal neighborhood. A standard recommendation is to put 20 percent down. Keep an eye out for programs with a down payment as low as 3 percent of the home's sales price, if you qualify. Aim for a 10 percent savings target and work your way up. The most important thing to do is begin saving now.
Money on the mind with no time?
Stash away your cash before you have time to even think about spending it. Saving happens in two parts: remembering that you need to save and putting the money away.
Both steps are done for you with Recurring Transfers. These automatic transfers make saving for your down payment painless – and easy! Decide how often and how much money you want to transfer from your checking account to a savings account. Start with once a month and then move toward setting aside funds each payday.
Sign up for Recurring Transfers
A latte here. A new pair of shoes there. Oh, and the latest must-have gadget…You know the drill. Non-essentials eat away at your wallet and delay you from reaching your savings goals. The funds you used to splurge on a shiny new item could have been for your long-term aspirations. The best course of action is to review your spending plan and keep the essentials only.
Here are some common situations and ideas on how to cut back. Decide which non-essentials can be bypassed to turn your dream of home ownership into a reality.
Weekend getaways or vacations
Plane tickets to and from Hawaii are expensive. Try a stay-cation or plan an extra relaxing weekend in with breakfast in bed, sheet masks, and homemade cocktails.
Subscription services and in-apps purchases
What seems inexpensive at first can add up in the long run. Resist from buying another power-up on your mobile game. Ask yourself if you need these add-ons or monthly subscription products. If not, take a pass and put what you’ve saved toward that future down payment.
Frequent nights out with friends
We tend to be less price sensitive once we’ve had a few drinks. Control the urge to spend by occasionally taking a rain check on bar hopping. Your wallet (and your head) will thank you in the morning. Instead, plan a movie night and everyone can bring toppings for a make-your-own popcorn bar. Spending time together is what really matters, right?
Although going out for lunch is a great way to de-stess midday, bringing a home-lunch is a more cost effective. A $20 lunch five times a week is a total of $100 you could have put toward your down payment goal. Consider bringing a brown-bagged lunch to work. You can still chow down with your favorite coworkers without breaking your piggy-bank.
Food delivery services
Convenience is king in today’s world, but the price you pay can be hefty. If you must dine out, don’t use a delivery service. There is often an order minimum, added delivery fees, plus the cost of tip. If you call in your order, by the time you arrive to the shop, your food is ready for pickup. It's still fast and there's no hidden up-charges.
Memberships you don’t use
Getting an awesome deal on a membership is great, but is it still a bargain if it is not used? From a savings perspective, this is just another expense taking a toll on your bottom line. If you haven’t clocked in a workout for over a year, it's time to talk to your fitness center. Ask about putting a freeze on your account so you can come back in a month or two while you get your finances in order.
Cancel or suspend the expenses that are non-necessities. This can be temporary while saving for your down payment. Once you’ve reached your savings goal, reassess your spending plan. You may want to add Sunday bunches with your besties back into your list of monthly expenses. And, that's completely fine! For now, stay goal-oriented and progress-driven. This will ensure you're saving swiftly.
Clear out your storage
Yes, you can take it with you - but do you want to? Chances are, if it’s been sitting in your storage unit, you don’t use it often enough. Resell the contents of your storage unit to second-hand stores or online marketplace. You'll get cash for items you no longer need and drop the monthly expense for storage. Consider using the money you gain and opening a Share Certificate to grow your money at a higher rate.
When you can afford your dream home, would you use the items in that storage locker? Many new homeowners redesign their living space after they get the keys. That means, most get rid of old furniture, dishes, artwork, appliances, etc. Get a jump start on the process - let go of the old and make space for the new.
Pay off other debt
Having a large amount of debt can put your dreams of home ownership on hold. Debt payments don’t leave room for mortgage payments, and lenders know it. How much credit you’re using and your ability to pay bills on time are crucial factors to your credit score. FACT: Paying off your debt will strengthen your credit score.
How much of your credit do you currently use?
Look at how much you currently owe and divide by your credit limit. The percent you’re left with is your credit utilization ratio. It’s best to keep this ratio to 30 percent or less. If your available credit is $2,000 and your current balance is $650, then your utilization ratio is 32.5 percent.
Once you've paid down your debt, use the extra funds you've freed-up toward your savings plan.
With these savings tips, you’ll be well on your way toward cultivating the down payment needed. The home of your dreams is in reach, but you must start now. Treat your journey as a marathon, where consistency and sustainability are key. Stick with your goals and your hard work will pay off.