Are you looking to purchase a home? Don’t get overwhelmed by the thought of a mortgage or saving enough money for a down payment. Depending on how much money you put down and the terms of your loan, your mortgage payment can actually be lower than your current rent, and it comes with the benefit of a tax deduction each year. When it comes to saving for a down payment, you can most likely stash away the right amount of cash in just a couple of years, or sooner depending on how much you can save per month.
8 Genius Ways to Save for a Down Payment
The first thing you need to do before you can start saving is know exactly how much you’ll need for a down payment. To do this, decide what area you’d like to live in and then meet with a lender and see how much you can afford and what type of loan you should get. Once you have that information, you’ll know how much you need for a down payment and can begin saving.
- Turn your hobbies into cash. Do you love to knit? Have a knack for writing or graphic design? Turn your skills into gigs by using sites like Etsy or signing up for freelance writing and designing sites to make some cash on the side. Don’t include this cash in your budget; instead, allocate 100% of your proceeds to your savings and watch how it will grow over time.
- Trim the excess. One of the quickest ways to save money is to stop eating and drinking out. Start cooking at home and taking your lunch to work. Have friends over for drinks and games instead of spending money at bars. Additionally, consider ditching cable and switching to streaming services like Netflix, Hulu and Sling. If your apartment has a fitness center, get rid of your gym membership. Finding ways to cut down on the smaller expenses you incur every month will add up big time in the long run.
- Make a budget and designate an account. Once you’ve determined how much you need to save each month, take a look at your budget and make sure you’re appropriating enough money to living expenses. Funnel the rest into a designated savings account that will keep these funds away from your regular checking and savings accounts. Ideally, you want to make the money hard to withdraw so you won’t dip into it on a whim. Keeping the funds separate is a great way to see the amount grow.
- Downsize or get a roommate. Find ways to cut down on your monthly rent payment so you can stash more money away. Consider moving to a smaller apartment, or one slightly outside of town to save on rent. If you’re able to, get a roommate to help split rent and utilities. If you really want to save money, consider moving in with a friend or relative for a while until you can save up enough money to buy your own place.
- Make it a game. It’s not easy to save a large sum of money, especially if you’re trying to do it in a short amount of time. To make it more enjoyable for yourself, turn your savings into a game by finding a friend or significant other who is in the same position (looking to buy a home) and make it a competition to see who can save more money. Choose a reward at the end that’s fun but not too expensive — loser buys a round of drinks or picks up the tab at dinner.
- Automate savings or pay yourself with every check. If your company offers direct deposit, check if they’d be willing to allocate a percentage of your check to your separate savings account. If not, just set up an automatic transfer on your own. This way the money will get moved every pay period so you don’t forget or get tempted to splurge on something else instead.
- Save your tax refund. If you’re expecting to receive a tax refund, go ahead and write it off in your mind as being part of your savings for your down payment. When you receive the refund, move the entire sum to your savings account before you get tempted to spend it elsewhere.
- Reward yourself. It’s not easy to scrimp and save to get a sizable down payment, so make sure you reward yourself. Break your goal into smaller, more manageable chunks and treat yourself every time you reach a goal. Your rewards don’t have to be big — maybe buy a pair of shoes you’ve been eyeing or go out to your favorite restaurant. You’re more likely to reach your goals when you have smaller rewards along the way.
At the end of the day, it’s only natural to feel like saving a large sum of money is out of the question, but with these tips you can be well on your way to your goal. Make it easier on yourself by enjoying the process and soon enough you’ll be walking through the front door of your very own home!
If you’re ready to start looking at homes to purchase in the Metro Atlanta area, check in with us at Smith Douglas Homes to see how we can find the perfect home for you.