Are you looking to buy a house, but the thought of saving a huge amount of money for a down payment sounds like an insurmountable challenge? It doesn’t have to be that way.
For starters, you don’t have to lay out as much money as you may think to get into a home. Depending on the loan types you qualify for, you could buy a home with as little as between 3% and 5% down for a primary property.
Secondly, just because you’re saving for a down payment doesn’t mean you have to subsist on a diet of ramen noodles and PB&J. Working in pursuit of any goal does involve sacrifices, but they don’t need to be painful.
We’ll go over some strategies to help you save so you can buy that house without giving up all of your creature comforts in order to do it.
Make It Automatic
One of the hardest things to do when starting to save toward any goal is to make it a habit. Ideally, there would be a mechanism allowing you to save without having to think about it. Luckily, this isn’t a pipe dream anymore.
At the most basic level, our friends at BoostUp offer a savings account service. What makes this different is the automatic nature of the transfers. Let’s say you had a goal of saving $50 per workweek toward your down payment. You can set it up so that $50 is deposited from your bank account into your savings account every five days. At the end of the year, you would have $2,600 in your account.
If you want to take your saving to the next level, you can turn on the RoundUps feature. Let’s say you buy a pizza with a connected credit card and the total comes to $10.60 with tax. The service will round up to the nearest dollar. You probably won’t miss that $0.40 and you’ll be saving faster.
Finally, certain partners will match your funds up to a certain amount. For example, when your savings reach $750, Quicken Loans offers a $750 lender credit if you close your mortgage with them. This can be used toward your closing costs.
Cancel Unused Subscriptions
There’s at least one magazine I subscribe to that I don’t read regularly. I can say the same about a monthly charge for unlimited access to digital comic books and a service dedicated to relaxation and guided meditation.
It’s not that the amounts being charged are egregious – far from it. But it all begins to add up after a while. If you’re not using it, you won’t miss it when you cut it from your budget.
Consider Ditching Cable
At my house, our cable package has over 400 channels. I think I regularly watch about 10 of them. Of those, I could watch five of them for free with a digital tuner.
Our cable bill is right around $200, and it’s not by any means the most deluxe package. For the sake of argument, let’s say you could ditch cable and get fast enough high-speed internet access for $60 per month.
The most expensive Netflix plan is currently right around $15. Many of us already pay $99 per year to Amazon for two-day Prime shipping. What people often forget is that Prime also gives you access to a vast library of free videos, movies and TV shows.
You can subscribe to many premium channels on an individual basis through Prime. HBO also has its own offering independent of cable for $15 per month.
The one area where the decision to cut the cord becomes a bit harder is if you’re a big-time sports fan. All the major sports leagues offer a service where you can see every game from around the league. Unfortunately, if you pay for more than one of these services, your monthly entertainment bill could be just as high, if not higher than when you had cable.
Bring a Lunch
Do you get your lunch out or at the office cafeteria every day? It’s understandable – the food is good and you save time in the morning. However, when you’re trying to save money, every cent starts to count.
Let’s say it costs $10 to buy lunch in the cafeteria. Let’s imagine you could cut that cost in half by packing your lunch. If you bring your lunch three days a week, that’s $15 back in your pocket every week.
Much of the time, you might get enough for two meals if you have lunch at a restaurant or cafeteria. If you buy one day and eat the leftovers the next day, you’re in effect saving yourself an extra $10, bringing your overall savings to $25 per week. Over the course of a year, that adds up to $1,300 – not an insignificant chunk of change! At the same time, you still get to splurge once in a while.
Hopefully, this post has given you a few ideas to help save for a down payment without giving up all the little things that make your day more enjoyable.