It's an often heard concern from first time buyers: "We don't have enough money for a down payment!"
While there are down payment assistance programs available, saving money is not as hard as we think it is. Often, there are dollars that we are already spending on something else and all that is needed is to re-direct the flow of it to a savings account. Here are some easy ways to put away some cash.
- Direct deposit a certain amount into a savings account. It is so much easier to not spend it if we don't see it in the first place. It won't take too long to adjust to that missing amount. We may find that we can't go out to lunch every day or something like that, but before we know it, a new routine will be in place and we will never miss that money. While we are not missing that money, it will be growing month by month.
- You know how much we look forward to our yearly or twice a year vacations? Maybe you have a cabin you rent at a lake, or maybe you head somewhere warm during the cold winter months....this year, just for this year, skip it. But take the $500, $1000 or however much you normally spend and put it away into the savings account. When you see that number grow, it will remind you what you are saving for. It is one year without vacations, and for a good reason. You can do it!
- If you have credit cards, make a few phone calls to see if you can consolidate and get a lower interest rate. You can nearly always get a lower interest rate. You know what to do with that money you save! Put it away! Every month thank your lucky stars that you got your interest rate lowered, and put the extra money into savings. It may seem small, but it adds up quickly. You may find yourself addicted to saving.
- Do you really need cable right now? Do you really need to order your groceries online? Can you skip having your mani pedi? What things can you do without for one year? This one takes our laser focus more than the others in some ways. We love our luxuries and comforts, they get us through after a hard week at work, or give us a break from the kids. It's our "me" time whether it be our favorite show, or getting our hair done. But it's one year, and consider your dream home. Not only will your down payment help you buy your home, it will help lower your monthly mortgage payment leaving you money to engage these little luxuries again. Unless you become addicted to saving for things you really want to have, of course. 🙂 Take the extra cash that you aren't spending on cable (you have our permission to put $15 a month back into Netflix), and throw it in the savings account.
- You could, for one year, take a second part time job. That entire check could be direct deposited into your savings account. Fed Ex, UPS, coffee shops, grocery stores, dog walking, house cleaning, or doing handyman work for others are all ways to bring in some extra cash. It will require some of your energy, but remember your dream home!
- Stop going out to eat!!! Cook at home! Drink at home! This is a major luxury most of us love- it would be the hardest for my family to give up. But we save a LOT of money, even if we stop drinking while we are out. An $8 glass of wine or two adds up fast!
- If you own your own business, consider creating more work for yourself for a year. This may mean getting up in the wee hours of the morning for awhile, or working for an extra hour after the house in all put to bed, but the extra money is going towards your dream.
Let's do a little math to see how these things could add up for you over a year's time if all 5 money saving ideas were engaged.
- Let's say you put away $200/month (either yourself or you and your partner, child, friend or spouse who will be buying with you). This number could be higher, but I'm going low to show you how much opportunity there is to save quickly. $200 x 12=$2400.
- I will use our low numbers again here. Twice a year we go to the Shore and it's $1000 a time. That's renting a cabin, eating out, vacation shopping and not worrying about money. Your vacations may be a lot more elaborate. I hope they are for saving's sake! $2000
- The last time we consolidated our credit cards and saved money, it was $70 lower a month. $70 x 12=$840
- We ditched cable, which saved us $80/month, but we did get Netflix which is $12. $68 x 12= $816 Skipping the mani/pedi/hair we'll say is an average of $50 8 times a year (every 6 weeks) = $400. Again, this number is pretty low, yours may be higher!
- If you bravely take on a part time job, you will likely be working 15 hours a week (assuming a 40 hour a week or more regular job). Take home cash may be $150 (staying on the low end!) a week. $150 x 52= $7800
- When we don't eat out, we save $200 a month, easily. And that, too, is a low estimate. Adjust yours accordingly. $200 x 12=$2400
- This one really falls under the 2nd job idea, so I am not adding anything extra to it.
Let's add those numbers up! Our grand total without borrowing from our retirement or a relative is $16,656. Add a little more for the interest. That's a decent little down payment. On a $250,000 home, rounding up to $17,000 with a 4.6% interest rate, the monthly payment would be around $1195.00. That's with only a 6.8% down payment. Borrowing from our retirement or a relative is a common way to accumulate a good down payment. If our down payment was 10% or higher, the payment would be even lower. and this is all not taking into account any programs that we may qualify for.
You can do it! Starting today, you are one year away from having nearly $17,000 (and probably more!) stashed away. We believe in you!