For many people, the down payment is the biggest obstacle to becoming a homeowner. It’s difficult to save even five percent of a home’s cost when you’re paying rent, healthcare, and other expenses.
Saving for a down payment is not easy, but it does pay off in the long run once you purchase your first home. With a solid plan and a little dedication, you can put this seemingly-impossible goal within your reach. Here are a few tips for making it happen:
Budgets and Savings Accounts
The first step to saving for anything is to create an accurate representation of where your money goes each month. Track your expenses and you might be surprised to learn where your money is going — like that gym membership you’ve meant to cancel or how much dinner and drinks with friends can add up.
There are also apps on the market that you can link to your bank and credit card accounts to scan your spending and recommend things to cut.
Once you’ve made decisions about where to cut from your budget, set up a separate savings account for your down payment so that you are not tempted to dip into it for other expenses.
Some financial planners like to point toward the “latte factor” as a reason why people can’t save money — if you spend $4 at Starbucks each day, you’ll never be able to buy a house. While it’s important to pare down spending in order to save, you don’t want to be miserable, either.
In determining what stays and what goes from your budget, choose the things that’ll give you maximum pleasure with minimal expense. If you enjoy a fancy cup of coffee each day, continue to buy them, but looks to make cuts somewhere else.
In today’s economy, making a little extra cash has never been easier. There are any number of part-time gigs that you can pick up whenever and wherever you are.
Drive for Uber or Lyft, shop for Instacart, or explore sites like Upwork to put professional skills to use. You can do these jobs whenever you want and as much as you want. If you don’t like one gig, there are plenty of others to choose from.
If you do land a side gig, be diligent about making sure that the money earned goes toward your down payment.