5 Creative Ways To Save Money For A Down Payment
When you buy a home is likely to be among the largest purchases you will make in your lifetime. With a typical down payment being around 20% of the total cost, saving up for the down payment is often the most challenging hurdle to home ownership. Here are 5 suggestions to try for cutting out unnecessary spending and making home ownership a reality.
Before beginning a savings plan for your down payment, two things are essential:
1. Establish a weekly budget. Examine your monthly income, weekly expenses, and monthly bills. Subtract what you are responsible for paying each month, such as rent and utilities, and see what you have left over. The game plan is to see how much you can save from your flexible expenses and discretionary spending.
2. If you have any debt, incorporate a payment plan into your budget, which will allow you to pay off your debts in a timely manner while saving for a down payment. Having fewer outstanding obligations will also work in your favor when it comes time to apply for a home mortgage.
1. Use Only Your Debit Card For Daily Purchases
Assuming you have a checking account and access to online banking, try putting your credit cards, checkbook and cash away, and use only your debit card. Most everywhere now accepts debit cards, including fast food drive-thrus, the post office, etc. When you use your debit card exclusively, you are using money from your checking account and not accruing credit card debt, plus by checking your statement online, you are able to immediately track what you have spent each day. Tracking how and where you have spent money on a daily basis can be an eye-opening experience.
Choose a bank or credit union that offers incentives such as reward points when you use your debit card for every day spending. Redeem the points for cash rewards and use them to start your down payment fund.
2. Spread The Word To Friends & Family
If you are an engaged couple planning a home purchase, why not consider establishing a bridal registry for your well-wishers to contribute to? Simply set up an account for the down payment fund at your bank and include the information on your gift registry. You may be surprised at how many of your friends and family members will embrace the idea of helping you and your future spouse realize such a big dream!
Already married, or planning on a home now and tying the knot later? Let your inner circle know of your plans and how hard you’re working towards your goal of homeownership. When gift-giving opportunities arise, such as birthdays and holidays, they may forgo another sweater and give you a contribution towards your down payment.
3. Explore New Entertainment Options
Dinner a movie certainly isn’t what it used to be, although still a very pleasant way to spend an evening, it adds up in a hurry. The same can be said of sporting events, there’s the ticket, concessions, souvenirs, and often out of town travel expenses. When saving up for a down payment, it is a good idea to look for new forms of entertainment that do not come with a high price tag. DVD rentals are an obvious choice, along with a nice dinner prepared at home. Watching spectator sports live may have to be enjoyed from sofa-side instead of ringside. It’s so true: “The best things in life are free”- so check your local entertainment guide and see what’s going on at your local college, church, museum, park or library – you may be pleasantly surprised!
4. Plan Menus And Save Money
It’s easy to waste large amounts of money by not planning weekly meals. We’ve all been there, tired, hungry, out of time, so we go for the quick and easy option, which is often unhealthy and expensive. Plan, shop, cook, and use the leftovers for lunches or soups, and in no time you will see the savings add up. Taking your lunch to work, purchasing local produce and buying in bulk is another way to cut costs. As part of your menu planning, cut down on “splurge” items like expensive cuts of meat, alcohol, and desserts. Not only will you be making progress towards a home of your own, you will be healthier in the long run!
5. Save On Transportation Costs
Does your family really need that second car? Could you make do without it? Eliminating car payments, insurance, maintenance, and gas for a second vehicle could be a big step in the right direction when it comes to saving for a down payment. Consider using public transportation, carpooling or cycling, whenever possible.
Best of luck turning your dreams of home ownership into a reality.
About the Author
Lisa Andree is a marketing professional who helps mortgage companies promote their brands and products such as 7/1 ARM rates (http://www.afrmortgage.com/7-year-arm.php) and 3/1 ARM rates (http://www.afrmortgage.com/3-year-adjustable-rate-mortgage.php) online.
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