Whether you’re planning to buy your very first home and rocking it solo, or you and your family are moving on to your next house, saving for the down payment can sometimes be a bit of a feat. Saving for the down payment of a new house is different for everyone, but there are definitely plenty of ways that you can start saving no matter stage you are in.
You don’t have to do all of these things at once, but you certainly can try a few of them to see how they work in your life and find the techniques that best suit you. Here are some ways to plan your down payment savings.
Determine Your Down Payment Goal
This is likely one of the first things you need to do when you start saving for a down payment on a house. Although you might not always know exactly what the house you buy will ultimately cost, you can estimate based on your budget and go for a general goal in that neighborhood.
You can also start researching home loan options to get a feel for term agreements that are most attractive to you. Many conventional home loans still expect the traditional 20% down payment, but some government-subsidized or alternative home loans will accept less than 20% while still laying out agreeable terms for homeowners.
When you’ve determined a rough estimate for how much you need to save, you can start planning in earnest to figure out how much money to lay aside each month.
Set a Savings Timeline
This might be built into your plan anyway, but if you don’t have any kind of timeline at all, you should probably set one up so you have an incentive to save quickly. By setting up a timeline for your savings, you can keep an eye on things and make sure they’re on track for you to actually reach your goal.
Since most people know when they want to buy a house or move, the goal is usually already involved somewhere. The trick is, remind yourself frequently and use it as a part of the motivation process.
Determine a Monthly Budget
Although this is a broader tip that can apply to a lot of different actions, setting up an ongoing budget for yourself can be one of the first steps in actually saving money. Even if you already have a budget, reevaluating after introducing this new goal is probably for the best.
Not only is it important to put money directly into your savings, but you should also make sure you have extra wiggle room for things like home renovations, moving costs, or other emergencies that might pop up in the meantime. This financial cushion can help you anticipate all the costs of owning a home without being shocked and uncertain when they crop up.
Downsize Your Living Situation
If saving for your down payment comes with being in between rentals, you can use this as an effective opportunity to downsize. The situation is temporary, and renting a place that requires you to squeeze in a bit will lower your rent payments and utility bills, and help you save faster.
Other future homeowners consider moving back in with family members — if everyone finds that acceptable — or splitting rent with roommates or partners to cut costs while they save. This is a personal decision, but a great way to fast track savings by reducing current costs.
Cut One Luxury
This is the kind of financial tip that many people get regularly, and the truth is, there’s no way that cutting out little luxuries can do all of the work associated with saving for something as big as a down payment. However, it can help you out with a little bit of extra cash for where you need it.
For example, not getting coffee every day, using coupons, doing your own hair and nails, and cooking at home more often can help you make a little bit more room in your budget to save. Over time, cutting enough regular luxuries in the short-term can add up to helping you achieve your larger goals in the long-term. Just don’t deprive yourself of all small moments of happiness; there’s always room for balance.
Find Secondary Income
Expanding your household’s source(s) of income is one of the best ways to save money and bring in extra cash when you’re working toward a big goal. If you have the time and means to expand your income outside of your primary job, then this might be a smart move for building savings.
There are so many ways you can bring in a little bit of passive income that you can devote right to your savings. Renting out a room in your home, investing, even selling your art or music can be a great way to collect a little money on the side.
If passive income isn’t in the cards for you, a side hustle might be! Getting another job on the side or starting a business with your own skills can be the perfect addition to your income. And this doesn’t have to last forever. It can sometimes just be for the time that you need it.
Automate Your Savings
This is something you can do no matter what you happen to be saving for, even if you just want to automate your regular retirement savings after this goal is finished. Some bank accounts will allow you to move a certain percentage of paychecks into a savings account automatically.
When you automate your savings straight from your account, you don’t even need to think about putting your money away. It just happens automatically!
Plan for Your Down Payment Savings
Saving for a down payment can sometimes be a little bit tricky, in addition to being a big goal. Although it’s different for everybody, there are a variety of ways that you can plan for your down payment savings with habits that work best for you.
Guest article written by Evelyn Long is a Baltimore-based real estate writer and the founder of Renovated, a web resource for home improvement and market trends.