10 Easy Steps To Save Enough Money for A Down Payment
We've all felt the sticker shock that buying a $7 latte at Starbucks or a $15 sandwich at the local deli can invoke! Saving money in today's economy can be a challenge! The idea of saving enough money to buy your first home can seem impossible! Thankfully, you don't need $500,000 cash to buy a $500,000 house, and with first-time homebuyer programs, a buyer only needs to save enough for a down payment of as little as 3-5% to buy a home. Small changes in the way you spend can lead to BIG savings. Those big savings can allow you to afford to buy a home, stop renting and start building significant savings from your home's appreciation.
So, how can you start saving more? Here’s 10 easy steps to get started.
1. Create a budget.
The first step to increasing your savings is understanding how you spend money each month. By creating a budget, you can determine whether a significant amount of your disposable income goes toward food, travel, shopping, or entertainment. You can use the budget to set limits on yourself and hold yourself accountable to save money.
2. Avoid impulse purchases
Impulse purchases are a common way for many individuals to spend the little money they've saved. We've all had the urge to buy that new flashy toy, an expensive piece of clothing, or even buy a lavish gift for a significant other. Remember the long-term benefit of saving money when you can buy your home instead of the short-term happiness that an impulse purchase brings.
3. Reduce the amount of times you eat out and order delivery
Eating out or ordering in can put a major dent in your budget, especially if you do it frequently. Pasta dishes at Italian restaurants can be as much as $30; if you cooked that same dish at home, it might only cost you $6! While not everyone has time to cook at home each night, meal prepping and cooking ahead can lead to big savings. Try to limit dining out or ordering takeout to no more than 1-2 times a week, and you'll notice significant savings.
4. Limit subscription services.
Subscription services, like streaming platforms and monthly box deliveries, can add up quickly. Netflix, Hulu, Apple Music, Spotify, Amazon Prime, Disney+, Chewy, StitchFix, and wine clubs, the options for subscriptions are endless. Many people pay for numerous monthly subscriptions that they haven't used in a long time. Review all your subscriptions regularly and cancel any that you no longer use or need.
5. Look for deals and discounts when shopping.
Always look for deals and discounts when shopping for groceries, clothing, and other items. You never know what promo code saves you money. Spending 5 minutes checking for a promo code before checking out might lead to big savings. Utilize companies like Honey and Rakuten to get the most out of your savings.
6. Save on transportation.
Uber and Lyft brought a new mode of transportation to the world, but they are also expensive! If you live in a walkable area or an area that has accessible public transportation, consider walking (or even biking) or using public transportation instead of using ride-share apps.
7. Avoid debt.
Avoid taking on debt, especially high-interest credit card debt. Paying off your credit cards in full each month will help avoid going into a "debt spiral" where you accumulate more interest each month than you can pay.
8. Compound your savings with sensible, low-risk investment.
Making your money work for you can be a helpful way to compound your savings. A high-yield savings account can allow you to make an extra 2-4% annually on your accumulated savings without worrying about any loss of value. 2-4% may not seem like a lot, but it all adds up! Talk to a financial advisor to discuss your specific investment options and what makes sense for you.
9. Travel at less popular times.
Everyone could use a vacation, but you can drastically reduce the cost of that vacation by booking your travel during less popular periods. For instance, outbound flights on Wednesday tend to be significantly cheaper than on Friday. Hotels are cheaper off-season than in-season. Planning your trip at the right time can save you thousands of dollars.
10. Make sure you have the right insurance.
It's easy for us to believe we are invincible, but unfortunately, we aren't! It's essential to protect yourself and your belongings by ensuring that you and your belongings are fully insured against loss, whether that means health insurance, dental insurance, or renter's insurance. The worst thing in the world would be to have saved almost enough to buy a home, and a tragedy strikes without insurance coverage, leaving you with a big bill and wiping out your nest egg.
By implementing these strategies, you'll be on your way to home ownership in no time! If you need help understanding how much money you need to purchase your home, don't hesitate to contact us at 512.881.5099 or apply now, and one of our loan officers will be in touch as soon as we receive the application. LendFriend would be happy to help you get on the path to homeownership!
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