Saving For A Down Payment
The decision to buy a home is one of the most notably exciting milestones of a lifetime. Often, people will spend months browsing real estate and homebuilder websites dreaming of the perfect home. They will fantasize about spacious, maneuverable kitchens, inviting family rooms, and perfectly landscaped yards. There could be visions of beautifully decorated Christmas trees, followed by sunny summer days on the deck, with the occasional thought of “I wonder what adding a theater room would cost…” They may talk themselves in and out of homeownership multiple times over before finally deciding that ownership is ultimately worth the investment. Once that period of mulling has passed, reality of the expense sets in and thoughts of bonus room costs turn to more realistic ones, such as “How much down payment do I need, and how in the world am I going to get it?” Well, with a bit of time, discipline, and some creative measures, you should be able to easily save what you need (approximately 20% of the cost of the home, incidentally) in less time than you may think. “How?” you may wonder? Keep reading….
1) If you have a 2 to 4 year goal, consider moving your money from a typical low-interest savings account to a high-yield savings, money market, or CD account. This alone could double (or more) your APY (annual percentage yield) rate, which is essentially free money.
2) If you’re leasing and able to downsize, consider moving into a small apartment or home with a lower rent. Not only are your monthly payments less, but your utility costs should be reduced, too. Put that difference directly into your designated down payment savings account.
3) Do you remember The Latte Factor (http://www.finishrich.com/lattefactor/)? Switch that morning jumbo latte at your local coffee shop for a small black cup of joe to which you add a splash of milk. Better yet, make your own coffee at home. Put what you would have spent into your down payment savings account.
4) How about that premium cable bill? Do you really watch all 500+ channels? Make the choice to spend less time in front of the television and reduce (or entirely drop) that subscription. Depending on your service provider, that can be an extra $1000 to $1200 per year.
5) If you’re like most of America, you probably have a home filled with items that you never use. Perhaps they’re buried so deeply in closets that you forgotten about them completely. EBay, Craig’s List, and even good old yard sales are excellent means of clearing the clutter and making extra cash. Don’t discount things as useless, either. Remember the old adage… your trash is someone else’s treasure.
6) Do you have a house full of avid readers? First of all, lucky you! Secondly, rather than buying your books at the big box bookstore, consider a used bookstore and trade them back in once you’ve read them. Better yet, the local library is free! For every book you borrow, rather than buy, put the would-be cost of it in your down payment savings account.
7) On a similar note, cancel those magazine subscriptions and view digital downloads from the library instead. Not only will you save an extra $10 to $25 per year, per magazine, but you’ll save thousands of trees and gallons of fuel used for delivery, as well.
8) Program your thermostat to be warmer during the day in summer and cooler during the day in the winter. Set it to reach your comfort level just before you return home for the evening.
9) To that note, keep your blinds or curtains closed when the sun is shining in during the summer. Open them during the winter to let the sun help warm you.
10) Eliminate your credit card debt. Seriously. Consolidate to a low interest loan, if possible, but make a budget and pay it down no matter what. Never mind that this is number ten on the list. It’s a doozie. It’s easily the most important point in the entire article.
11) Manage your bank fee costs. Use only free ATMs, don’t exceed your transfer limits, don’t overdraw your accounts, and make sure you keep the minimum amount required in your savings to avoid those monthly service fees. The amount of money you can save by just being vigilant about your transactions is stunning.
12) We’ll end the list with an unconventional method. Depending on your income, pick a bill and stash it every time you receive one. For example, decide that going forward, every time you pay cash and receive a five-dollar bill in your change, it will go into your down payment savings. It’s an unexpectedly fast way to save some extra money.
Obviously, there are many, many more ways to save your way to that 20% down payment, but these are a good start. Whatever methods you choose, the most important move you can make is to outline your strategy and stick to it.
Guest post courtesy of Manchester Green Homes.