Owning a house is a dream for many and that is not out of reach.
Yes, most people save for their downpayment for a big number of years. It is because they didn’t know there are some tips to make it faster. If you plan to buy a house or a car, the down payment should be higher so that the loan amount will be lower. The lesser you pay for a loan, the better as you do not need to pay someone unnecessarily. So, the question arises here. How to save money for a down payment.
Is that possible to own a house paying a higher downpayment in a short period of time?
Yes, it is possible to buy a house no matter if you already have some money in your savings account or you don’t but can start saving from today. You need to commit to saving for your house downpayment to make it possible. You might have to compromise on things but it is all worth it.
So, let’s see how to save for a down payment to buy your favorite stuff be it small or big.
Start Saving Right Away
So, in order to save for a down payment to land in your favorite house faster or buy a car, the only thing you have to do is start saving for it. Not just simply saving whatever the amount, you need to make it a priority and save. As you know going a higher down payment is better than paying higher interests. Moreover, when you pay a higher amount in downpayment, you will stand a chance to bargain more. Thus you can save more money.
So, make up your mind to start saving for the down payment right away. The next thing you will have to know is “how much”. How much money you need to save each month and for how long you need to save.
Calculate the Amount You Need
Now that you have decided the only way around to save for your down payment is saving every month a higher amount (don’t worry about saving a huge amount, you can do that following simple steps). But first, you need to know how much amount you will need to save. For this, you need to do simple leg work. Know the costs of the property you are going to buy. You can know this by inquiring about the prices in the area you wish to buy as you don’t exactly know which one you are buying. This way you can calculate the amount you will need to save for a downpayment.
Write Down Time Frame
So, for how long? Take a pen and paper and write down how much you will need to have to buy a house, how much you need to save for down payment, and how much you can save. There will be a huge difference from individual to individual, but that’s okay. Now calculate how much you can save by dividing the down payment by the amount you can save each month. To make this simpler you can rely on savings calculators available on the internet.
Hope you have got an idea of how much and how long you need to save for a down payment. Now let’s see how to save more for a down payment.
Plan a Budget
You should have a budget to track how much you are earning, spending, and saving. Thus you will have an idea of how much you can still save for your down payment. Moreover, by preparing a budget you will not spend on unnecessary things.
Open a Savings Account
You need to protect the money you save from yourself. Hence you need a separate savings account that does not let you withdraw cash from it until the maturity date. Also, plan in such a way that the amount you save should directly get deposited into your savings account.
Pay Off Debts
Don’t stress yourself by managing your expenses, saving, and paying other debts at the same time. However, there is a 50/30/20 budget plan. You can’t manage debts and down payment savings in your 20% of income right? So, try as much as possible to pay off the debt be it a student loan or a car loan. In cases where you can’t clear off your debts, plan to pay off at least the higher interest rate debts first. You can do this selling an extra car you don’t actually need it very much or any expensive unused items. It is better to get rid of both unaffordable and unused items to save for your down payment.
Cut Down Expenses
To reach your goal faster or reduce the time frame for landing in your dream house, you need to compromise on certain things. As said plan a budget and stick to it. Cut down your expenses as much as possible. Say, you can cut down a major part of your expenses by switching to home food than going for restaurants. Eat at home every day and you will save a lot. Instead of using the car to ride to your office, walk, or bike. Cut all not-so-important parties and gifts so that you can bank a lot for your down payment.
Shop during sales or make use of cashback or discounts to save at least some money for your down payment.
Think About a Second Job
To save more you need to earn more. These days making more money is not that hard. You need to just invest your time and skill. Apart from your regular 9-5 job, consider having a side hustle. There are plenty of side hustles you can do to make more money such as becoming a driver, delivery boy, baby sitter, pet walker, virtual assistant, freelance writer, renting out your car when not in use, and whatnot. You can even make money walking and getting your steps tracked by some apps.
Compromise on Vacations & Holidays
Okay, this might sound a little harsh. But you can a lot by skipping vacations and holidays. Imagine how much you can save by compromising a 1-week vacation? Even holiday gifts and shopping cost a lot. Instead, you can put this money in your savings account, right? Though this sounds rude, you can actually celebrate the double after you land in your own house. Think that way and skip long vacations and expensive holidays. Instead, you can go for short weekend vacations to nearby places and prepare do-it-yourself gifts for holidays.
It’s more important to save the money you saved for a vacation or fun than spending it.
Sell your Unused Stuff
The other way you can add more money to your savings account is to sell the items in your home you don’t need or use. Declutter your home, pack all the old furniture, unused machines, mobiles, books, DVDs, and sell them either in a garage sale or online on Declutter, Amazon etc. There are many simple ways to sell your used stuff online and make more money.
It is always a smart idea to buy things you can afford right now. Though this is not the case with buying a house, you can at least make a heavy down payment so that you will have to pay for a light loan. Moreover, having a small debt is not only good for your financial life but also to your mental and physical health. So, follow the above tips and you can save for a down payment much effectively.