New year, new investment goals, we’d love to help you stick to them. Maybe you’re finally ready to think about buying a home, but you doubt your ability to save up the necessary down payment. Twenty percent of even a modest home can seem out of reach for first-time homebuyers. Here are some creative tips for eking out some extra to boost your savings:
Nearly all discretionary funds (the money left in your budget to spend on entertainment, eating out, and other frills) can be redirected. When using this method to save for your down payment, it is important to isolate the savings, so continue to pay the full amount for everything, just pay it into your savings account instead.
Ditch the cable or satellite: If you pay $50 for cable, you can switch to Amazon Prime or Netflix and have an extra $30 to put into your down payment savings account.
Revise gym membership: If you pay for monthly gym membership, you can find an extra $35 to $55 per month by switching to a lower-priced gym or working out in a local park or recreation center instead.
Socialize at home instead of going out: host a game or movie night and convince your friends to do the same. You’ll all save money and have fun.
A way to create the discipline of saving is to make a game of it.
Indulgence Matching: One idea is to set up a matching game where whatever you spend on non-essentials (that latte at your favorite coffee shop or wine) requires you to put an equal amount into savings. So if you can’t afford to pay eight dollars for your non-fat half soy espresso drink ($4 for the drink and $4 for savings), you’ll have to find a less costly alternative to enjoy.
Savings Challenge: Compete against a spouse, partner or friend to see who can save the most money in a specific timeframe (one month, six months, etc.). Create a savings metric (actual dollar amount, percentage of income, etc.) you can each achieve with disciplined effort. Make the prize be another savings for the winner such as the loser hand-washes the winner’s car.
Consider adding a side job, or doing chores for elderly neighbors and family members. If you don’t know anyone that needs help, sign up with TaskRabbit to get connected with people that do.
As the money in your savings account grows, transfer it to a secure short-term savings account like a CD or money market account. Even an online savings account will earn more than your big-bank savings account.
Let family members know that you’re saving up to buy a home. That way, they’ll know to gift you with either money or something to increase your savings (restaurant certificates so you can save on eating out, gas cards, etc.).
When you know you’re nearing your savings goals, stay in touch with your real estate professional. We know when a listing drops in price or the seller is offering incentives that can stretch your savings into the amount you need.