Research has shown time and again one of the greatest hurdles to home buying is coming up with the – sometimes dreaded – downpayment. Here are a few practical strategies to help you clear the hurdle and come up with the cash you need.
6 Steps to Saving for a Down Payment
1. Plan for progress.
Savings isn’t all dollars and cents. It’s a little emotional. To remind you why you’re in the savings game, it’s a good idea to find a few visuals – photos or a list of features of your dream home. When you’ve chosen your reminder, store it close to your budget, wallet, or in the place you pay bills to remind you of what you’re working for.
2. Slow your spending.
The biggest enemy of spending is the impulse to buy. When you’re tempted make a purchase over $25, wait 10 days to decide whether it’s something you really need.
3. Spend less for convenience.
Your mother was right, good things take time…and so do cheap things. From coffee on the go to lavish meals out, most consumers are paying quite a bit for convenience. Become friends with your kitchen to help your bottom line.
4. Drink more water.
According to the National Soft Drink Association, the average American household spends about $850 annually on sweetened drinks. In contrast, water costs just a penny per gallon. Make the switch to water and you’ll start your life as a homeowner not only richer, but a bit healthier too.
5. Track expenses.
Experts agree, the only thing more powerful than creating a budget is actually reading and tracking it. Schedule some time every week to review your spending habits and find new ways you can save.
6. Eliminate the excess spending.
Locate the excess in your budget and slash it. Trade the gym for home workouts, swap expensive movie nights for checking out free videos from the library, and keep an eye out at the end of each month for services you aren’t using.
Serious Sources for a Down Payment
If you’re serious about saving, these sure fire moves will help you reach your goal.
Tax refund: You know it’s coming, why not use it toward your down payment? If you’re really serious about home ownership, talk to an accountant about tax planning to make sure there is a little green at the end of the year to help with your down payment.
Borrow from the 401(k): It’s not losing your retirement, but rather using a piece of one investment to make another. First-time homebuyers can borrow up to $10,000 from their Individual Retirement Accounts (IRAs) without paying early withdrawal fees. Talk to your 401(k) or IRA administrator to find out how it will affect your retirement.
More work: Yes, we said it: more work. If you’re serious about reaching your down payment goal, consider spending a few hours working part-time. Ten hours per week at $10 per hour for a year will get you $5200 closer to your goal.
Payroll deductions: One of the best ways to save money is to hide it from yourself. Redirecting some funds from your direct deposit to a special savings account can be a great way to trick yourself into saving.