Smart ways to save for a down payment

Smart ways to save for a down payment

After years of renting, people often get bored with moving all the time and not having their own place to call home and customize exactly how they want. Additionally, it seems that rent prices are only going up. That is pretty much why so many of us decide to buy a house at some point in life. However, getting all the money you need for purchasing one is not easy. So, we’ve decided to help you and collect all the smart ways to save for a down payment in one place. 

As we already mentioned, this is not an easy thing to do. Especially when you still have part of your income going towards the rent. Therefore, it will require some determination and persistence to make it work. However, it is far from impossible. Here’s how to do it.

Determine the priorities

When you’re trying to save up for something important, like a house, knowing what your priorities are is crucial. Some of the things you should cross off your list as soon as possible are eating out all the time, expensive vacations, fancy clothing, and new cars and gadgets. Those are usually the biggest expenses in people’s lives that are not crucial for their existence. 

So, if you want to save some money for your house in a smart way, you need to prioritize saving. After you’ve done that, try to find other areas where you can cut back so you can save more money. Remember that saving for a home is not something that you can do simply by finding the best-rated personal loan lenders. It’s a process that lasts and you’ll have to stick to your guidelines and budget.

Three women standing on a cliff talking about smart ways to save for a down payment.
A nice holiday somewhere overseas does sound nice, but going somewhere closer is one of the smart ways to save for a down payment.

Pay off all of your debts first

The second thing on our list is something that most people overlook when thinking about smart ways to save for a down payment. If you’re paying a lot of interest, you can’t really save any money. So, the first thing you should do is to pay all those debts off.

Start with the debts that are small and have high-interest rates and work your way down. If you do this in continuity you will be done very quickly as the snowball effect will be created. It’s pretty much the fastest way to pay off everything you owe. Apart from making it difficult to save, having too many consumer debts can also damage your chances of qualifying for a mortgage.

Imagine a situation in which you’ve found the perfect house, you’ve saved enough money, and you’re ready to start moving house with help of someone you trust in the blink of an eye. However, you get declined or you have to find more money to pay for all the debts first. Not a situation anyone wants to be in.

Get rid of one car

We know that this may sound extreme to some of you, but if you and your partner have two cars, think about getting rid of one. This can easily save you a few thousand dollars per year. Start using public transport, try cycling, or simply walk if you don’t live in a big city. Carpooling can also help when the weather is simply too bad for any other way of transport.

Still not convinced? Let’s put it this way. If you can make this work, you’ll potentially save on a car payment that comes up every month, gas, maintenance, and insurance. All of that adds up to almost $9,000 a year for an average car owner. So, even if you spent less on your car than an average person you’re looking at nice savings. You’ll not only have enough for a down payment, but for all the hidden costs of buying a house in no time.

You don’t even have to go cold turkey. Try it for a few weeks. Park your car and don’t use it at all for a set amount of time. If you can make it without it, sell it and put all the money in the bank straight away.

Man sitting on a bed of his pickup.

Having a car has become a necessity these days. However, if your family can live with fewer cars, you will save lots of money.

Find cheaper ways to do things

Finding cheap ways of doing things you do every day is a skill of its own and of the smart ways to save for a down payment. However, it can be very helpful and it is one of the smart ways to save for a down payment. And the best thing about this lifestyle is that it can be learned very easily. Here are some examples of what you can focus on.

  • Don’t buy new books. It’s great if you like to read, but try the library. They have millions of books that you can borrow without much hassle.
  • Watching lots of movies? Well, try to watch them online or on TV. You’ll save a nice amount of money just by avoiding the cinemas.
  • Try to eat in as much as possible.
  • Don’t spend too much money on your hobbies. Try to find some that aren’t that costly.
  • Don’t buy new clothes for a while. Try sticking to your current wardrobe and making the best out of it. It can’t be that bad really. 
  • If you have a big family, calculate how much money goes towards the snacks, drinks, and weekly entertainment. We’re sure that you’ll want to cut that down a little bit.

You can look into the power of budgeting and how to master it if you want some special tips. In general, you’ll have to resist and focus on the bigger picture and the ultimate goal.

Woman counting money.

With having lots of money on your hands comes the temptation to spend it. Be sure not to do that.

Bank all the windfalls

The last one of the smart ways to save for a down payment is something that we’ve briefly touched on earlier. What you can do to make the process of saving the money faster and easier is banking all the periodic windfalls you encounter. So, all the income-tax refunds, gifts, bonuses, or the money you get from selling something you don’t need should go straight to the bank. This is how you fast-forward the process. You’ll be surprised when you see how quickly these can accumulate. 

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