Saving for a down payment on a home can seem daunting and complicated, especially for first-time homebuyers. The amount owed for a down payment can vary from 5%-20% of the home’s purchase price, depending on the type of loan you’re applying for.
To put this into perspective, the median price of existing homes sold in the US in April of 2021 was $346,800, meaning the minimum amount of money needed for a 20% down payment would be around $69,000. That’s an intimidating sum, but with some smart strategies and dedication, it’s possible to triple your savings and get closer to that goal. Here are some tips on how to go about it.
Create a Budget and Track Your Spending
The first step would be to create a budget and track your expenses and spending. This should include listing your income on one side, and your expenses and debt on the other side. The expenses can be broken down into categories, such as living expenses, food and groceries, entertainment, and so on. This will help you see where your money is going and where you might have some wiggle room to cut back and start saving.
Automate Your Savings
A great way to start saving for a down payment is to automate your savings. You can set up a plan to have a portion of your paycheck automatically put aside into a separate savings account or put into an investment account. This way, you’re eliminating the human element and ensuring that you are consistently and regularly saving towards your goal.
Set Saving Goals
Once you have automated your savings plan, you should set savings goals. Be clear and specific about how much you want to save and by when, breaking it down into manageable chunks. This will help you stay motivated and focused on your ultimate goal, whether it’s saving an extra $100 a month or earning a percentage of your income.
Live Below Your Means
In order to truly maximize your savings, it is important to strive to live below your means. Take a look at your budget and identify areas where you can cut back, such as dining out, cable, or unnecessary clothing spending. Even if you save a small amount of money here and there, it can add up.
Get a Side Gig or Start a Small Business
If you’re really looking to triple your savings, then consider taking on a side gig or starting a small business. You can look for freelance jobs related to your skillset or start a blog or small business selling products or services. It might help you to look into additional tax deductions for sole proprietors or entrepreneurs in order to maximize your income.
Open High-Interest Savings Account
Another great way to triple your savings would be to open a high-interest savings account. The interest rates on these accounts are higher than what you would find on a regular savings account, helping you grow your savings faster. The exact interest rate you can get depends on the type of institution and the account you choose, so do some research and shop around.
Final Thoughts
Saving for a down payment on a home can be difficult, but it is possible to triple your savings if you are willing to be disciplined and commit to your financial goals. Setting a strict budget, automating your savings, engaging in side gigs and opening a high-interest savings account can all help you reach your goal of saving for a down payment. With hard work and dedication, you can achieve your dreams of home ownership.
