Saving for a Down Payment: 3 Tips You Can Use Today
Saving money for a down payment isn't easy - in fact, for many people, the task just seems too big.
Saving for a Down Payment: 3 Tips You Can Use Today
One of the biggest keys to saving for a down payment is to start early and save often. However, that aside, here are a few things you can do to boost your savings and improve your bank balance:
- Trim out unnecessary expenses
- Open an account just for down payment savings
- Automate the chore of saving
Here's a closer look at each.
Saving for a Down Payment Tip #1: Trim Out Unnecessary Expenses
You might spend a little cash here and there that you don't need to spend - and if you saved it, you could boost your savings account significantly. You might:
- Cut the cord on cable TV and switch to a much cheaper streaming service. The average cable bill is about $250 (that's $3,000 per year), while Netflix clocks in under $20 a month - and that could save you $2,760 a year alone.
- Pack a lunch instead of dining out at work. If you spend $10 on lunch each day while you're at work, you're dishing out $50 per week and $200 a month (that's $2,400 per year). If you bring lunch from home, you might be able to cut that in half (or even less if you pack leftovers or bargain-shop for lunches).
- Cancel your gym membership if you don't use it (gyms bank on you "meaning to go"). Most gyms cost between $50 and $100 a month across the U.S., which means you're saving between $600 and $1,200 per year on membership fees - and you can work out at home with YouTube videos or go for a run.
- Cut down on dining out and opt to eat at home more often. Even if you only spend $40 on dinner a couple times a week (which is both cheap and an underestimation of what many people do), you're shelling out $80 a week and $320 a month. Refocus that cash on groceries for dining in and put what's left over in your down payment savings.
Saving for a Down Payment Tip #2: Open an Account Just for Down Payment Savings
It's easier to focus on savings when it's not mixed in with your regular money. Find a bank that's offering a deal for new account holders - like $150 in free cash - and open a savings account. You won't get much by way of interest, but honestly, you're not getting any interest when your savings is mixed in with the money you spend in your checking account, either.
Saving for a Down Payment Tip #3: Automate the Chore of Saving
Many banks offer cool features like "Keep the Change" transfers. When you use your debit card to buy something that doesn't have an exactly even total, your bank will round up and put the difference in your savings account. For example, if you spend $5.47 at your favorite coffee shop and use your debit card to pay, the bank will put the extra $0.53 that rounds it up to $6 into your savings. It's like an automated coin jar.
If your bank doesn't do that, you might want to ask your employer to split up the way it pays you. You can have 5 percent of your paycheck go into savings while the rest goes into your checking account, for example. While it's not an overnight miracle, that money will really add up. For every $1,000 you bring home, $50 will automatically go into savings - and you won't even notice it because it won't be in your checking account.
We know that saving up for a down payment is hard. We also know that money isn't as easy to come by as it used to be. Even if you don't use these tips to save for a down payment, putting them into action (we were horrified when we tallied up the cost of cable TV) can make a big difference in your everyday life.
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