May 18th, 2015 2:14 PM by Leonard Silvestri
Saving for a down payment on your dream home may feel like you're putting shackles on your bank account, but it doesn't need to feel this way. There are an infinite number of ways to pinch on cash without giving up everything.
Before you can even begin saving for a down payment, you need to define your financial goals. Start by analyzing your household's financial status. Break down what your paycheck, what you're spending and where. Now analyze your dream home goals. Where do you want to live? How much house can you afford? Where can you make sacrifices. Comparing your home goals alongside your financial status will give you a better idea of what your goals can and should be. Give yourself a range that includes a high, low and average range to know exactly what your options are.
I bet that overall goal number seems pretty high and feels far off, but breaking it down into a monthly budget plan will make it perfectly manageable. First thing to consider is your timeline. When would you like to reach your down payment goal? The sooner the save, the tighter your budget and living expenses will be, but worth it if purchasing in a buyer's market. Once you've created your monthly budget plan, stick with it.
It's a bit intimidating to manually drop a large chunk of change into savings every month and can lead to tempting feelings of using that money elsewhere. Automating your savings goals avoids this temptation. Most banks offer a program to pull a set amount directly from your paycheck into a savings account without you ever seeing a dime. This helps you visualize your goals into seeing exactly what you will be living off every month. After a month or two, you won't even miss the money you're saving especially when you see your savings pile grow effortlessly.
Now that you have a growing savings account, it can be very tempting to "borrow" from the honeypot every once in a while. Don't derail your efforts. No matter what, stick to your savings and use only your debit and credit cards to pay for bills and living expenses.
Many couples have quickly saved for a down payment by putting one spouse's paycheck directly toward the house fund and the others toward living expenses. This allows the couple to save large chunks of money on a monthly basis without sacrificing life's necessities while discovering savings options they never thought possible.
This one may seem obvious, but working a little more every day adds up quickly. Put the money from additional hours directly into your down payment fund. If you can't even fathom spending one extra minute at your job, consider getting a part-time side job somewhere else, or try freelancing. Another option is to turn a hobby into money. If you're crafty, sell your goods. Or if you're particularly good at something, coach others for cash on the side.
There's an infinite number of ways to save for your dream home's down payment. You know what they say - where there's a will there's a way. But the most important thing to remember is plan and then stick to that plan. Do this, and you'll be curled up in your new home in no time.