Buying a house is a goal for a lot of people.
Sure, there is the whole rent vs. buy debate, but at the end of the day, many people want a place to call their own. A place where you don’t have to ask someone if you can put a nail in the wall.
It can a dream to buy a house one day, but with the home market rising in cost in many places, it can be hard to figure out how to come up with a down payment for a house.
The home buying market varies in terms of costs and requirements. If you’ve spent time researching housing costs, you’ve probably read some tips on how much to save for a down payment. Putting a down-payment of 20% of the house’s purchase price is the rule of thumb in order to avoid paying PMI (private mortgage insurance) on top of your mortgage.
No matter what percentage of the house’s purchase price you put down, you can almost guarantee it will be a hefty amount. If you want to be fully equipped to save and reach your house down payment savings goal, here are few things to do.
1) Get on a Budget
It can be easy to think you don’t have any extra money to save towards a house down payment. When you’re contending with things like debt and high costs of living, saving a big amount of money can be overwhelming at first glance.
However, the first step to reaching any savings goal is to know your cash flow, the income you have coming in and the expenses that are going out. Start tracking your spending to see what you can start working with.
Once you have figured out your cash flow, get on a budget. Check out our free automated budget spreadsheet for a way to quickly budget but still stay close to your spending and really understand it.
Try meal planning in order to cut down on food costs. Cut the cord so you don’t have to deal with a pricey cable subscription. Prioritize what’s important to you and what the nice to have vs. need to have expenses are.
2) Open a New Savings Account
I love creating separate savings accounts for different goals I have. I have one for my emergency fund, one for travel, and another for immediate savings.
There are several good reasons to open up a new savings account for your house down payment, preferably one that isn’t at the bank where your regular checking account is. Most traditional brick and mortar banks have not so great interest rates on their savings accounts.
Online banks, however, have interest rates on their savings accounts that are way higher than the national average. They’re able to offer higher interest rates because they don’t have physical locations to manage like brick and mortar banks.
3) Save Windfalls
While you may not magically get a big inheritance out of nowhere, you could get bonuses at work or extra income through something else. Have a savings plan for any bonus income you get.
Windfalls of money, no matter how big or small will get you closer to your house down payment savings goal. Maybe you’re able to sell some things around your house in order to make some extra money. Whatever the case, put the money in your dedicated savings account so you’re not tempted to spend all of it.
4) Increase your 9-5 Income
Increasing your full-time job income can be one of the most beneficial things towards improving your finances. Look for ways you can grow your 9 to 5 income.
Consider taking on more responsibilities at work. Learn some new skills to increase your marketability. Outline what you’ve done to help your company succeed and use it to negotiate a raise.
Use tools to compare salary data to use in your salary negotiations. Look at how salaries compare across different companies. Make connections with others to find out about new opportunities.
5) Start a Side Hustle
There is only so much you can cut back in terms of expenses. Sometimes increasing your salary at your full-time job isn’t always an option. Enter the side hustle.
If you’re really wanting to supercharge your house down payment savings, then picking up a side hustle is the way to go. In DC’s book, Hustle Away Debt, he talks about how to find, start, and grow a side hustle.
Saving for a house down payment can be a long process. Having a side hustle can help you make more money and accelerate your savings, as well as have a cash cushion for when unexpected expenses come up. An added bonus is that you get to explore new interests and learn new skills in the process.
Final Word
Saving for a house down payment isn’t an easy process. If you’re juggling a small income with debt, which many millennials are, then it can feel like a never-ending process.
Make a point to set down and determine a timeline for your house goal. Breakdown your final savings goal into smaller mini goals for you to hit so you don’t feel overwhelmed. Utilize financial technology services to your advantage. Research to find out if there are down payment assistance programs in your area. Be proactive.
Are you planning on buying a home? How are you saving for a house down payment?
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Good tips Colin. We’ve done a lot of the same things when trying to build up a down payment for a house. We tried to over save actually as you never know what may come up with a house purchase and it’s pretty much a guarantee you’ll need the money for something – whether it’s for the house, moving related or simply for savings.
We’re doing a lot of this with hopes of becoming homeowners next year. We’re even planning a very small Christmas this year to maximize savings and like John, I think it will provide more peace of mind to over save a bit just to be on the safe side.
I am agree, side hustles helped me to build an emergency fund that helped me to pay unexpected expenses and don’t touch savings….there are a lot of things you can do also directly from your home…thaks for the tips