In part one of this blog post we covered the first steps to help you save for a down payment, which involved:
- Knowing how much you need to save
- Setting a timeline for saving
- Selecting the loan you would be eligible for, so you know how much down payment you need (5% to 20%+)
Now let’s talk about some of the money habits that can help you get there faster.
4: Create a realistic budget
Saving money is hard enough, but it’s even harder without a budget. Create a realistic budget based on your essential expenses—food, housing, cars, student loan debt, etc.—and non-essential expenses like entertainment, eating out, and shopping. One of the biggest mistakes people make here is not being realistic about your actual spending. For example, you can put $200 for your food budget, but if you actually spend $600 a month then you are not likely to hit your $200 goal.
Once you have your budget, put savings into a separate account immediately after you get paid. Treating savings as an essential “expense” and setting it aside can help you avoid spending it on other things. Having your savings automatically transferred from your checking account is another great way to make sure you do it every month.
5: Find ways to make more money
If money is already tight and it would be very hard to save money based on your current income, look for ways to earn more. Some examples of how to earn more include:
- Asking for a raise at your next performance review or right away
- Getting a new job if your current one isn’t making you happy and doesn’t pay enough
- Downsizing your current living arrangements—for example, sell a vehicle to get rid of a car payment or move to a smaller or less expensive apartment
- Picking up some gig work or a second job if you have time
- Renting out a room in your house or using apps like Neighbor to rent out some storage space or allow someone to park in your unused driveway space
6: Eliminate bad habits that cost a lot
Sometimes the best way to save money is to figure out where you are spending a lot on something that is bad for you or your health. For example:
- Cut back on smoking or quit altogether
- Avoid buying alcoholic beverages when you go out to eat
- Cook at home instead of eating out
- Avoid gambling or buying lottery tickets
- Give yourself a spa day at home instead of paying for manicures or pedicures
- Make coffee in the kitchen instead of stopping at Starbucks
For many people saving for a down payment seems out of reach, but with the right steps, you can save enough to get there. Talk to our lenders at Integrity First Lending for more tips and help making your American Dream of owning a home more of a reality.