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Buying a home in many circles is considered the American dream. You own a piece of property and no longer have to pay anyone else rent and associated living fees (unless you buy a condo or co-op).
My husband and I are currently saving for a home of our own. While this isn’t his first time, I’m very excited to put my name on an acre or two. Over the next few years we plan to save 20 percent for a down payment on a home. Even though the total figure looks high on paper (well, it is), with the proper planning, we will hopefully meet our goal.
Anytime you embark on a hefty financial adventure, it’s important to stay committed. Yes life will deal you unexpected blows, but ultimately you must keep the end result at the forefront of your mind. Here are some ways to save for a down payment.
Reduce your debt. I’m sure you’ve heard this time and time again, but it’s very important. You’ll find it difficult to meet the necessary savings requirement if you’re paying out to others. Take the time to tackle your financial obligations. While student loans might take a little longer, credit card debt and other IOUs need to go sooner than later. Don’t put off what you can pay today. And add a little extra when you can.
Bank extra money. Tax refunds, bonuses and other types of additional income need to go in the bank. As much as you want to spend it, you must do everything to resist temptation. The more you can put towards your down payment the faster you’ll get to your goals. Tip: If you receive a bump in pay save that amount. There’s no need to add to your monthly expenses.
Challenge yourself to save a little more. I love eating out like the next person but know how quickly it adds up. As much as I complain about how I wish I had more, I challenge myself to save. Whether it be $100 a month or a certain amount every three months, it’s good to up the savings ante. My husband and I committed ourselves to the 52-week money challenge that will add close to $2,800 a year (combined) to our savings. Every little bit helps.
Look for the best return. Sometimes your average savings account isn’t the best place to stash your cash. Neither is your mattress but you get the idea. Things like a high-yield savings account can help pad your down payment. Another option are CDs (certificates of deposit) that you can reinvest money into once it matures. Those who wish to invest (e.g. stocks, mutual funds, ETFs) should speak to a financial adviser. You’ll want to hold on to those investments for some time in order to avoid short-term capital gains tax.
Regardless of what avenue you take, it’s important to make the commitment. So many people have good intentions when it comes to achieving money goals, but allow them to fall through the cracks. If you’re able to stay committed, do it. You’ll be able to realize your dreams of home ownership sooner rather than later.
