Purchasing your first home is a major life milestone and big financial goal to meet. If you find yourself in a place where your goals are defined and your finances are aligned to cover a mortgage, housing costs and maintenance, then you’re likely at the point of needing a stash of cash to use for the purchase.
The biggest piece of the home buying equation is the need for a 20% down payment. A down payment of this size not only helps to avoid increased costs of private mortgage insurance (PMI), but it also translates into more manageable monthly mortgage payments, meaning more flexibility in your cash flow.
Are you ready to start building your new home fund? Consider these four creative ways to save:
1. Start a side hustle
Chances are your income is already fully accounted for in terms of bills, lifestyle expenses and saving. Consider any skills or talents you have from your existing job and hobbies and how you can leverage them. Can you tutor, teach guitar lessons, sell crafts on Etsy, consult on marketing, or do web design? Establish a side hustle that aligns with your talents and allocate all extra money earned towards a separate “new home savings fund.”
2. Make it a game
Budgeting and limiting purchases is a tried-and-true way of increasing your savings, but can feel too confining at times. Consider making a game of the savings process and challenging yourself to have “no spend days” or to eliminate one item from your budget for a period of 30 days. Rotate items eliminated on a monthly basis, such as happy hours, dining out, clothing purchases, or pricey Pilates and yoga classes so you don’t feel overly restricted at one time. Stash away any money saved from these areas into your new home savings fund each month.
3. Hang on to extra money
Extra money can feel like free money and usually translates into treating yourself to a new purchase of sorts. If you want to build up your new home fund at a faster pace, stash all the money you receive in the form of gifts, bonuses, tax refunds, or raises into your savings account. If you absolutely must spend some of the money on yourself, set an allocation of 80% to savings and 20% to personal spending.
4. Get an accountability buddy
In a world where it’s hard to lose weight, ditch bad habits and more, consider what your savings success will look like if you enlist a good friend or family member to help keep you on track. Break down your savings goal into smaller monthly or weekly amounts and schedule check-ins with your partner to evaluate and discuss your progress along the way. You’re likely to feel more guilty telling someone else that you didn’t meet your goal than if you were simply making the commitment to yourself.
Building up a down payment fund can feel like a long process, but it’s important to determine how much home you want to purchase and the amount of mortgage you can afford, and then back into your down payment amount from there. Break this amount into small steps and automate your savings along the way. You’re likely to see real progress in no time.