3 Ways to Skyrocket Your Savings While Saving for Your First Home
Saving up for a down payment is tough. You can put small amounts away little by little by keeping everything status quo or you can drastically put away significant amounts of money in a shorter period of time by making some strategic cuts. Here are a few tips to skyrocket your savings without having to watch every penny.
1. Cut corners on where you dwell.
The bulk of a household budget normally goes to housing. It’s usually the costliest part. If you are currently paying a high rent, that can leave little extra money to put aside to save for a big purchase such as a house. If you are looking to slash a major amount of how much money you shell out on housing costs while you are waiting to save up for your first home, consider changing your living arrangement. It might be the unpopular thing to do but a little bit of short term sacrifice can go a long way to pad your savings for a down payment. If you have a friend or a family member you can share a dwelling space with for a short period of time, take advantage of that as a way to free up extra money. If you get a roommate where you currently live, you can potentially slash your living expenses in half.
If that option is not available to you, a less expensive apartment for a short period of time will help you put away larger chunks of money monthly. Subletting can also be a an option as opposed to a regular rental. If you can find someone who is subletting their place, that can equate to even more savings. You can often get the place for a reduced amount as a sublet. Look for rental listings in your area or find out through word of mouth. If doing that for a couple of months or so means you can save a big part of your paycheck, then this might be an option for you.
2. Slash other big expenses.
While cutting your living expenses can radically reduce costs, transportation also consumes a large portion of the monthly budget. After being able to get an inexpensive place to live, ward off the temptation to get a new car. So many of my friends purchased new ones once they landed their first jobs out of college. I wanted one as well. At the time, I knew that taking on a new car payment would derail us from reaching our goal. So my desire to have a home won out over getting a new car.
3. Create a down payment fund.
Know the exact dollar amount that you are shooting for to reach your goal. When you cut your spending, be sure to actually put that money away into a savings account, one that is separate from any other you may have. It’s easy to forget how much money is supposed to be set aside for saving and spending when it’s sitting together in one account. You don’t want to fool yourself into thinking it can be used for discretionary spending. Set up a system to automatically deduct a fixed amount each month from your incoming money to this earmarked savings account. This way you won’t be tempted to pull out of it or set the money aside. There are online banks that make it easy to set up an extra savings account and automate reoccurring transfers.
The Bottom Line
Get a handle on the big expenses to quickly build a savings. Once you figure out how much you need to save, look for the biggest ways you can cut back. This could mean a temporary change in your living arrangement or driving a used car longer than expected. If you remember to keep your focus on the goal, it’s easier to endure in the short term. You’ll be well on your way to handing over your down payment and empowering yourself to purchase your first home.
Karen Cordaway is a part-time teacher by day and freelance writer by night. She’s a recovering shopaholic who spent years wasting money until she learned how to stop by reading personal finance books. In her spare time, Karen enjoys trips to NYC, photography, authentic Mexican food and believes chocolate is a food group. You can also find her writing on MoneySavingEnthusiast.com