Saving for a down payment to buy a home can be a big challenge for most people. In a society where credit is so easy to obtain like in situation of buying cars with no money down and being able to apply for store credit cards to buy items you want but do not have the money for yet has created a lack of understanding for saving money. On purchasing homes, we now have options as low as 0% down with VA home loans and other products but most commonly people need to have at minimum 3% to put down. While you can purchase with these low monies down options it is optimal to purchase with 20% down and avoid PMI (Private Mortgage Insurance) Here are five different ways to save more money for your down payment.
1) Morning Routine
If you drink coffee or tea this one is a great place to save money. Most people are buying these hot beverages out at locations such as Dunkin or Starbucks and while doing so pair it with a breakfast sandwich or some other breakfast bakery item. The cost of the breakfast and drink is approximately $4-$8.00 per day while the same items at home would cost about 50% less or more. This means weekly $20-$40 and annually $1,040 to $2,080 when purchased out vs $520 to $1,040 when made at home. That creates a savings of $520 to $1,040 a year and that does not include the other costs such as driving to the location and the loss of time. Here is one place we all can find a lot of extra money in our budget never mind looking at all the times we go out to eat.
2) Cell Phones
There are two places on cell phones where people spend a ton of money from buying a new phone each time a new model comes out to paying the top priced provider for service when there are other options. Most phones debut at a cost of around $700 or more and release new versions annually this means if you just skip every other version you save $700 biannually and that is just the cost of the phone not all the new accessories, chargers, and apps you will need to buy to complete the phone. The other place you can save money on phones is going with discounted service providers such as Metro by T-Mobile or Cricket Wireless. A lot of people avoid these brands and go with AT&T or Verizon but the truth is these companies have great networks with similar coverage for a fraction of the costs. Most people using the premium providers are paying over $100 per month while the discounters are selling unlimited plans at only $50 a month so that means a $50 a month savings or $600 a year. If you were to skip the upgrade every other year and move your plan to a discounter, you would save roughly $950.00 annually.
3) Pay Down Credit Cards
The average family has approximately $16,000 in credit card debt and has around a 17% interest rate. Annually this is costing them $1,400.00 in interest alone. If you were to pay off that card in one to two years instead of leaving it running for five the savings would be roughly $4,500 to $6,000 which is around 40-60% of your minimum down payment on a $300,000 home! Credit debt is easy to get into so make sure to find out what is going on the cards and slow the flow of spending. By slowing the spending not only will you save all the interest costs you also will be spending less money.
4) Skip A Trip
Americans spend north of $1,000 per person per vacation and usually take at least one vacation per year. This means a family of four is spending over $4,000 annually to go away. While taking a break from work and life is important there are several options that can save you a lot of money. A staycation with nicely planned day trips can save a lot of money. Another option is to rent a home somewhere within driving distance where prices are low using a VRBO or Airbnb. Choose an area with a lot of natural tourist attractions like hiking and swimming that you can visit for free. While on the trip make sure to hit the grocery store and limit the meals out to cut down on costs. If you were able to spend $2000 instead of $4000 this means an annual savings of $2000!
5) Sell Sell Sell
Part of buying a home is moving and part of moving is noticing how many items we have. Now is a great time to figure out what items we have that we can sell. From the cell phone we no longer use to the wardrobe we no longer fit in there is a ton of things we can part ways with and get paid for. There are two advantages which are saving money on the overall moving costs and taking in money when you sell your unneeded items. In the modern era with Facebook marketplace, Ebay, and websites like Poshmark it has never been easier to pull value out of unused items. Looking at stats from rental insurance companies the average two bedroom apartment has over $30,000 in personal belongings meaning if you were to only sell 5% of that you would earn $1,500 extra money.
The truth most people do not understand on money is the compounding effect that saving can have vs spending ahead using credit. As soon as you learn to spend less than you take in and to pay off your consumer credit debt you will immediately notice homeownership becoming closer than ever. Take time to really think about your day and where you are spending your money and make small tweaks and you too can become a homeowner. If you are looking for advice on making a plan or looking for an agent to help you with the purchase reach out to us at Movementum Realty and we would be happy to align you with one of our “Move Mentors”.