Buying a home is perhaps the single biggest purchase decision most people will ever make.
The financial burden alone is enough to warrant serious consideration and planning. And while you don’t need to put an entire 20% down, it’s never too soon to find ways to save for your next home.
If you’re like most people, this is a challenge. Budgets are almost always thin, and significant savings month after month are hard to come by.
But with proper preparation, and a few extra efforts to save, it’s possible to grow the money you’ll need without making any massive sacrifices.
Here are a few tips for saving for a new home.
Use Tools to Grow Savings
Small deposits over time can quickly add up to big savings. There are a couple interesting ways to do this: 1) Use a tool like Digit to automatically deposit into savings a specified amount of your income or paycheck. This feature, also offered by most major banks, lets you save amounts small enough you may not not even notice in the short run and, 2) Tools like Acorns, which let you round up purchases to the nearest dollar, and deposit the difference straight into savings. It might not sound like much, but it can make a huge impact over time.
Revisit Your Retirement Savings Plan
If retirement is still a ways off, considering pausing contributions to your 401(k) or IRA to drive that percentage of income into your new home savings. This may not be wise for everybody, and should be temporary in any case. But it’s a quick way to divert your own money towards a more immediate need.
Manage Your Debt
Saving money has its extra challenges when you’re also paying off debt and interest. Start by avoiding any new debt you may be considering and reducing the debt you already have.
Any debts with high interest rates should be revisited. Many loans can be refinanced for lower rates, and some debts (such as credit card debt) can be transferred to lower interest accounts.
Cut Excess Spending
One glance at most bank statements, and it becomes clear that not all spending is completely necessary. This is where a few sacrifices can be made:
Cancel unused or unneeded subscriptions and services
Prepare food at home
Cut back coffee runs and expensive lunches
Buy clothing and household goods only as needed
Lower the priority of other costly projects
Reduce travel as much as possible
Amplify Your Income
Today, bringing in a few extra dollars is easier than ever. And nothing will grow your savings more directly than an extra stream of income. If you’ve heard the term “side hustle”, this is what we mean.
Drive for a ride-share service
Deliver goods or food
Walk or babysit pets
Market your existing skills as a freelancer
Work longer hours
Work a second job in your free time