By: Kyle Spearin
How do people save enough money for a down payment?
This is perhaps the most frequently asked question of anyone looking to transition from renting to buying a house. In many instances, the biggest barrier to home ownership is coming up with a down payment.
People are often intimidated by the prospect of saving enough for a down payment of at least 3.5%. This adds up to a large sum of money that appears unattainable: it seems like our lives are filled with nothing but expenses. Between paying rent and other bills, it seems close to impossible to get ahead.
You can do it.
Despite these obstacles, home ownership is still within reach for most Americans. In fact, it’s actually quite simple. There is a caveat, though-- it’s not going to be easy. To successfully save for a down payment takes sacrifice and discipline. You are
going to need to change your lifestyle and at times do things that you don’t want to do.
Do you think it’s worth the sacrifice if you get to buy your dream home?
Only you can decide that. If you’re determined to save for a down payment, this article will show you how. The best part is that each technique mentioned works independent of the others. They also work together if you decide to employ more than one
Start your path to home ownership by saving for a down payment today!
Educate Yourself about Money
To use a house analogy, even the most beautiful house in the world couldn’t stand without a strong foundation. If you want to save money and build wealth, you need to create a strong financial foundation. The best way to do this is by reading fundamental
books that can teach you what you need to know.
Reading won’t pay immediate dividends, but it will have the longest lasting effect on your financial future. There are three books that anyone looking to save money should read. Each of the books outlined will teach you the skills necessary to save
for a down payment and beyond.
1. Set for Life
This book was written by the CEO of Biggerpockets.com, Scott Trench. The purpose of this book is to take you from little to no savings to a financially free life. If you’re looking to save money for a down payment, look no further than the first part
of the book which discusses this in depth. After reading this, you’ll have a step-by-step process to build up your bank account and have a totally new outlook on money.
2. The Richest Man in Babylon
This is a very short and easy read. It’s written in the narrative form and tells the story of people living in the ancient city of Babylon. The point the author makes throughout the book is that the principles instilled in you from this book worked
in the past, are useful in the present, and will continue to help you in the future.
3. Rich Dad Poor Dad
Another great book and perhaps one of the most transformative books ever written. Throughout this best-seller, author Robert Kiyosaki tells the story of how he learned to save money and build wealth. There are numerous lessons from start to finish
that will change your life.
Eliminate Unnecessary Expenses
Do you have a Netflix account? How about Hulu or Disney Plus?
With so many streaming services to choose from, it’s easy to find yourself paying for multiple subscriptions. All of these small costs add up pretty quickly. Think about how much you’re wasting on entertainment each month.
This doesn’t just go for t.v. shows though, it carries over into most other elements in life. When confronted with making decisions such as getting another subscription or buying those shoes you love on Amazon, just ask yourself a simple question:
do I want this or do I need it?
There are plenty of apps to help you track spending such as Mint. By seeing where your money goes each month, you can begin to dial back based on the patterns you notice. It could be that you need to go out to eat less and cook at home more. It could be that you like going on shopping sprees
online. Pay close attention to where your money goes.
From there, you need to cut any unnecessary expenses and stay disciplined. These luxuries are nice to have, but the short term pleasure is keeping you from a long term reward such as owning a house.
Think of every dollar you save as another dollar that can go towards your down payment.
Pay yourself first: it’s really that simple. Take (at least) 10% of what you earn each paycheck and put it aside. Although it might not seem like a lot at first, this will quickly grow into your down payment and more if you stay focused.
One suggestion for successfully saving money each time you get paid is to set up a direct deposit to your savings account. If it goes directly there, then you’ll be less tempted to spend it. Just act like it never existed and live off
Every time you get paid, just imagine yourself one step closer to owning your dream home.
Many of the previous suggestions involve saving money. Another way to build towards your down payment is to develop a side hustle. This means that on top of your day job, you will need to put in additional time to make money at a second
job or offer some type of service people will pay for.
In the short term, there are some great side hustles available to just about anyone willing to work. As Amazon continues to expand, they need more people to help in warehouses. Consider picking up a few shifts there and putting the money
Some other suggestions involve owning a car, but allow you to essentially be your own boss. You can deliver packages for Amazon (clearly a theme here), drive for Uber or Lyft, or even deliver food for
These are opportunities that most people can take advantage of. If you have a skill set that you can offer, there’s also going to be a way to make money there. Whatever you choose, there are abundant options for side hustles if you're
willing to work.
Owning a home is well within your grasp if you’re willing to put in the effort. By following at least one of the ideas mentioned in this article, you will be well on your way to saving for a down payment.