Saving for Your Down Payment

Have you started thinking about making that next big step in your life, and purchasing your first home? I’m sure a lot of questions are floating around in your mind, and it can be difficult to find a place to start. Whether you’ve got a real estate agent lined up, or you’re just scrolling through housing websites I’m guessing the biggest question you’re asking is: “How do I save X amount of money for a down payment?”. The down payment can be one of the most daunting obstacles to tackle when buying a home, and while there are plenty of programs available to assist buyers with small down payment, saving a good amount is your best bet. This doesn’t have to be a huge challenge, and the answer may be as simple as a small temporary lifestyle change. The pursuit of any goal requires sacrifices, but they don’t have to be painful.

Automate Your Saving

The easiest way to start saving is to make saving a habit. Luckily there are plenty of tools available to help you along the way. Here are a few tech-savvy savings tools:

1. The savings app Acorns is a great place to get started. Acorns takes your debit purchases and rounds them up to the next dollar and invests that change into a diversified portfolio. There is a $1 a month fee to use the app. You can set up your deductions to be daily, weekly or monthly. This app is not backed by FDIC, so stock market changes could reflect on your money saved.
2. The app Digit does the thinking for you and takes the guesswork out of saving. The app looks at your current income and spending habits, then calculates what you can save and puts the amounts in and FDIC-insured Digit account. This app is a smart app, which means it re-analyzes your spending and saving a few times a week. This app also gives you the ability to earn a 1% savings bonus every three months. There is a monthly fee of $2.99 that comes into effect after the first 100-day free trial period ends.
3. If you want to learn about saving while saving there is an app to the rescue! Qapital is very similar to Acorns in that it saves money rounded up from transactions you make from your checking account. The difference with Qaptial is that it provides you with lessons on goal-setting for saving. Qapital, however, does not invest your money, so the amounts stay stagnant in an FDIC-insured account. There are no fees, and your money may qualify for small interest earning depending on the amount saved.

Re-evaluate Your Subscriptions

If you take a look through your bank account transactions, you may see small charges you didn’t notice. Magazine subscriptions, paid for apps, and online accounts like LinkedIn Premium could be costing you. These costs aren’t outrageous but can add up quickly when you have multiple services pulling money away from your account. Run through your account transaction history and unsubscribe to these companies that are charging you for services you may not need or haven’t even used in a while.

Ditch the Cable Plan

Cable packages can have over 300 channels, and you maybe watch 10 of them. Of the 10 channels you watch, half of them could be found on a streaming service like Netflix or Hulu. Cable bills on average are $120 a month for basic packages. Depending on your package you could be spending nearly $1,400 a year on cable. If you already have Netflix or Hulu, which who doesn’t, you’re only spending on average $144 a year for streaming. A cheaper alternative to cable is Amazon Prime. The service is only $99 a year, and on top of free two-day shipping you get access to a vast library of free videos, movies and television shows. Ditching cable and going to streaming services could help you save almost $1,000 a year.

Lifestyle Switch

This is probably the most uncomfortable piece of advice you can hear when trying to save money. Humans are creatures of comfort and habit, and we like to do things our way. Changing your day-to-day operations may take some getting used to, but it can definingly help you save.

We are not saying you need to cut down to eating just PB&J sandwiches and Ramen Noodles but cutting back on food expenses is a great way to start saving. The Bureau of Labor Statistics estimated that on average Americans spent $3,008 per person on going out to eat or ordering takeout in 2017. This is an average of $62 a week. If you cut out going out to eat, or at least significantly cut back, you can take the money you would have spent and invest it into a savings account or stock portfolio.

After food expenses entertainment spending causes a significant gouge in your savings. Going to concerts, heading out to the movies, and wallet emptying shopping trips are also stalling you down payment savings. You don’t have to become a hermit to save up but making some minor changes can really add up. Instead of going out to the movies and paying the inflated ticket prices, head over to a Redbox and rent a movie for much less.

These lifestyle changes don’t have to uproot your entire way of living. Small changes in the way you spend will pay off in the long run.

The Numbers

We did some calculating in our office with numbers from our own personal spending habits. Using all the tricks and tips mentioned in this article, we found that we could save roughly $4,205 a year per person.

Saving for your down payment can be stressful and exciting all at once, so take it slow and do what works best for you and your situation. It will all be worth it when the keys to your new home are in your hands and you walk through the front door, your front door, for the first time.