How to Save for a Down Payment and become a Homeowner Faster
Home prices and interest rates have rarely been as attractive as they are for home buyers right now. If you are sitting on the sidelines because you’re not saving fast enough for that first down payment, there are steps you can take to help your nest egg grow faster.
“Saving what’s left in your checking account after your monthly bills are paid is simply not a good strategy,” said Maryland accountant Donald Estevez. “In addition, too many so-called savings accounts become nothing more than ‘give-and-take’ accounts, because the money is too easily accessible.”
Estevez offers seven ways to help you save for a down payment more aggressively:
Pay yourself first. Bank 10% of every paycheck before you pay a single bill. Most of us fritter away too much “loose change” every month to save as much as we could—and 10% of every check adds up in a hurry.
Bank online. Most online banks offer better interest rates and fewer fees than brick and mortar banks—and since the money is not quite so easily accessible, you may be more inclined to let it sit there and grow.
Cool it on coffee. Add up what you ‘contribute’ to Starbucks or equivalents and you may be shocked at the final figure. Brew your coffee at home, stuff a few dollars in a piggy bank daily and empty the piggy bank into your online account at the end of every month.
Buy second-hand or online. Instead of searching for that lamp or bookcase downtown, check Craigslist or haunt a few garage sales. While you’re at it, don’t browse bookstores. Try the library, it’s free. (and they have lots of movies, too).
Learn a new skill. Change the oil in your car yourself. Launder more and dry clean less. The more you can learn to do for yourself, the more you will save.
Find extra work. Even if you have a full-time job, you may be able to find a few spare hours. Can you tutor students? Type term papers? Teach piano to beginners?
Make a game of it. How many ways can you think of to save a few extra bucks? Brown-bag your lunch, eat fewer dinners out, quit paying gym fees in favor of a morning run—the list is endless if you put your mind to it. Think about being a homeowner as the prize and your ingenuity may surprise you.