When you are paying, with monthly utility payments, car payments, and other expenses on top of that, saving up several thousand dollars for a down payment sounds almost impossible, especially in this economy. Luckily, there are a handful of almost painless ways to set money aside, allowing you to buy a home within a few years, if not sooner. Start by opening a savings account with a high interest rate to put your savings into, and then leave the money in there until you are ready to buy. - Save your tax return. Depending on your living and working situation, this could add up to a considerable chunk of your down payment, especially if you make the commitment to save the whole thing. Set it up so that the money goes in as a direct deposit; if you never see the check or hold the money, it will be easier to save.
- Set up direct deposit for your regular paychecks. Put 10% (or whatever you can afford) straight into your house savings account. Again, what you don’t see, you’ll be less likely to miss.
- As you pay off student loans, car loans, or credit cards (always a good idea before buying a home anyway), keep writing those checks. Instead of going towards your payments, put the amount towards the home. As you are already used to living without that money, you won’t miss it as it builds towards your down payment.
- Draw up a budget plan. Don’t cut out all of your fun money, but try to cut down what expenses you can. Saving $100 a month on groceries, dining out and wasteful spending can add up to an extra $1200 a year. If you can also transfer over to a cheaper cell phone plan, cut down on your cable or satellite costs, and drive less (car pool), you can add even more to that amount. If you aim to cut $50 a week overall, that will add up to a significant $2600 a year.
- Take on a second job. This doesn’t have to be as bad as it sounds. Is there some skill you’ve always wanted to learn, haven’t ever had the chance to learn? Consider this paid education. Learn how to make a perfect pizza, make your lawn extra beautiful (working in a garden store or with a landscaping crew), or consider doing some freelance work. Many department stores offer employee discounts—work in a place that sells furniture or other household items, and you could save a lot when it comes to furnishing your new home.
It’s important to keep motivated. Figure out how much you need to save (aim for 20% of your ideal home price), and make a chart showing your progress. Attend open houses in the area. Being able to visualize yourself owning a home can make skipping your daily latte (in exchange for making coffee at home) less of a sacrifice. It’s not always going to be easy, but with enough commitment, you will be able to buy your first home within a few years.