Buying a home means coming up with a down payment, and coming up with that money can be difficult for homebuyers. A down payment is one of the single largest expenditures that most households ever make. It’s often in the tens of thousands of dollars, and sometimes the equivalent to an annual salary. Here are a few tips to help you come up with a down payment, and hopefully move into the home of your dreams sooner than later.
Identify a goal
When you begin saving, ask yourself: What am I saving for? What size of a down payment am I shooting for? What’s my end goal? Before you begin saving, define what success means to you. As you save money for your down payment, you’ll slowly see yourself moving closer and closer to that goal. That progress will be motivating, and will encourage you to save more as you get closer to buying a home.
Make a budget
If you’re going to save, you need to make a budget. Having a full knowledge of your income and spending habits is step one in having control over your money. If you’re not paying attention to what’s going on with your money, it will get away from you.
One useful trick for saving for a down payment is to make saving a regular line item in your budget. When paying bills, put in a consistent, set amount into the account that you’re using to save for your down payment. Don’t wait until the end of the month to save. Make saving one of the first steps you make when budgeting.
Remember, budgeting doesn’t have to be dismal. Be sure to also include some line items for fun as well. Just because you’re trying to save money, doesn’t mean you have to give up dinners out or shopping trips. Just don’t overdo it. Set limits for yourself, and work within those limits.
Cut back on unnecessary spending
Chances are, there are a few areas in your regular spending patterns where you can cut back. Eating out on a regular basis, for instance, is an easy way to lose money slowly, but steadily. Learning to cook at home and make food that you enjoy, is a good way to avoid sinking money into eating out.
Find out where you’re unnecessarily spending money. Is it at lunch? At the bar? At the coffee shop? Identify areas where you can exert some control over your money, and control it.
Put away windfalls
If you happen to get a windfall like a tax refund, inheritance, or some other large amount of money, your first instinct might be to make a large purchase or go on a shopping spree. Resist the urge to buy a new TV, though. Instead, put that money into your savings account and let it sit there and accrue interest. It will make your goal of buying a home that much more attainable.
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