Hi! My name is Angela and I am the Web Project Manager intern here at Quizzle.
This next year is going to be a big one for me. Not only do I graduate from college, but I am also hoping to buy a house in June and am getting married in October.
In addition to saving for the wedding, my fiancé and I have begun to save for a down payment on our first house. We would like to put down at least 10% (~$10,000). In saving for such a big purchase, we’ve learned a few things that work and a few that don’t. Here are our six best tips for saving money for a down payment:
1. Check your credit report
The first step to buying a house is to understand what other expenses you will incur in addition to the down payment, for example, closing costs.
Check your credit report (you can get a free credit report at Quizzle.com) when you first decide that you are ready for a house, as well as periodically throughout the process.
Get an understanding of what is on your credit report and make a list of the items, if any, that must be taken care of to ensure you will be approved for a home loan. Knowing what items are on your credit report ahead of time can help you manage your money, know what debt you need to pay off and ultimately, save for that down payment.
2. Know your income schedule
Check which weeks of the month have more bills than others so you know when you are able to put money aside for the down payment. Some weeks of the month may not have any bills allowing you to set aside an entire week’s pay. If you get paid on a weekly basis, keep in mind that some months will have 5 paychecks as opposed to 4 paychecks. In these months you can set aside that entire paycheck as most budgets are based on 4 paychecks a month.
3. Create a budget and set goals
Creating a budget will show you how much money you have coming in on a monthly basis compared to how much money you are spending on debt and living expenses. You can create a simple budget using free personal budgeting software from sites like Quizzle.com.
Once your budget is created, look for areas in which you can cut down expenses. For example, my credit cards add an extra $500 to my expenses each month simply because I am carrying balances on them. If I can spend a few months paying off those balances, in the long run I can save $500 a month. Imagine what kind of house you can afford if you have an extra $500 each month for a monthly payment!
Set new goals each month to eliminate certain expenses so you have room in your budget to save for your down payment and later on for our home loan payment. I’ve found that it helps to make a game out of it to see how many expenses I can eliminate each month.
4. Only carry cash
I know it’s sometimes tough to make time to stop at the ATM to get cash, but include it on your way to other errands such as getting gas. If you happen to use your bank card, use it as a debit card and get cash back when you are making other purchases.
By only carrying cash you are less inclined to use your credit cards, allowing you to pay down your debt even faster because you’re not constantly adding to your balance. Set a weekly budget amount – I like to call it my “Miscellaneous Fund” – and take out that much from the ATM each week. If you budget yourself, say, $40 each week and only carry the $40 and no credit/debit cards, you will be more likely to stick within those limits. Any money that I have left over, I add it into the next week’s miscellaneous fund. Some weeks you might have enough money for extras, like going out for dinner.
5. Avoid going out for lunch and dinner
Even though it is really tempting to go out for lunch, it can become costly. Consider this: If you eat out each day at work, 5 days a week, you may be spending an average of $50 a week just on lunch! By simply bringing your lunch, you might only spend $10 each week.
Buy items in bulk such as snacks and water that will last you the entire month. If you always have that urge to eat out, then make it a once a week thing. Treat yourself to a Monday “get the week going” lunch or a Friday “we made it through the week” lunch. This lunch should come out of your miscellaneous fund that I talked about above.
I know that some restaurants are just too good to give up. I love eating out myself and some days I just don’t feel like cooking. But by eating out for dinner, you are more than likely to spend more than you’ve budgeted. What you think might be a $25 dinner, will turn into a $40 dinner after an appetizer and dessert.
By eating dinner at home, the average household can save about $400 per month. If you must eat out then nix an appetizer, order water because it’s FREE, and eat dessert at home.
6. Cut out late night shopping trips
I’ll admit that when I am bored I love to go shopping. It’s probably one of my worst habits. By simply not going to the store unless you need too and skipping the mall all together, you’re less inclined to spend your hard earned dollars. If there is something that you must have, take a look at the budget and see what can be eliminated to help you make your purchase. See shopping as a reward if you eliminate something from your budget; reward yourself for meeting your ultimate goal.
Bonus Tip:
7. Use one bank account
If you are living with your significant other or married, you may want to consider using only one bank account. I have always said that I would never combine my money with my partner, however it just makes sense to do so. My fiancé and I only use one bank account; he has his paychecks direct deposited into my account and we pay all of the bills from my account. Because he is limited to spending what money I give him and I am less inclined to spend money that isn’t really mine, we have seen our money grow faster together than it would have separately. By using one account, it is easier to pay your bills and keep track of your budget.
Budgeting for a down payment isn’t that easy. I know there are times when you must spend that $30 to get your oil changed or $25 on a birthday present; those are occasional purchases. Even if you occasionally spend money you can still watch your bank account grow with the tips listed. I personally don’t see a reason to budget everything I buy, just as long as I keep those occasional purchases to… “occasional.”
Keep in mind these are just 6 tips of many that I have for budgeting and saving. There are a lot of other ways to save money, whether it be for a down payment on a home or some other goal. The key is to always remember your end goal. If you constantly remind yourself of what you are trying to accomplish, you will save money faster than you ever have before.
