How to Save For A Down Payment and Not Sacrifice Your Lifestyle

Having enough money to put up as a down payment can greatly help you get the mortgage you want. You are more likely to get a better interest rate, make your offer to sellers much more appealing, and even skip out on PMI. The trickiest part of having a sufficient down payment is saving up for it. Saving 20% of a home’s purchase price might seem like an impossible task, and could very well take a long time to do.

Don’t lose your cool though; there are plenty of options to save cash for the home you want. Buying a home is just one item on your plate, so throwing every dollar at your down payment isn’t a good idea. Instead of sacrificing your fun, just look for smaller ways to sacrifice that could have a big impact. Saving 20% is more of a marathon than a sprint. It is possible to save while still enjoying life. Here’s how.

Limit your expenses without your limiting your services

Trimming down your costs is the first place to start when you saving for your down payment. Once you find what you can live without, you can take that money you used to spend and start placing it in your savings. Look at everything you can live without and cut it off immediately.

Find out what services you don’t need, like the subscription to a magazine you have, or maybe even cable; call them up and tell them you can’t afford their services anymore and see if they can come down on their price a bit. If they are unwilling to budge, cancel them, you’ll be fine without them.

Match your savings to your discretionary spending

This method can help you keep on track while spending your money carefully. Each time you go spend money for something you want, take the receipt and transfer that amount of money from your checking into your savings.

The way this works, is you are paying for something you want (not necessarily need) and making a matching contribution to your savings account. This is just doubling your efforts to reach your goal, and may make you think twice before buying that new shirt!

The point of this trick is to make you spend money on only what you need.

Change the home-buying timeline

If you want to buy a home immediately, or in three years, that will determine how diligent you save. If you want to be moved into a house fairly soon, you may have to sacrifice your lifestyle and penny-pinch until you have your down payment. There’s nothing wrong with enjoying life and taking your time to obtain the down payment.

The way to determine how much you should budget each month is to look at how much you can willingly save without altering your budget too much.

So if you want to save $50,000, and then take the amount to save divided by however much you can put away each month. If you can save $1,000 a month, then it will take you 50 months to reach your goal.

There are a few ways to increase the monthly supply like investing your money instead of putting it in a savings account. If this is the route you choose, be aware it is with risk.  Talk to a financial adviser on how you can minimize your risk, and which strategies are better for you.

If you don’t mind altering your lifestyle, you can attack the savings by cutting your expenses drastically. Maybe you could even eat beans and rice for a while.

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