How to Save Money to Buy a House
Buying your first home is one of the gold standards of financial independence in America and, for many, a sign of true adult “success.” However, with the average cost of a home over $250K, and even higher in some places, gathering the necessary funds to make the purchase, particularly if you want to put down 20% to avoid private mortgage insurance, or PMI, is more than a little bit intimidating.
However, if you are already in a good position financially (i.e. comfortably making all your monthly payments with savings in the bank) the clear, defined goal of saving up a certain amount of money for a home purchase makes cutting back on spending and making sacrifices a bit more palatable. In fact, there are several creative ways to increase your income and/or reduce your expenses in order to save the money you need for a down payment on your first home.
Creative Ways to Boost Your Income When Saving for a Home
Earning extra money with the sole purpose of using that paycheck to save for a down payment is one of the oldest tricks in the book when it comes to home ownership. However, aside from a weekend gig at the local hardware store or coffee shop, the internet has opened up a plethora of additional income streams that are a bit more flexible, creative, and fun. For example:
- Sell Items on eBay: Not only can you reduce your own clutter this way, once you get good at it, you can ask family and friends if they want you to sell their items too (for a commission) which significantly expands your income pool.
- Capitalize on Craftiness: Turning a hobby such as knitting, woodworking, or design into an income stream is really easy thanks to the popularity of websites like Etsy and Fiverr, which allow crafters and other creative types to sell their homemade creations and services easily. eBay is another great place to sell homemade items.
- Look for Odd Jobs: Sites like Criagslist and Taskrabbit are a hub for local odd jobs that range from buying groceries for older people to putting together furniture to helping people move. These little jobs are low-commitment, and great for people with less time to dedicate to a job or hobby or the less-creative among us.
If you do go the traditional route and opt for a second job, it is a good idea to steer clear of your current career field. Although it may be possible to make more money doing what you know best, it is also easier to burn out, which has more serious long-term impacts on your financial situation. Instead, focus areas of side interest or get a job at a place you regularly patronize, such as the supermarket, which may also have the benefit of offering employee discounts.
Creative Ways to Cut Expenses When Saving for a Home
Cutting expenses is one of the cornerstones of debt management, and one that we discuss frequently here on LRWC. However, when saving for a home, there are some more extreme measures that you can take, since the cutbacks are temporary. Aside from the obvious, like ditching cable and avoiding high-priced daily coffee drinks, there are several more creative ways to cut your expenses in the short term:
- The “No Spending” Challenge: Designate one week per month as a “no spending” week (other than regular bills that come due). During this time, cook at home out of the pantry, plan free activities with friends such as a hike or walk around town, or have a “reading marathon” over the weekend.
- Question Every Line: Take your budget and give it a thorough once-over, challenging and questioning EVERY SINGLE EXPENSE. Clearly, there will be many that you cannot change, but by taking serious stock of what you spend and whether there are more affordable alternatives is the best way to cut expenses down quickly.
- Learn to Negotiate: Price negotiation is not limited to home buying alone. Many Americans fail to capitalize on something that many people around to world do every day – haggling. From monthly subscription services to furniture, there are many areas where simply asking yields lower prices.
Again, just like earning extra income, there are several old reliable methods to cutting your expenses that include everything from downsizing your current home to your car. What sacrifices you are willing to make are personal, but, again, remember that they are temporary.
How to Stay Motivated When Saving for a Home
The prospect of saving tens of thousands of dollars for the purchase of a home is no doubt daunting to many people. However, it is possible as long as you take a measured approach to saving and keep motivated.
One easy way to do this is by setting mini goals rather than looking at the savings process as an “all or nothing” proposition. Break up your savings goals into increments of $5,000 or $10,000 and then allow for a small “splurge” or reward for yourself when you reach each milestone. Use one week’s savings to out to a nice meal, get a spa service, or indulge in a a few gourmet coffees. This way, you not only continue to enjoy the pleasures of life, you feel a sense of accomplishment while you do.
**What creative ways can people use to save money or earn more when trying to build up a down payment?**