How to Save for a Down Payment Even when you Live Paycheck-to-Paycheck

You’ve mastered your finances, living paycheck-to-paycheck, but now you’ve decided it’s time to buy a house. How will you ever save when you just get by with what you spend now?

Fortunately, there are ways to save even when you think you can’t. Here are our favorite ways.

Look at Your Spending

Yes, saving requires you to budget. But don’t let that discourage you. Remember your reason – buying a house! It’s one of the largest and most exciting investments in your lifetime.

Pull out your bank statements from the last 3 months. Include your credit card statements too. Look at what you spend. Write it down and categorize it. You’ll likely find that you spend a lot more than you realize.

Go through your list and cross off what you can eliminate. Look for things like:

• Unnecessary subscriptions and memberships
• High cell phone bills
• Excessive entertainment or dining out
• Bank fees
• High credit card APRs
• High insurance premiums

Some of these changes take some work. For example, to get a lower credit card APR, you’ll need to call your credit card company and ask for a lower rate. If they say ‘no,’ shop for a balance transfer credit card with a lower APR.

Cell phone bills and insurance premiums require some legwork too. Shopping around for lower rates is something you should do annually anyway, but it’s a great way to save money.

Any money you save, put aside in a high-yield savings account. You can find great options online which is even better – out of sight, out of mind.

Pay Yourself First

When do you normally save money? Do you wait until the end of the month to see how much money you have left?

Don’t worry, you aren’t alone, but this doesn’t help your savings account.

Instead, pay yourself first. Make savings a line item in your budget and automate the transfer. Set up an automatic deposit with your bank or direct deposit with your employer. Figure out how much of your income you can save each month and set it up.

Automation makes it much easier to reach your goal. There are no excuses and if you put the money in an account you can’t easily access, it should grow.

Meal Prep and Use Coupons

How many times a week do you run through the drive-thru because it’s ‘easier'? It may be convenient, but it’s expensive, not to mention bad for your health.

Instead, pick a day each week to meal prep. Whether you actually prepare the meals, or you create a meal plan, you’ll be less tempted to eat out.

Not dining out saves money, but you can take it a step further by using coupons and shopping sales. Create your weekly menu based on the week’s sales. Buy products you use often in bulk when they are on sale and use coupons as often as you can.

Make it a game – see how much money you can save on your grocery bill. Whatever you save, put away for your down payment.

Don’t buy What you Don’t Need

Impulse buying is one of the worst ways to waste money. For starters, shop with a list and stick to it. If impulse buys come up, set a 48-hour rule with yourself.

Step away from the purchase for at least 2 days. Chances are that you’ll forget about it at that time or decide you don’t need it. If you are still thinking about it after 48 hours, check your budget and see if it fits.

If you can’t buy it in cash – don’t buy it. This should free up more money to save for your down payment.

Live a Cash Lifestyle

It’s so tempting to swipe a credit card to make a purchase, but don’t do it. In fact, while you’re saving for a down payment, put your credit cards away.

Only buy what you can afford. If you can’t pay it in cash, you don’t need it or need to find a way to save for it.

When you use credit cards, not only do you live beyond your means, but you pay much more for the purchases because the interest charges add up. A $50 purchase could turn into $100 or more before you realize it.

Start a Side Gig

Once you cut down your expenses as much as possible, it’s time to think about increasing your income.

Starting a side gig is one of the best ways. Using the internet, there are hundreds of side gigs to start, such as freelance writing, website design, video creation, affiliate marketing, and voice-overs.

If you prefer something more hands-on or in-person, think about pet sitting, house sitting, cutting lawns, doing handy work, or running errands.

Any money you make working your side gig, immediately set aside for your down payment. The funds will add up much quicker, especially when you combine your side gig cash with any cash you saved by cutting your expenses.

How Much do you Need for a Down Payment?

Today you don’t need as large of a down payment as most people think. 20 percent isn’t the norm any longer.

In most cases, you can get by with a 3 or 3.5 percent down payment, so $3,000 - $3,500 for every $100,000. That’s not a lot to save especially when you put your efforts into high gear.

Once you have your finances in order and you’re able to get approved for a mortgage, you’re well on your way to owning your first home before you ever thought it would be possible.

For more information on how you can be a homeowner in less than a year, contact our office at any time. We are experts in Southern Maryland homes and real estate and would love to help get you into a home today!