What I hope will be a series of posts, today we’ll walk you through buying a home from start to finish. There are a lot of things to consider when purchasing a home, and the process can be less than intuitive for first time buyers. Although we live in the city, these steps are largely the same for most buyers in the US, whether you live in the country or city. Throughout the series I’ll be sharing tips, tricks and the tribulations we experience while looking for our first home.
Step 1-Save a Down Payment:
Saving such a large amount of money can sometimes seem daunting, especially on a modest salary. A few friends have asked me what’s the, “secret” to saving a down payment when you’re on a tight budget? So far, I’ve come to the conclusion that there’s no real “secret”…just sacrifice. Most people already know that the key to to saving for a big purchase later, is being able to delay instant gratification, now. This may sound easy in theory, but in practice it’s much more difficult then it sounds (which is why most of us don’t do it!).
Simply put, when I’m starting to feel frustrated or deprived, I remind myself that cutting back on little luxuries now, means a more financially sound future later. And that’s a “sacrifice” I’m definitely willing to make.
Here are a few of the things we’re doing to save money for our down payment:
Pay Yourself First: Since I paid off the remainder of my student loan debt last year, I’ve been budgeting/saving $1500 per month for a down payment on a house, using the pay yourself first principle. The “pay yourself first” principle simply means that I’m treating my savings the same way I’d treat a bill. Each month I know that I “owe” $1500 to the down payment fund, and I have that $1500 auto-debited from my checking account to an online savings account that we’ve named the “house down payment fund”. I like using the pay yourself first principle because the money is automatically debited and I don’t have to think about it. You pay all of your other bills each month, so make sure you’re paying yourself first!
Save Everything Extra: Any “extra money” that we receive goes directly into the “down payment fund”. From Christmas and birthday money, to rebate checks and bonuses at work. Any money that comes into the household that isn’t part of our regular paychecks goes directly into the fund. You wouldn’t think that this money would amount to much, but it actually adds up much quicker then you’d think. And since this money hasn’t already been budgeted for expenses, we don’t need it or miss it.
Work More: OK, so most people don’t get excited about working more, I get that. But when you’re saving for something you really want, working more doesn’t feel so bad. I’ve been trying to pick up more customers at my dog walking/pet sitting business and have been writing content and articles for several online publishers. It’s usually an extra $20 bucks here and there, but if I can make an extra $20 a day Monday-Friday, I’m making/saving an extra $400 a month.
Sell Stuff: If your house is anything like ours, it’s filled with things you don’t need/want. Sell it! A couple of times a month I try to sell some of the things we no longer need or want on Craigslist or E-bay. You’d be surprised at how many things you have to sell that other people want. I’ve sold everything from my grad school furniture and books, to used clothing and shoes, to gifts we’ve received that aren’t our style (those gifts won’t be named to protect the identity of the seller and the feelings of the gift givers). Of course, eventually you’ll run out of things to sell, but until then…sell away!
Keep a Separate Account: Our down payment fund is in a separate online savings account that we use solely for saving for our down payment. That way we know exactly how much money we have saved, and are less likely to dip into the account accidentally for other expenses. The account doesn’t earn much interest, but since we plan to buy something sooner then later, we don’t want our money tied up in a CD or mutual fund. If you’re saving for a longer period of time, you might want to look into options that will pay you more interest.
Shop Online; There is no doubt that if you want your money to go further the best deals available are to be found online. Whether you are after fashion items, something like animal hatsor wild hats, or you want to hire a cleaning service. The best place to research prices and then ultimately buy is via the internet.
Do you have a house? How’d you save for a down payment? Are you saving now, how’s it going?