Houses are incredibly expensive, and prices tend to go upwards. The sticker price of a house is daunting to almost any homebuyer. Luckily, there is no need to pay the entire price up front!
While you likely will not need to save hundreds of thousands of dollars before you buy a home, you will still need to do a fair bit of saving. The typical down payment is 20%, meaning most people need to save tens of thousands of dollars before they can buy a home. This is further complicated by the need to pay closing costs when the sale is finalized, which can be thousands more dollars.
Saving this much money is never easy, but there are strategies you can use to make it much more accessible. This post will highlight our 5 favorite strategies for putting extra money away to save for a down payment.
1. Set a Detailed Budget and Follow Through on It
This piece of advice may sound simple, and that is because it is! Setting a budget is a no-brainer when trying to save for a down payment. However, the unfortunate reality is that far too few Americans track their expenses against a detailed budget.
When you set a detailed budget, it is easy to identify areas where you can cut your spending. For example, after a couple of months of tracking expenses, you might see that you spend hundreds more than you thought eating out and grabbing coffee. Once you identify these areas of potential savings, you can easily implement an action plan to reduce your spending.
There are several categories on which people often spend much more money than they think. They include coffee, dining, takeout, gas, subscriptions, and impulse purchases at the grocery store, among other things.
2. Check Your Credit Card and Bank Statements for Unnecessary Recurring Charges
This is the best way to optimize your spending because it comes at no sacrifice to you. While you probably have subscriptions you want to keep, there are likely ones that you have but don’t have any use for. These subscriptions can cost anywhere from a couple of dollars per month to hundreds of dollars per month. All of these savings go straight to your pocket, and you don’t even miss out on any services that you use!
Another idea is to evaluate what subscriptions you have and determine whether or not you can condense any of them into just one. A great example of this is streaming services, as it has become common to subscribe to all of Netflix, Hulu, Disney Plus, Peacock, HBO, and Apple TV+ all at the same time. These subscriptions can cost you as much as $150 per month, and you probably aren’t using them all to their full potential.
If you fall into this category, you might want to see which services you use the most and cancel the others. Or, if you are interested in particular shows on particular services, it might be best to cancel all subscriptions but one while you watch a given show, and then switch providers once you finish that show.
3. Download the Acorn App
Sometimes saving money on your own can be challenging. Luckily, there are several tools to help you save even when it can be difficult! The Acorn app automatically rounds up all of your purchases to the nearest dollar to help you save a few cents here and there throughout your daily life.
While this may sound daunting, the app’s functioning is actually very simple. If you spend $5.50 grabbing a coffee, the app automatically rounds your purchase up to $6. This extra 50¢ is a small amount, but it adds up over time. If you struggle with setting extra money aside, the Acorn app might be the perfect option for you.
This app can easily amount to tens or hundreds of extra dollars saved per month. This money is passively saved and can help you to better structure your budget in your day-to-day life.
4. Open a High-Yield Savings Account
The dawn of technology has brought a new type of bank account: the high-yield savings account. This type of savings account offers interest rates far above traditional savings account interest rates, and they are usually very easy to open.
As brick-and-mortar bank branches have become less common, several banks have doubled down on their digital operations. Since digital operations are much cheaper to run, these banks are able to save much more money. These savings are passed on to account holders in the form of reduced fees and higher interest rates, which means much more money in your pocket as a normal account holder.
One of the biggest issues to address when saving for a down payment is risk. Traditional investment accounts involve a degree of risk, as there is always a chance that they will decrease in value. High-yield savings accounts only ever go up in value, which is a huge advantage when trying to save for a down payment.
These accounts offer much higher interest rates than traditional savings accounts. Opening an account is often free, and this is a very safe way to put money aside before buying a house. Most high-yield savings accounts are insured by the FDIC for up to $250,000.
5. Seek Ways to Earn Extra Money
While finding ways to save money that you already have is always a great idea, there are many ways to seek out extra income, too. Extra income is much easier to come by than many people think. Whether it is mowing lawns or teaching a skill, most people are capable of making some extra cash on the side.
Finding ways to make extra income is a great way to save for a down payment. This money usually exists above your normal budget, which means it can all be saved. These extra savings exists outside of your normal monthly obligations, which can greatly impact the money you have to put towards a down payment.
Thanks for reading our post about ways to save for a down payment. Saving for a down payment can be intimidating, but the steps outlined in this post can help you to get a head start. Tens of thousands of dollars can be difficult to come by, but with enough time, any amount of savings is possible.
If you visit Myrtle Beach or any other place in South Carolina and fall in love, we’re here to help. We at The Boyd Team are committed to helping you find the right property for your needs and dreams. Any question that you have about moving to the area and finding your dream home by the beach is our pleasure to answer. Feel free to send us an email at firstname.lastname@example.org or text or call us at (843) 222-8566, and we will get back to you as soon as we can. Being true natives of the Grand Strand and Horry County and with over 25 years of experience in the local real estate market, whether buying or selling, we can help you make your dreams a reality.
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