Thoughts on Saving for a Downpayment

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The idea of saving for a "first" home is daunting for many people that I know because of the dreaded downpayment. I think that's why many people that I know don't even consider moving away from rentals (we live in a HCOL area). If you do have a budget in place and know that you have space to save (or the capability to save), then anything is possible!

Before you start saving for your home, make sure you do have an emergency fund set up that has 3-6 months of living expenses, just in case anything comes up. After you reach that goal, it's time to focus on saving for that downpayment. Here are a few things that I'm doing now to start saving for my first home, that I hope you find these helpful:

1. Understand how much money you need to save for your downpayment by looking at the average costs of homes in your area that fit the size of your family. (Don't go big here - be reasonable). Also, most states have programs that allow you to pay a lower downpayment if you are buying for the first time, so read up on these to learn how best utilize available offers. 

2. Re-examine your budget to see if you have additional areas to save for money. I, for example, am currently saving all my money budgeted for travel, given current circumstances. I have also cut back on miscellaneous expenses (especially Amazon).

3. Set up a special savings account that is not very easily accessible - This will keep you from accessing the money for something else. You want to consider using an account that will give you a relatively high interest rate, if possible. If you need an idea, check out my blog post on Worthy Bonds, to see how you can earn 5% on bonds that are fully liquid.

4. Determine how much you will put away each month and STICK TO IT! Set up an automatic deduction so that you don't even have to think about it and don't stop allocations in lieu of a "fun" expense. 

5. Don't forget to still have fun. Save a bit of money in the budget so that you can still do the things you love. Don't fully deprive yourself - if you do, you're more likely to give up if you make your life too restrictive. 

These are just a few ideas - but let me know what other things you've done to help save for your first home. I'd love to hear any other tips and tricks!

Comments (1)

Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning Christen Thomas - it is important to have a plan like this one and stick to it.

Jan 13, 2021 03:40 AM