Saving for a down payment can be a challenge for anyone, but especially someone trying to purchase their first home. However, with thoughtful planning and preparation, first-time buyers can make the dream a reality.
If you’re looking to break into the housing market, here are a few simple ways to cut back on costs and grow your nest egg – perhaps even faster than you anticipated.
Audit Your Expenses
Forgotten expenditures can add up quickly, so be sure to audit all of your expenses to understand exactly where your money is going each month. Budgeting apps like Mint make this easy by allowing you to track your spending and manage all of your accounts in one place. You can even get notified when there’s an increase in your subscription costs, which is often overlooked. Whether or not you use a budgeting app, take the time to identify what subscriptions, streaming services, memberships, or other expenses can be eliminated or scaled back.
Park Your Money in a High-Yield Savings Account
While higher interest rates make it more expensive to borrow money, there are some upsides for savers. In fact, you can reach your financial goals faster with the help of a high-yield savings account, which offers a higher return than traditional savings accounts and earns compound interest. Currently a number of banks offer an annual percentage yield (APY) in the 4% to 5% range, which is significantly higher than the national average of around 0.45%. Keep in mind there may be minimum balance requirements or other conditions that you must meet in order to get a bank’s advertised rate (which can change at any time), so be sure to read the fine print or consult a financial advisor.
Ever gone to the grocery store to buy a few essentials and left with a cart full of items? We’ve all been there. Before you run errands, make a shopping list (and stick to it!) to avoid impulse purchases. Meanwhile, look for sales and discounts in stores and on websites and promotional emails. Holiday weekends are usually a great time to shop for furniture and other big-ticket items, while clothing prices are slashed at the end of each season.
Clean Up and Cash In
Declutter your home and make some extra cash by selling items you no longer need, from clothing and electronics to furniture and collectibles. Poshmark and ThredUP are two popular online marketplaces where you can buy and sell secondhand apparel, shoes, and accessories. This could be a great opportunity because the secondhand apparel market is booming, according to a recent report from ThredUP. Additionally, platforms like eBay, Craigslist, NextDoor, and Facebook Marketplace provide another easy way to sell any of your unwanted items that might be another person’s treasure.
Dine In (or Dine Wisely)
Examine how much you’re dining out, getting takeout, or grabbing coffee each week, as these expenses can also add up. If you’re still looking to enjoy the occasional night out, consider signing up for restaurant loyalty programs that will start saving you money after a few visits. For example, Chicago-based Lettuce Entertain You offers one point for every dollar spent at one of their participating restaurants, giving customers $10 in reward dollars for every 150 points earned. Of course, you can also cut back on your bill by taking advantage of restaurant specials like happy hour deals.
There’s no shame in asking for help, and there’s plenty out there for first-time buyers who need assistance coming up with funds for a down payment. Most state and municipal governments offer down payment assistance programs to first-time buyers, with some programs offering up to 5% or more of the home’s sale price as a grant or loan. Ask your mortgage lender what programs are offered in your area.