So, you’re ready to buy a new home; that’s exciting! Now’s the time to start saving for your down payment and moving expenses, here’s a few tips and tricks that will fill your piggy bank.
Every great plan starts with a tangible goal in mind. The first thing you need to do is determine just how much of a down payment you’ll need. An experienced mortgage professional will be able to discuss options and determine not only the loan size you can afford, but also how much you can afford to put down on a home. Even if you’re choosing a Wisconsin FHA mortgage with only 3.5% down, that’s still more than many of us have tucked in our savings accounts. You’ll still need a bit of money stashed away even if you qualify for a Wisconsin VA or USDA home loan with no down payment and minimal closing costs. There’s generally a cost associated with any move; packing materials, professional movers or truck rental. Even if you have friends or family helping, there’s generally the expense of at least feeding them. On top of the actual cost of moving, there are all those other little items on your wish list; new window coverings, paint, new carpet, new furniture to fill a larger space, maybe new appliances, small repairs or updates, and landscaping to mention a few. Saving money for the expected and the unexpected is not only smart, but it can be surprisingly simple.
Saving money for a short term goal like a down payment is different than saving for a long term goal such as retirement. You won’t be able to invest your money and watch it grow over time; instead you’ll need to reduce spending or increase income, or both. Anything you save for your down payment or moving expenses should go directly into a savings account; you may even want to open a separate account. This prevents you from spending the money you’re working so hard to save, but it’s also a great way to track your progress. Reaching any goal is easier when you can actually track the progress your making. So here are some tips to saving up for your exciting new purchase.
Reduce your monthly expenses like cable, phone, gym membership, satellite radio, subscriptions, insurance and even utilities.
- Check around for lower rates on all of your monthly bills, your current provider may also be willing to drop your monthly rates if you tell them you found a better deal somewhere else.
- Discontinue monthly memberships all together such as; the gym, cable, Netflix or satellite radio.
- Reduce utility bills by conserving energy. Change your thermostat a few degrees and be sure you turn off all electronics not in use.
Figure out exactly how much you’re saving each month by comparing previous months and put the difference directly into your savings account every month. In other words, if you cancel your gym membership ($40/month) and your cable ($30/month) and you reduce your car insurance by $10/month and your current electric bill is $10 less than the previous month, you should put $90 into your savings account this month.
Garage sales are a great way to get ready for moving and gain some income. Try to get in on neighborhood sales which will draw a bigger crowd. Big ticket items can easily be sold on Facebook or Craig’s List with little effort and no cost. Deposit all your profits right into savings. It’s also a great way to avoid moving all those items you never use!
Pack your lunch everyday rather than getting takeout or going out to lunch. Or possibly you enjoy a cup of coffee from your favorite barista, but foregoing this little luxury can add up to a nice little savings. Say you’re spending an average of $3.00/day on coffee, that adds up to $90.00/month or more than $1,000/year. Avoiding eating out can be a great way to save money. Add up what you generally spend eating/drinking out in one month and put that amount into your savings account instead. For example, you normally get takeout for lunch 3 times a week averaging $10/day and you go out to dinner once a week and spend about $30; that adds up to $240/month you can now put into savings.
Part-time work or temporary work is a great way to plump up your savings account. It’s usually pretty easy to find part-time retail or food service work, but you could also drive taxi, babysit or walk dogs to temporarily boost your income. Deposit 100% of your additional income into your savings account to reach your savings goal.
Refinance current debts such as your auto loan or credit cards. Taking advantage of low/no interest deals is a good way to lower monthly payments. Let’s say you’re paying $400/month on your car payment, $200/month on your credit card, $100/month on one store credit card and $50/month on another store credit card; you might be able save $200/month or more. Your auto lender may be able to increase the term on your loan, reducing your monthly payment to $300/month. If you’re able to transfer all of your store cards to a credit card offering 0% interest on balance transfers, saving you $100/month or more.
Always check with your mortgage advisor, though, if you’ve applied for a home loan or are planning to apply soon. Any changes to your credit (good or bad) can impact your ability to secure a home loan.