4 Tips to Save Your Way to a Down Payment for Your First Home
Owning a home has always been part and parcel of living the American dream, and making a sizable down payment can cut the long-term interest expenses of your mortgage dramatically. It might be overwhelming to think about where you're going to come up with the money for that down payment, but we've compiled four highly effective tips to help you achieve the goal of purchasing your first home.
Tip #1: Watch Your Shopping Habits
It's one thing to set aside money for the electricity bill every month and count that among your expenses, but it's another to take out a bunch of credit cards and go into debt for a new pair of shoes or a wardrobe upgrade that you just don't need. Do you know why credit card companies love to offer teaser rates? It's because they count on you not being able to restrain yourself when it comes to managing your personal budget. If you're serious about putting money away for a down payment, then it's time to start treating every dollar you don't spend as another dollar that's there to help you afford your first home.
Tip #2: Boost Your Income With a Second Job or a Side Hustle
Freelance work is in high demand these days, and virtual gig platforms like Upwork and Fiverr let you earn extra money by using skills that you already have. If you're working a standard 40-hour workweek right now, then you have several extra hours in your day to pick up some gig work and boost your monthly income. Think of this extra income as bonus money. It's there to act as a cushion if you need some help affording your down payment, and you can customize your extra earning hours around your primary job. In fact, some people end up quickly earning more from their side hustle than they ever thought possible and replacing their "normal" job in short order.
Don't underestimate the potential of the gig economy. There's a good reason that it's exploded so much in recent years.
Tip #3: Slash Your Expenses
You probably don't need that extra cup of overpriced coffee every month, and it might seem like saving a few dollars a day won't really make a difference for your finances. These little expenses add up, however, and saving money is as much about developing a responsible mindset as it is about getting your balance sheet in order. If you aren't willing to delay a little bit of gratification for long-term financial success, then how much can you really trust yourself to stay disciplined when the numbers get much larger?
When you cut out unnecessary expenses, you're going to be pleasantly surprised at how you magically seem to have more money than you thought whenever you check your bank statements.
Tip #4: Pay Off Your Debts Before You Take On New Liabilities
Unless you're paying for your first home with 100% cash, then you're going to be taking on new debt. If you have existing credit card debt, student loan debt, or other liabilities that are taking a bite out of your income each month, then focus on paying those debts down first to put yourself on more solid financial ground. The interest payments on a credit card, for example, are always going to be much higher than even the highest mortgage rates. By eliminating your interest expenses each month, you'll be able to put more of what you earn towards your down payment and stay out of trouble when you do close on your mortgage.