Claire Rainville's Blog
Saving enough funds for the down payment on your home can be an obstacle for everyone. With general living costs and accumulated debt (Student Loans!), many young couples and professionals don't believe they'll ever save enough to move from being renters to buyers. There are steps you can take to put aside the funds you need for your down payment, but you’ll need to consider your priorities and a serious commitment to your spending and saving strategy.
Take a look at the median house prices in the area you want to buy and set a realistic budget for the price of your new home based on your current income and means. If the average home price is around $275k, then with a standard loan you’ll need about $55,000 for your down payment.
First, open a separate savings account, or designate one of your accounts for the money you’ll put aside. If you can separate your funds from the checking and savings accounts you access on a regular basis, then you'll help yourself refrain from using your down payment savings for other purchases, maintenance, or emergencies that arise.
Second, analyze your spending habits and create a realistic budget based on your current income to help you make strategic spending cuts. There are many free apps, spreadsheet templates, and useful blogs to help you set up and manage your budget. Inquire with your local bank to learn if they offer financial advisory services or can set you up with a partner to help you review your budget—many credit unions provide these services free with membership. Check what your financial institution offers and take advantage of free wisdom!
- Review your memberships and subscriptions. Can you consolidate your streaming services, cancel NFL channels after football season, or join a more affordable gym?
- Instead of going out to eat or to the movies for date-night, set a limited budget for entertainment and take a few extra minutes to discover the many free activities your city has to offer. While making these significant changes, it is essential to allow yourself to continue to have fun times and relieve some of the pressure you're adding to your life—finding more affordable activities and restaurants can help you spread the fun money a little further and still put significant funds aside for your down payment.
- Curb your unnecessary purchases. For some, this is one of the most difficult changes to make. From little convenience store purchases to emotional retail shopping, you’ll have to monitor your habits to catch yourself before you make purchases you don’t need. If you need the energy drink every morning, take the time to stock up when they’re on sale. Find a coffee shop that offers deals or a punch card (at least!). And if you can’t cut all the retail shopping, try limiting yourself to resale stores or clearance outlets to curb spending.
There are many ways to save for your future home. Work with your real estate professional to determine what your loan and down payment requirements might be. Then, get started on your savings plan!
Saving for a down payment on a home is a long process that requires discipline and organization. But we all know that with so many other things going on in our lives it can be hard to spend enough time focusing on your budget.
Fortunately, there are several tools available to soon-to-be homeowners who want to keep track of their spending and make sure they meet their down payment goals. In this article, we’re going to talk about some of the best budgeting apps, websites, and other tools to help you keep yourself accountable so you can be living in your new home as soon as possible.
Why budget for a down payment?
If you’ve saved money in the past for a purchase without a budget you might be wondering why you should go through the effort of creating one now.
However, there are many reasons to have a budget, especially if you’re planning on making an investment as large as a home. Here are just a few:
Keeping an accurate budget will let you know almost exactly how much you can expect to save for a down payment
Budgeting helps you locate and cut out expenses that would be better used in your savings account
Budgeting will give you peace of mind along the road to saving for your down payment
Now that we’ve talked about the importance of making a budget, let’s talk about some of the best ways to get it done.
You Need a Budget, often shortened to YNAB, is one of the most useful tools for learning about and creating a budget. I don’t know about you, but I was never formally taught how to budget in school. But, it would have been a useful class to have!
YNAB combines budgeting tools with educational materials to help you save while you learn more about managing money. It can be easy to feel lost when it comes to learning about personal finance--that’s what makes YNAB so great.
Their basic precept is that you “give every dollar a job,” meaning there won’t be any money in any of your accounts or in your paycheck that doesn’t have a purpose. That doesn’t mean you can’t spend money on yourself every once in awhile, just that you’ll have planned ahead for moments so you can manage them.
You Need A Budget is available for Apple, Android, on Alexa and in your browser.
Saving with your spouse
Planning a budget yourself is complicated as it is. But planning together with a spouse can be even more confusing. However, there are ways to effectively make a family budget to save for a down payment.
First, you should both make sure you have individual budgets to make sure you know how much money from each of your incomes can go into savings. Opening a joint savings account and having a certain percentage of your paycheck direct deposited into that account is a good place to start.
From there, monitor your savings for a month to see if you need to alter this number, and try to stick to your monthly savings goal.