Saving up to buy a home is a big project. If you plan to put down 20 percent of the home’s value at the start, you’ll most likely need to save tens of thousands of dollars, while paying rent and saving for your other goals.
Since you have your regular expenses to deal with, it might be difficult to find money to save for a home. But, if you’re committed to owning a home sooner rather than later, you can make some adjustments to your lifestyle to help you save money.
Create a Special Home Savings Account
If you haven’t already, open a savings account just for your down payment savings. You don’t want to blend the money you’re setting aside for the down payment and other housing costs with your emergency fund or other savings plans.
Shop around when looking for an account and choose a bank that offers the highest interest possible as well as the lowest fees or even better, no fees. Remember, you aren’t married to your current bank, so feel free to look around for the best deal.
Trim Everyday Expenses
Now you need to find the money to save for a home. If you don’t have any extra money coming in to put aside, you’ll need to find ways to trim your everyday expenses. Here’s a few ideas:
- Cut cable. I’m not going to lecture you about how much you don’t need 1,000 channels. But, if you are looking to cut your expenses, cable is a good place to start. Switch to the most basic package or cut it out completely and sign up for a streaming service such as Netflix or Hulu. Both other packages that let you watch as much as you want for less than $10 per month.
- Adjust your cell phone plan. You might be able to find a cell phone plan that offers what you need for less than you are paying now. For example, I have a plan that costs $60 a month, but could switch to a very similar one that will be around $30 per month. Really think about your plan and only get what you need. Do you need unlimited data each month or would you be better off getting a smaller package?
- Rethink your health insurance. If you’re generally healthy and only see the doctor for preventative health care, you can save each month by switching to a plan with a higher deductible and lower monthly premium. You’ll have to pay more out-of-pocket should you have a medical issue, but you’ll pay less each month as long as you stay in good health.
Save When Shopping
Along with cutting your bills and expenses, another way to save money is to pay more attention to special deals and coupons.
The Shared Wall blog has some great ideas for saving money, from meal planning to visiting the dollar store to decorate your apartment. If you don’t already use coupons, I encourage you to give it a try.
You don’t have to become an extreme couponer, but do try to track down coupons for the items you buy on a regular basis, such as shampoo, body wash, and paper goods.
Along with using coupons, pay attention to the sales at your local grocery store and discount stores such as Target and Wal-Mart.
Since most items go on sale on a regular basis, there’s no reason you should pay the full price for something, especially when your goal is to save money.
Save on Rent
Paying rent each month is probably one of your biggest expenses. If you can find a way to trim your rent, you’ll be on your way to homeownership sooner than you’d think.
Depending on where you live, you might think about moving to a new apartment that has a lower rent.
If you’re in a trendy part of a town, you can move to a slightly less hip area to shave a few hundred off of your monthly rent.
Another option is to move to a bigger place and find a roommate. A 2-bedroom apartment doesn’t usually cost twice as much as 1-bedroom, so you’ll save if you are able to share your space.
You can also try to negotiate with your current landlord, as long as you’ve been a stellar tenant. Good tenants are hard to find and most landlords realize that.
If you’ve been in your place for a while, have made all your payments on time, and haven’t caused significant damage, work with your landlord to get them to lower your rent by a certain amount each month.
If you’re a great tenant, your landlord might be willing to sacrifice $100 or so a month to keep you, rather than take the risk of finding a less-than-ideal tenant.
Kelly Anderson is a financial planner who blogs about financial advice you can use in your everyday life. Connect with her on Twitter, Facebook and Google+.