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Homeownership seems like a long-lost American dream, but you can make it a reality by putting a cash-saving plan into action. Check out these five ways to save up money for your first home purchase.
If you’re saving cash to buy a home, you need to cut corners. Eating out for lunch and socializing with colleagues at happy hour may appear to be minor costs, but they can add up. In 2015, the average American household spent approximately $3,008 a year on dining out. This same amount can make a significant difference in home sale closing costs, which can average between 2 percent and 5 percent of the home’s price. So, instead of dishing out all of your cash on take-out, consider packing your own lunches and hosting potlucks or “eat-in” pizza nights to keep costs down and cash in your pocket.
With bills that average more than $100 per month, cable is one expense you can cut to save an additional $1,000 plus a year, which you can use toward your closing costs. The evolution of streaming services has made it easier than ever to get rid of cable altogether. If you’re done with being “tied down” to a cable contract or subscription that requires a physical box for channels you don’t even have time to watch, consider a streaming service instead. You can stick with one of the classics, such as Netflix, Amazon Prime or Hulu, or if you must have the channel experience, you can choose from DirecTV or Dish, Sling and YouTube TV. But, if you want to save some serious cash, consider nixing the unnecessary. Besides, there’s a ton of great free content online on YouTube that can easily eat up your time if need be.
That extra vehicle you only drive on the weekend or that DSLR camera that you use only seasonally may be worth selling to save some cash for your future home. Consider getting rid of unnecessary items of value by selling them on Amazon, eBay, Poshmark or other online selling platforms.
As of 2016, the median rent for an unfurnished apartment in the U.S. was $1,478. It’s not easy giving up the luxury of living alone, but if it means you will end up in your dream home in one year instead of three, it may be worth it. Consider cutting back on an expensive apartment or even moving in with a family member or friend to save as much as $18,000 in a year.
If you want to speed up the process of saving for your down payment, you need to get entrepreneurial. You don’t have to (nor should you) quit your job, but you’ll reach your goal of living in your home a lot sooner if you produce some extra income. Creating passive income (income that you earn regularly without contracting or working for someone else) can help you achieve this goal without the stress of holding down a second job. Some passive options include the sale of digital products (such as courses, eBooks or apps), affiliate marketing, rental income and peer-to-peer lending.
Saving for your home doesn’t have to be a far-off dream. If you stash away your money and apply these cash-saving tips, you can make it a reality. Whether you take an aggressive savings approach and cut back on rent and cable or a moderate approach that involves a three- to five-year savings plan, be clear on how much you really need and what you’re comfortable doing without while you’re saving.