Saving Up For a Down Payment
The process of looking for a new house can be just as taxing on your senses as it is exhilarating. As difficult as that process might be, there are not many more fulfilling things you can do than closing the deal and loading up the moving van. In fact, for some, buying a house is a life’s pursuit. When you’re shopping for houses, one of the best things you can do before signing any contracts is to take your time and save up for a solid down payment, at least 20% of the cost of a house. This will obviously depend on how much money you’re willing to spend on a house and how large of a mortgage you’re able to get approved for.
When looking at your finances and calculating just how much 20% might add up to, that down payment might seem a bit far off. Don’t worry, the Rebound Finance team has a few tips for you so that you can start budgeting, save up enough for your down payment and move in sooner than you’d think.
Having Your Financial Goals
If purchasing your dream home is one of your life’s pursuits, it can be a real downer when you take your finances into consideration and realize that pursuit is further away than you’d like. However, setting up some more reasonable financial goals will get you on the road towards making your down payment. Consider some of the following options:
- Go to your bank and have them start an automatic transfer, either weekly or monthly, from your chequing account to your savings account.
- Stop eating out at restaurants and getting take-out. Eating at home is a good way of saving money here and there.
- Set your sights higher. In other words, make a goal for the amount you save. That way, as soon as you’ve made it, you’ll feel even more fulfilled.
Giving yourself more challenging financial goals, as difficult as they might be to reach, is a good way of forcing yourself to budget properly and make your down payment more obtainable.
Start Making A Budget
Once you have set yourself some reasonable financial goals, it’s a good idea to start budgeting. True, sticking to a tight budget is not always easy or fun, but it’s a good method of teaching yourself about responsibility and personal finance.
First thing’s first, start adding up what you need and don’t need to spend money on. If you’re already living in an apartment on your own, some of your more necessary purchases are going to be:
- Your monthly rent
- The utility bills
- Food/household supplies
- Your cell phone bill
- Transportation costs (car, public transit)
- Paying down debt (credit cards, etc.)
- Savings, RRSP, TFSA, etc.
Adding up all of these expenses should give you a basic idea of what you’re spending on a monthly basis. Once you’ve done this, you can weigh it against your current income and determine what money remains for other purposes. While storing it all away in your savings accounts is not always a realistic option, it’s certainly a good idea to set most of it aside for the future.
Force Yourself to Stay On Track
As we said earlier, it’s not always an easy or entertaining task to make a budget and keep up with it. Saving money for the future is essential, but often not simple. Following your budget takes a lot of time and effort, but if you do, you’ll start to have an idea about what it will be like living as a homeowner. If you’re having trouble staying on track, just remember how awesome it will be to start unloading the moving van into your new home.
Save Up, Just In Case
True, budgeting and saving as much as possible is a top priority. However, another important thing to think about is saving for emergency situations. Unfortunately, it’s hard to expect the unexpected. During the course of your life, things are going to happen that are simply out of your control. So, should one of these situations arise, it’s always good to have a “rainy-day” fund set up to help you out during difficult times. While it can make your down payment saving situation even tougher, setting aside small amounts in an emergency fund is also important.
Make More Money!
When you’re trying to save up for that life’s pursuit of being a homeowner, you’ll likely do anything you can to get there. This means making more money every month. If you’re not making enough at your current employment to afford that down payment, it might be a good idea to find a job that pays more or just find a second job that you can do on nights and weekends. On top of this, you can also try selling stuff that you don’t need through a used goods website. Sell your car and start taking public transit to save on gas. As long as you’re making an effort, it should pay off in the long run.
Remember, buying a house, whether it’s your first home or your seventh is a big responsibility and your finances will be affected significantly. While that down payment might seem like a challenging goal to reach, if you’re really serious about being a homeowner, you’ll find a way to achieve it.