It can be hard to start saving for a new home down payment. Usually the amount needed seems quite large. This can be discouraging. But it doesn’t need to be. Saving for a down payment on a new home is possible with some smart planning.
Regardless of if you’re in your 20s, 30s or 40s, it is always possible to start saving for a new home down payment. It will take at least a year, and possibly several more, to make this a reality, so it is important to understand the commitment involved. If that doesn’t scare you, then it’s time to take the first step towards owning your own home.
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4 steps to start saving for a new home down payment
Step 1 – Create a separate savings account for the down payment
If you’re going to start saving for a new home down payment, this should be done in a separate savings account away from all of your other money. This makes it easy to keep track of and reduces the desire to use the money.
Some people take this a step further and don’t link it to their other bank accounts. This makes it even more difficult to withdraw from. The downside is that you will likely need to make all deposits in person at a local bank branch.
Step 2 – Create and perfect your budget
Money will not magically appear in your new savings account. You will need to have funds to deposit in it each month. This means you need to study all expenditures, figure out how much you have and what can be saved. It is also wise to take an inventory on what you’re spending money on each month.
For example, eating out a lot can take up a bigger chunk of your monthly income than you might realize. If you want to save more for a down payment, it is in your best interest to reduce this. Same thing goes for entertainment expenses. You don’t need to eliminate everything, but if you do cut back a little here and there each month, the faster you can save for a new home.
Step 3 – Use your 13th month pay
Utilizing your 13th month pay can be a great way to start saving for a new home down payment or building on what has already been put away. Of course, you shouldn’t feel as if everything needs to go directly into savings. Instead, find a nice split, something along the lines of 50-50, for the bonus. Half can go towards a new home down payment and the other half you can use to treat yourself.
See more: Better ways to use your 13th month pay
Step 4 – Put up visual reminders of your goal
It is important to not lose sight of your end goal. Saving money is challenging and you can feel as if you are missing out on things you once enjoyed like going out with friends and buying the latest tech gadgets. Be sure to have visual reminders up so you are constantly aware of what you are saving money towards.
If you have a dream home in mind, set it as the background photo on your phone or laptop. You can even go old-fashioned and print out one of those charts to keep track of your savings and how far you’re away from the goal. It may be a little cheesy, but filling it in each month just might give you more inspiration.
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