Buying a home is likely one of the biggest purchases you will ever make. One key factor to getting the best mortgage rate when purchasing a home is being able to have a sizable chunk of change as your down payment. After all, the higher your down payment, the lower your loan amount! Whether you’re looking to purchase a home in the next year or you’re just starting to think of the possibilities, you’ve probably been thinking about how you’re going to save money for such a large purchase. Well, never fear. NJ Real Estate Geek has put together the best 8 Strategies to Help You Save Money for a Down Payment Fast! 

#1. Make a Budget 

Buying a home is a big financial undertaking. When referring to Strategies to Help You Save for a Down Payment, your budget should always be your starting point! If you don’t already have a monthly budget, make one. A good monthly budget helps you keep track of expenses and manage your monthly income. Additionally, it gives you an idea of any places you may be overspending or places that you can cut costs when trying to reach a savings goal. This can also help hold you financially accountable. 

Whenever anyone asks me about the best strategies to save for a down payment, I always tell them to start with their monthly budget. Laying out your finances in a concrete monthly budget makes all of those numbers coming in and out of bank account(s) tangible. Having the knowledge of what is available to you also gives you more control over your monthly finances. You wouldn’t believe how many times my clients say to me, “Rick, I can’t believe how much we were spending on going out to eat each week!” or “We never realized how much we actually make each month”. 

Trust me. Make a monthly budget and stick with it! Know where your money is going so you have the financial control you need to optimize your savings. There are a lot of posts out there about making monthly budgets. This is my sure-fire method that has proven to work every time- “How to Make a Monthly Budget That Works”. 

Already have a monthly budget? Great! You’re on the right path. Review your budget frequently and make sure it’s up to date. Try to account for as many expenses as possible. The more detailed your budget, the more success you’ll have on Strategy #3! 

#2. Track Your Spending

Tracking your spending is a great habit to get into. This is one of the best Strategies to Help You Save for a Down Payment and doesn’t just help when saving money! It also helps you build financial awareness. Spending habits are called “habits” for a reason. Sometimes, we buy things and we don’t actually realize how much we spend per month on one small luxury. These spending habits become even more crucial when you’re trying to reach a large savings goal like a down payment for a home. By consciously tracking your spending, you become aware of your spending habits. 

Let’s face it- we all make little purchases each week that we barely even think about. Maybe you stop for coffee every morning or you pick up a sweet treat on your way home or maybe even a slice of pizza a couple of times per week for lunch. While these expenses are relatively inexpensive and cost anywhere from $4 to $10 each, spending this amount every day can certainly add up fast!

When you track your spending, you find out exactly how much these little spends add up to each month which in turn will make you much more conscious of your spending habits and more likely to be financially accountable. 

So, how do you track your spending? That’s up to you! You can jot down your purchases in a notebook, make a spreadsheet in excel or google sheets, or even get a free app to track your spending. Whatever method you choose, try to take at least one month where you’re keeping track of every amount you spend. Trust me. You’ll thank me when you’re able to toss an extra $200 in savings each month because you stopped getting Dunkin’ every morning on your way to the office! 

But, I need my coffee! What do I do?

Now, you might be thinking “Rick, that coffee is the only thing that gets me through the day sometimes”. That’s okay! Just because you spend on little things here and there doesn’t mean you need to cut it all out. Tracking your spending isn’t about taking away every little vise you have. It’s about being aware of what you spend and having control of that. 

How much you want to cut out is really up to you and your monthly budget. If you notice that you’re spending more than you need to in a certain area, try cutting back. Instead of stopping for coffee every single day, cut back to maybe 2 or three times per week. You’d be surprised at how much you save from giving up that small amount! 

#3. Cut Costs 

Now that you’ve established good spending habits and created/ reviewed your monthly budget, it’s time to take a good look at the numbers. Trimming your budget is a big part of being able to save a large sum of money fast. Of all the Strategies to Help You Save for a Down Payment, this will by far make the biggest impact. After all, when you establish your budget there are really only 2 ways you can adjust how much you can save. Either you 1.) bring more money in OR 2.) lower your expenses. Cutting costs refers to lowering your expenses. We’re freeing up your income by decreasing what comes out of it. 

First, take a look at your expenses and ask yourself some questions: Are there any places you feel like you’re overspending? Are there some things you can do without having while you’re saving for a down payment? Here are some ideas of places where people commonly trim their budget when trying to reach a savings goal: 

Stop Eating Out 

If you’re busy like my wife and I, take out can be an easy option. Just as with other expenses, this can easily add up. Try to order take out 2 less times per week. 

Pause Subscriptions

If you’re enrolled in subscription services like magazines, newspapers, subscription boxes, or programs, consider pausing them for the time being. With most of these services, this is pretty easy to do and you can resume once you meet your savings goal. 

Take a Break from the Gym

Explore temporary at-home workout options while you’re saving. If you have a membership you don’t use, cancel it! That money will go to better use in your savings account.   

Skip the Drycleaners

Only use the dry cleaners for clothing that is Dry Clean only. Yes, that means you’ll need to do laundry more frequently but you’ll save more in the long run! 

Cut the Vacations 

Everyone needs a break sometimes. However, if you’re looking to save for a down payment fast, cutting your annual vacation may be a quick way to pocket some extra money. Most vacations cost upwards of $3,000 depending on where you go and how you get there. That’s $3k that you can add right to your down payment fund! 

Pro Tip: If you don’t want to cut out your vacation completely, try cutting your vacation budget in half. Maybe go someplace closer or less expensive while you’re working on saving. Adding something extra to your down payment fund is better than nothing! 

Skip the Laundromat

If you don’t have a washer/dryer in your home and you go to a laundromat to do your laundry, see if you have a friend or family member that would let you come over to do your laundry! It might seem like a stretch but as long as you bring your own detergent and some good company, most family and friends won’t mind.   

Go Without Cable

Cable services are not cheap. I don’t know about you, but in our house, we rarely use cable. Most of the time my wife and I are on Hulu or Disney+ watching our favorite shows. Let’s face it- with streaming services, you really don’t need cable anymore. While you’re saving for a down payment, it might be worth it to get rid of your cable! You can always get it back again once you’ve reached your goal.   

Go Longer Between Haircuts

For some, this isn’t an option but if you can, try to cut back on trips to the hair salon or barbershop. If you usually go to the barber for a shave, try to do it on your own at home and save $15. Depending on how frequent you visit the salon or barber, this might end up saving you anything from $50 to $400 per month. 

Pro Tip: If you do need to visit the salon or barbershop frequently, see if there are less expensive services that you can utilize for the time being. Some people will only ever go to one person to cut their hair and if that’s you, it’s okay! This might be one expense you just can’t cut. 

Skip the Nail Salon

Need a manicure? Try to do your nails at home and save the $40 from visits every other week. 

Lower Your Grocery Bill 

Most of us have room in our grocery budget to make a few cuts. Depending on how many people you’re shopping for you can have a grocery budget from $300 to $800 a month. There are a million ways to cut your Grocery Expenses. Some of the best strategies include… 

• • Plan Out Your Meals 
  • Make a Grocery List and Stick to It 
  • Never Shop Hungry 
  • Use Coupons (Digital & Paper) 
  • Buy Generic & Store Brands 
  • Get Cashback with apps like Ibotta & Fetch 
  • Buy Produce from your local Farmers Market 

Use Less Electricity

Cutting your electricity bill is easier than you think! Turning off lights, programing your thermostat, and changing out lightbulbs are all great ways to try and lower that electric bill. For instance, just by switching your light bulbs to LEDs you’ll save energy, use less electricity, and save money on replacing bulbs! That’s a win-win. 

Consider Changing Insurance Companies 

We often get comfortable with our insurance companies. We’ve used them forever, we have some “special” discounts for being loyal, and we think we’re getting a “great” rate. That may be true but, sometimes we don’t realize that we could be getting a better rate someplace else. If you’re looking to cut costs, it might be a good time to get some quotes from other insurance companies. 

A lot of my clients that take my advice on this end up realizing that they were in-fact overpaying for their insurance and end up switching companies. Check it out and see! While you might not “save hundreds by switching to Geico”, you might save quite a bit by switching to a different company. It never hurts to shop around. 

Utilize Free Entertainment Options

How many times have you spent unnecessary money because you’re bored and want something to do? Well, those frequent trips to Target don’t just come with a hefty price tag for no reason… Go to google and check out free things to do in your area. Plan out your weekend ahead of time. You’ll be less likely to impulsively go to stores or to the movies if you have a list of options that are completely free. 

Now that you know some ways to cut costs and trim your budget to help you save money for a down payment fast it’s time to put those extra funds to work with a Savings Plan. Check out this detailed post on “How to Save for a Down Payment” to learn how to make a savings plan that will work for any budget and help you get to your savings goal! 

#4. Pause Your Retirement Savings 

To some, this might seem a little weird, especially if you’ve been saving for retirement since you got your first full-time job. But, if you’re trying to save for a down payment, take a break from contributing to your retirement fund and direct that money to your down payment savings- especially if you’re looking to buy within a year.

If you’re a little sketched out by that recommendation, I get it. Trust me. This is such a temporary lapse in contribution that it won’t make much of a difference long term. Plus, once you own your new home, you can simply resume your contributions and pick up right where you left off. (AND since you now own a home, you’ll have this magical little thing called equity!) 

Pro Tip: Don’t listen to the articles that recommend taking money out of your retirement account to use toward your down payment. This is not a smart idea. When you withdraw funds early from a retirement account, like a 403b or 401k, you get hit with a ton of fees such as taxes and withdrawal penalties. This ultimately hurts your retirement savings more than it benefits you and potentially could cost you thousands of dollars. Definitely not worth it. 

#5. Pick Up a Side-Hustle

This is one of the most common Strategies to Help You Save for a Down Payment because it helps you save quickly by boosting your monthly income. A side hustle is a great way to put a few hundred dollars of expendable cash in your pocket each month. It also doesn’t have to be something that you hate doing! For example, Starting up a side-gig might be a great opportunity for you to put your interests or hobbies to work for you! Here are some great ideas for hustles that you may not have considered: 

• Driving: If you have a reliable vehicle and don’t mind delivering goods or offering up your car to someone needing a ride, see if you wouldn’t mind applying to Uber, Lyft, or Doordash. You get a flexible schedule and extra cash! 
• Teaching: Tutoring jobs are plentiful. Now with the possibility of remote teaching, there are some you don’t even need to leave the couch! Check out companies like VIPKid where you can teach English online to children around the world and Outschool where you can teach enrichment courses online! For many of these, you don’t even need a teaching degree. 
• Pet Sitting: If you love animals, consider pet sitting as your side-gig. Some people need someone to let their animals out during the day or to stay with them while they’re away. So, let your circle know that you’re starting to offer this service or you can use an online service like Rover to score clients. 

#6. Bank Extra Cash

When trying to reach a savings goal fast, any extra cash you get should go directly into your savings. Make a point to deposit that money as soon as possible to avoid the temptation of spending it on frivolous things that you don’t need. For example- let’s say you got $400 in cash between friends and family for your birthday. Take that cash and deposit it directly into your savings account. That’s $400 extra that you weren’t planning on netting that month! 

#7. Sell Stuff

Garage sales, yard sales, craigslist, eBay… the list is endless. If you have extra stuff lying around, don’t just throw it out! The old adage “one man’s trash is another man’s treasure” is even more true in our digital age. In other words, what you might call garbage might be exactly what another person is looking for. Here are some unexpected things that you can make money by selling: 

• Movies
• Textbooks
• College Notes 
• Toys (old and new)
• Games
• Furniture
• Clothing 
• Organizational items (baskets, hangers, containers) 
• Kitchen gear 
• Holiday decorations 
• Office supplies

So if you’ve got unused items around your home, check to see what others are selling for online and get to collecting some extra dough! Not only do you end up cleaning out some unwanted stuff but you also get some extra cash to put into savings. 

#8. Reduce High-Interest Debt 

This probably goes without saying, but when it comes to Strategies to Help You Save for a Down Payment, high-interest debt can come between you and getting approved for a mortgage. Before you start saving for a home, pay off that debt. It will not only improve your chance of getting approved for a mortgage, it will also help you get your best possible interest rate! Not to mention, all of the strategies listed above can be used to save any lump sum of money- not just a down payment! 

The Takeaway 

In conclusion, Saving for a down payment might seem like an uphill battle and in a lot of ways, it is. But, with a few sacrifices, a bit of financial planning, and self-discipline you can certainly streamline the process of saving up such a large sum of money. I hope you use these strategies to help you save money for a down payment fast! 

Thinking about getting buying soon? Contact Me or reach out via Email! 

Which of these Strategies to Help You Save for a Down Payment have you used? Have any more I should add to my list? Let me know in the comments below!