How to Save Money for a Down Payment in Just 2 Years

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Making the switch from home renter to home owner is a challenging shift for pretty much everyone. The hardest part by far is saving enough money for a down payment on your first home. If you are serious about this goal you will make it your number one priority in the upcoming few years to become a home owner. Make it your ultimate goal by dedicating everything you do to support this venture. It will not be easy and you will be required to make some drastic changes in your spending habits. You will need to boost your income as well.

The national median home price is currently still rising. If your goal is to save for a house in two years, you will need to have a 10 percent down payment at least. But how will you be able to reach this goal in just two years? You need to develop a timeline and break up your savings goals to start off. Anna Behnam, an Ameriprise financial adviser in Rockville, Md. Suggests that you should “create an account that will hold only savings designated for your new home. This can help keep you organized and track your progress.”

Big Goals From the Start

If you have made the choice and are fully committed to buying a new home, you need to make some aggressive lifestyle changes. Try moving i with family for a set period of time or try to downsize to a smaller apartment. Simply going from a two bedroom to a one bedroom can save you 20-30 percent on rent depending on where you live. If you have extra space, take on a renter to save more.
If you are truly committed, you need to find new sources of income. A possible lifestyle change is to work overtime if possible or taking on an other job. You find a job doing something that you are interested in outside of your current job. Even consider working at Lowe’s or Home Depot to learn more about home improvement and general home care.
An aggressive saving plan will get you that much closer to your financial goal. Grow your down payment fund by cutting costs where possible and making extra income. You may have to sell your car or trade it in for a more gas efficient one.

Baby Steps for Big Savings

Create a household budget to see where your current income is going each month. You can cut spending on things like new clothing, shoes and other personal things that would be considered “wants” as opposed to “needs”. Sacrifice your morning coffee, your monthly Netflix subscription and even carpool to work to start stacking some money. Pay attention to what you need and what you want. Physical cash is better to use as apposed to virtual money on credit cards.

Critically assess all your spending sources. Do you really need to have a gym membership and go out for entertainment? You still need some pleasure and enjoyment so rather than cutting it all off, try to set a limit for yourself. If you like to go out to restaurants, cut back to one meal a week and have a potluck with friends instead.

Where to Save Your Money

When you are trying to save for a short term goal, financial experts recommend that you stay with a low risk investment like a high-yield savings account. A credit union or an online bank may look like they offer a better interest rate on savings as opposed to most traditional banks.

While it may be tempting to invest your down payment savings for a higher return you should know that there is always a risk that an investment will lose money. The rate of return on your down payment savings is less important than making sure the money is available when you should need it.

These few tips are great for helping you meet any financial obligation whether you wish to buy a house in the near future or later on in life. It will take a lot of self discipline, a drastic lifestyle change and a solid saving plan to achieve your goals but it can be done. Follow these savings tips, be mindful of your spending and live your dreams!