Saving money for a down payment can be challenging simply because it involves putting money aside for some future use. When you have become accustomed to the pleasure of instant gratification it can be very difficult to say no now so you can say yes later, but take a look at some of the tips below that make saving money for a down payment a whole lot easier.
Determine How Much You Need to Save
The first step should be to figure out how much money you need to save. It is no good to have a vague idea of what you need because for a goal to be effective it needs to be specific. Before you put the first set of money aside you should sit down to figure out how much you really need to have for your down payment. The size of your down payment is of course dependent on what you are saving to buy and your intended price range.
Get Rid of Large Expenses
When you have set your sights on a figure to save the next step is to find ways to channel money towards that goal. One great way is to get rid of a large monthly expense and then put that money into the savings account instead. You may be able to sell a car you are not using or cut your gym membership. This is different for everyone but the important thing is to target an expense that generally takes up a large amount of your monthly disposable income.
Explore Other Ways of Saving Money
If you have found a way to get rid of one large expense you should be motivated to to spend less money and put it towards savings instead. Maybe you can start eating out less, rent DVDs instead of buying them or start monitoring your utility bills. There are lots of ways to trim the fat on even a very tight budget.
Open a Separate Account
If you really want to give saving for a down payment the best chance of success, you should open a separate bank account. This way it is easy to monitor your progress and you will know exactly how much more money you need to reach your target.
Make Saving Automatic
It is easy to spend money you should have put towards your down payment, so to eliminate all possibility of falling behind on your goal you should make saving automatic. Setting up a standing order at your bank doesn’t take much time or effort and it can save you from making spending decisions you are sure to regret.
Make Your Down Payment Work
Finally, you can certainly open a regular bank account to hold the money for your down payment, but these accounts typically do not offer attractive interest terms. Instead of allowing your money to sit idly in a bank account try investing in a short term certificate of deposit for a higher rate of interest and earn some money while you wait to make your purchase.