January 19th, 2020 10:50 AM by Jackie A. Graves
Buying your first home can seem like an insurmountable goal,
especially if your expenses are already high. Pricey rent, not to mention car
payments, insurance, utilities, groceries, and all the other realities of life,
can make it hard to save.
Many renters assume they’ll never be able to buy a house for
this reason. They spend so much money month to month, there is little or
nothing to put away. And the idea of coming up with tens of thousands of
dollars for a down payment seems impossible.
But here’s the reality: The current national median home price
is $257,000, and 3.5% of that—the minimum amount needed for an FHA loan—is just
under $9,000. Does that seem more doable?
The truth is that there are probably a bunch of cuts you can
make to your current budget to come up with that kind of cash. Here are 20
ideas for 2020.
Do you know how much you spend every month on bills,
necessities, and incidentals? Many people don’t. Having a debit card makes it
easy to spend, spend, spend, and, often, a lot of what is being purchased is
unnecessary, frivolous, and counterintuitive to your goals if you’re looking to
buy a home.
Setting a budget is key. But it has to be a realistic budget so
you can stick to it. We love mint.com,
a free website from the makers of Quickbooks, that can help you set up a budget
and track your spending.
“The average cable or satellite user spends a little over $100 a
month on their TV bill, which means canceling their service could save them
over $1200 annually. But many pay TV defectors will likely be looking for an
alternative way to watch their favorite programs,” said Mental Floss.
“Assuming you're one of the 83 percent of consumers who pays for both TV and
internet, switching to a web-based service shouldn't be too expensive.
An Amazon Prime plan costs $99 a year, a
basic Netflix subscription costs $132, and Hulu costs $96.
Even if you spring for all three choices, you'll still only be paying $327
annually, saving you about $875 if you're a former cable subscriber.”
Go for a run, jump rope, do some planks, or take a fitness class
on YouTube. There are tons of options for home-based fitness that will allow
you to take a break from the gym, and the payments. That $60 a month translates
to $720 a year.
“If you’re already saving for retirement, this might feel really
weird,” said Dave Ramsey.
“After all, Dave normally recommends you start investing 15% of your household income
for retirement right after getting your emergency fund in place. But if you’re
planning on buying a house in the near future, hold off on your retirement
savings and redirect those funds toward your down payment. It’s temporary, so
don’t worry. Once you’re sipping coffee in your new breakfast nook, you can get
right back to that 15% toward your retirement goal. Think of it like this: If
you’re currently investing $500 a month into 401(k)s and IRAs, and instead, you
put that toward your down payment savings, you could save around $12,000 in two
years. That’s a big boost to your savings timeline!”
This has been a hotly contested topic, with many financial
experts insisting that millennials are throwing their money away on expensive
coffee drinks and millennials countering that they should be able to spend
their money any way they want. Shawn M. Carter wrote about this topic for CNBC and
admitted that he had spent $2,300 at Starbucks in one year!
Save hundreds of dollars per month with a few dry cleaning
tricks. “There is a difference between ‘dry clean’ and ‘dry clean only,”
said Capitol Hill
Style. “As The Laundress explains,
many items labeled ‘dry clean’ can actually be machine washed on gentle or
hand-washed. So when looking at clothes, check the tag: Is it dry clean or dry
clean only? To lengthen the time between cleanings, you need a steamer. A
steamer smooths out wrinkles and refreshes clothes. And since hot steam kills
bacteria, it can prevent clothes from smelling. This $20 steamer from
Secura is well-reviewed.”
Simply switching from name brands to generics at the grocery
stereo can save you $160 per month, per Dave Ramsey.
According to meal planning service Wellio,
“You can save around $16 per meal by cooking at home,” said MyDomaine.
“That means if you cook just one meal at home a week that you would normally
buy from a restaurant, you could save $832 a year.” Extrapolate those savings
out over multiple nights and you could have your down payment in no time!
Imagine all the money you could save if you were also bringing
your lunch to work! Even if you just weave in a day or two a week, you could
save $150 a month or more.
We all get mailers that have coupons for local restaurants, but
how many of us actually use them? If you are going to go out for a meal, use
that buy one entree, get one free offer.
You could be throwing away money on credit card rates that are
higher than they should be. LendingTree has
a great breakdown of the best options, hitting on interest rates, rewards
programs, and other important details.
Savings those credit card points for a vacation? Check to see if
your points are redeemable for cash. If not, they may be able to be turned into
gift cards, which you could use for daily spending, which would free up that
money for your savings.
That $30 per week may just put you over the top, or at least
help pay for your closing costs.
Serious savings sometimes calls for sacrifice. Will $200–300 per
month make a difference to your savings? We’re betting the answer is, “Yes.”
You can save money by lowering the temp by a few degrees in the
winter and raising it in the summer. According to the U.S. Department
of Energy, the savings can add up to 10% per year “by simply turning
your thermostat back 7°-10°F for 8 hours a day from its normal setting. The
percentage of savings from setback is greater for buildings in milder climates
than for those in more severe climates. You can easily save energy in the
winter by setting the thermostat to 68°F while you're awake and setting it
lower while you're asleep or away from home. In the summer, you can follow the
same strategy with central air conditioning by keeping your house warmer than
normal when you are away, and setting the thermostat to 78°F (26°C) only when
you are at home and need cooling.”
Buying in bulk can save you money, but those savings may
evaporate if you end up letting all the food you bought spoil. Shop your Costco
list with a friend and split up the apples and avocados, and the toilet paper
and paper towels, too. You can save hundreds of dollars per year.
There’s a worldwide effort to ditch single-use plastic bottles,
and doing so could help save the planet while saving you money. Get yourself a $25 Brita
filter and stop buying bottled water. You’re looking at a
savings of more than $100 per person, per year, in the household.
If you carry a balance on at least one card every month, you’re
unnecessarily paying interest. Wouldn’t you rather be earning interest instead?
There are plenty of banks that don’t charge monthly fees or ATM
fees. That can save you $25 or more per month, and it all adds up. Ally
continues to get high marks for its online bank account. “This account pays a
modest interest rate and offers free Allpoint ATM uses and up to $10 in monthly
reimbursements for other bank ATM fees,” said The Balance.
“There are no monthly fees, plus no fees for ACH transfers to or from other
banks, no fees for cashier’s checks and no fees for incoming wires. This
account also offers free checks, which come in handy for your landlord or
anyone else who still wants to get paid like it’s the 1990s.”
Another way to lower your footprint and save some money is by
driving to work with a colleague. Rideshare estimates
that, “For a person with a longer than average commute (e.g., more than 12
miles) and carpooling 250 days a year, the potential savings in a two-person
carpool could exceed $1,500!” For even more savings, trade off cars to lower
the wear and tear on your automobile.
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