Whether you've settled into a tiny urban studio or a quaint rental house, renting can be an appealing short-term option for many. However, most renters daydream about that perfect home that they can enjoy for years. In fact, two-third of those surveyed in a Wells Fargo survey reported that home ownership was seen as a major goal in life. What's stopping the average renter from packing up and moving into that dream home? Cost. But with a little planning, nearly anyone can save up a great down payment. Find out how to save for a new home while paying rent!
Eliminate Your Debts
First things first: Do you have any credit card debt? It's difficult to move into your future investments without settling your past debts. Though you may feel like you are two steps behind while sinking money into your credit card bills, this is actually a huge step forward. Credit card debt typically carries a high interest rate, which can put a major damper on your funds. If you eliminate this source, you'll free up quite a bit more money to shift into your savings account. Also, a debt-free slate will make you much more attractive to potential lenders. It's hard to secure a great rate for a mortgage with a low credit score or high debt-to-income ratio. Put your best foot forward and take care of your debt sooner rather than later!
Utilize Your Raises
The next time you score that big promotion, use the pay bump as an easy way to save up for that down payment. Let's say you receive an extra $1,000 per year after your last evaluation. Rather than using your extra income for extra gadgets and goods, consider moving that sum directly to savings. You'll still live comfortably off of your old salary as usual, while growing your house fund month by month. What if you haven't gotten a raise? Don't be afraid to ask for one. Just be sure to do the research on average salaries to show that you mean business.
Save Your Refund
Do you have any plans for your tax refund? You may want to hold off on that shopping spree or weekend getaway. If you get a big refund, send it directly into your savings account to get one step closer to your new house. However, you may also want to double check with HR. You may want to file a new W-4 to file for extra allowances or withhold less money. That can lead to a bigger paycheck each month, and a faster route to your down payment.
Examine Your Lifestyle
Be honest with yourself: Could you afford to cut down on your monthly spending? It's easy to let the membership fees, take-out bills, and other luxury costs creep up and up. Here are some areas where you could potentially cut back:
- Drop recurring services, like gym memberships and streaming entertainment.
- Switch to a bank that offers free checking accounts.
- Cut commuting costs with public transportation or work-from-home options.
- Switch cell phone carriers to reduce your bill.
- Get a roommate or sublease your apartment to cut rent costs.
- Consider a title loan to free up extra cash quickly.