A lot of the time the biggest thing standing between renters and their dream of owning a home, is the downpayment. No matter how hard they try, they can’t seem to save enough money. Does a down payment on your first home feel out of reach? We’ve got some saving ideas and tips!
Pay off your credit cards
Paying down high interest debt can be a life saver in the process of eventually saving for a down payment on your first home. With credit card debt, the accumulating interest charges make it hard to fully wipe it out. Pay off the credit card with the highest interest rate first. Then focus your efforts on the card with the second highest interest rate. This method is called the avalanche method and will save you the most money long term.
It may sound counterintuitive to pay off debt when you’re trying to save money for something else, but we promise, it’s a good idea! Think of all the money you won’t be paying in interest rates that you can put straight into savings.
Tap your IRA
Tax laws allow first time home buyers to withdraw up to $10,000 in IRA funds to buy their first home without penalty. If you are married and both first time home buyers, each party should be able to pull from their retirement account, potentially doubling that number. And technically it doesn’t even need to be your very first home! As long as you or your spouse did not own a principal residence three years prior to purchasing the new home, you should be fine.
Look for lost money
The U.S. Department of Treasury says that there are about $23.8 billion worth of matured savings bonds that remain unredeemed. Check for old bonds. Even check old bank accounts for extra cash. Or check the National Association of Unclaimed Property Administrators for missing money.
Set up an automated savings plan
Set up something that pulls out of your paycheck every month. The idea is to make the savings automatic and invisible. In theory, if the money is pulled out before you see the paycheck, you won’t miss it as much! There are some amazing savings apps that do all of the work for you. Check out The Best Automatic Savings (and Investing) Apps of 2018
Save that tax return
It can be tempting to spend your tax return on truly ANYTHING else, but save it. According to the IRS, the federal tax refund is many times the largest check people receive yearly. Which makes it a great opportunity to start saving. You are able to divide your refund into two or three different accounts. Request that they directly deposit your return into a special account so that you won’t touch it. A few years of saving your tax returns could leave you with a nice sum of money for a down payment!