There are a number of ways that you can save for a downpayment on a home. But which ones actually work? Here we have put together a list of things that you can do that are proven to be effective in helping you to save for a downpayment on a home. While we focus on that goal, many of these methods can be used to help you reach other financial goals as well. Here are our tips.
Make a choice to Prioritize Your Goal
When you decide to save for something, the reality is that unless you make it an actual priority, you aren’t going to reach your goal. You have to make choices that align with what you are trying to accomplish. Do you go out to eat every day? Do you buy a $5 coffee on your way into work every day? Do you go on expensive vacations? Purchase the latest iPhone? In order to achieve any kind of financial goal, you have to be intentional with your time and money. It is up to you. If you want to save for a downpayment, make the choice and follow through.
If saving for a home is your goal, then you must identify other areas where you can reduce your spending. This will allow you to put more money towards your goal.
Pay Off Your Consumer Debt
The reality is that you can’t effectively save money if you are paying a ton of interest to someone else. That is why, before you start actually saving for your down payment, it is vital that you pay off all of your debts. One provenly effective way to do this is to begin by paying off your smallest debt. This is called the debt snowball method and became famous through financial guru Dave Ramsey. Using this method, you then take all of the money you were throwing at your first debt and roll it into your payment for your second smallest debt. By paying off your debts smallest to largest, you are going to create positive momentum faster, which helps propel you forward in your debt-free journey.
Don’t Increase Your Lifestyle When You Increase Your Income
A lot of the time while trying to save for a downpayment, people will increase their income in some way – be it through asking for a raise at work, getting a second job, selling stuff or working overtime. However, as your income increases, you must remember where that money is supposed to be going. Tip: Try to save any extra commission cheques, try saving bonuses, or tax refunds in your separate savings account.
Use Your Tax-Free Savings Account to Your Advantage
A Tax-Free Savings Account is an often unutilized tool for those trying to reach a financial goal. This is because the money that is saved in a tax-free savings account can grow tax-free. In other words, you won’t have to pay income tax on the money you earn as your account grows in this account. If this is something that you are interested in learning more about, your financial planner or advisor can provide you with more information.
Look for More Cost-Effective Ways to Spend Your Time
One way that financially stable people get or remain there is through creating a lifestyle that contains more cost-effective activities. Here are some great ideas:
- Instead of going clothes shopping on a weekly or, in some cases a daily basis, consider sticking with your current wardrobe for a little longer. Alternatively, purchase clothing that coordinates with items that you already own. This will allow you to get more use out of what you already own, and require you to purchase less.
- As much as we all enjoy going out to eat, the reality is that it costs a lot to do so – especially if you have kids. Start meal planning and base your meals off what you already have and what is on sale.
- Another great option is to look for fun things to do around your community that are free or don’t cost very much. For example, if you enjoy going out to the movies, consider either borrowing a video from the library or checking out what is available on a streaming service that you (likely) already subscribe to.
If you can work some of these into your lifestyle, regardless of how busy you get, you will definitely save money. All that said, it is important to note, however, that the real key to saving money is to stop yourself from spending it on something else. Remember it is about prioritizing what you want most as opposed to what you want right now.
Look into First Homebuyer Programs
The First-Time Home Buyer Incentive is a new program that was established by the Federal government. It is designed to assist first-time homebuyers without adding to their financial burdens. Essentially, eligible first-time homebuyers who have the minimum down payment for an insured mortgage can apply to potentially finance a portion of their real estate purchase through a shared equity mortgage with the Federal government.