One of the more difficult aspects of buying a new home is saving for a down payment. Most lenders require at least a 5% down payment on conventional mortgages, and because most people don’t have $10,000 sitting around it takes some effort to save up for a down payment. Here are a few ways to make saving for a down payment a little easier.
Set Intermediate Goals. If your goal down payment is $10,000, put a suspense date on your goal. For example, define your goal like this, “I will save $10,000 in six months for a down payment towards our home.” To make sure you hit the intended target, break that goal down into milestones such as $3,333 in two months, another $3,333 (for a total balance of $6,666) at the four-month mark, and another $3,333 to reach the target amount of $10,000 in six months.
Create a wall chart. I am a visual person. I like to create spreadsheets and graphs and track (to the point of being obsessive) numbers when chasing a financial goal. In the past I’ve created a huge chart with our total debt remaining as a bar graph so I could fill in a little less each month and I paid off the debt.
Use this same idea in reverse. Create a bar graph beginning with the current month and your current savings balance. Increase the bars in future months to see your progress, and go ahead and fill in the bar for your target month with the full goal amount shaded in.
Put savings on autopilot, but take the controls every now and then. Try to automate as much of your savings plan as possible, but occasionally toss in a little extra cash when you receive any “found” money, such as small inheritances, windfalls, bonuses, gifts, etc. We currently have our down payment savings fund on autopilot–$385 each week for the next 26 weeks should yield our intended target savings amount of $10,000 in six months.
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