Top 5 great tips to save for a down payment
Do you want to own your own house? Well, who doesn’t? You may not want to buy a house now, but eventually you will. Owning a home is a dream for most people, but only a few manage to get the home they really want. You’re not alone if you’re worried about saving enough money for a down payment. We hope our tips on how to save money will help you get the amount you need for a deposit on the apartment you’ve been looking at.
Your bank will finance almost 80% of the cost of the house/apartment (90% in some cases). The balance is a down payment that you will have to finance yourself. This is a substantial amount for a middle-class family. For example, if your 2 bedroom kitchen costs Rs. 30 Lakhs then your bank would finance up to 24 Lakhs and remaining 6 Lakhs is self financing.
Buying a home is a difficult decision, especially if you are a first time home buyer. You will need professional help to help you get the best homes at the best price. Having enough money in the bank before buying a home will give you confidence and peace of mind when choosing a home. We’re going to share some money-saving tips to help you take control of your finances and save for those daunting debt payments as a down payment.
1. Track your spending and expenses
OK, we admit this is one of the most boring and clichéd money saving tips out there, BUT tracking your spending really does work. There are tons of apps and websites that help you track your spending and keep a running tally of how much you spend on specific items or categories.
This process is an eye opener for many. Sometimes we don’t see the obvious until the app tells us!! You will have to cut back on luxuries and redirect money into savings. Knowing where your money is going is the first step to figuring out how to keep more of it in the bank.
2. Invest in mutual funds – don’t worry, research
Do a simple research on the power of compound interest or the power of compound interest and you will understand why mutual funds are one of the most popular methods of investing these days. Recently, India has seen a sudden increase in the number of people investing in mutual funds. While there are many things to consider before investing in mutual funds, we suggest you start a monthly SIP in an equity fund that matches your risk appetite.
Generally, equity funds are the best because they offer you a high rate of return. These funds are also risky as market fluctuations in these equity funds can be a regular thing, but over a period of time, mutual funds usually offer better returns than bank rate FDs.
Go to a website called valueresearchonline.com and read about mutual funds. The final decision is yours, but we speak from experience – mutual funds offer good returns on investment. There are several SIP calculators that help you plan the exact amount of savings you need every month to reach your down payment within a certain period of time. For example, if you plan to buy a house in 2020, a mutual fund SIP calculator will tell you how much money you need to start saving for a 20% down payment.
This way of investing is not one of the usual money saving tips, but it is a method that helps your money grow.
3. Make a monthly budget and stick to it
Sticking to a monthly budget will be difficult, especially if you are used to a life of indulgences and luxury. Sticking to a strict budget is often not much fun and it’s challenging. Remember, a penny saved is a penny earned. That being said, indulge in the occasional indulgence or two, but treat it as an exception and ALWAYS offset the cost of that exception in other activities. Some belt-tightening is now a minor sacrifice that will be quickly forgotten as you collect the keys to your new home.
4. Start saving early
Have you heard of the saying well begun is half done? One of the major failings of our education system is that we are not taught financial literacy at a young age. They don’t teach us how to save and why to save. We do not know long-term and short-term financial goals.
Although our mothers always insist on saving, most of us lack proper financial literacy. Start saving early, set aside at least 15-20% of your salary savings every month. Start your first job when there are fewer responsibilities. Some people save up to 50% of their savings while they can. Of the many tips to save money, this one is the most effective.
The benefits of starting to save early is that by the time you reach your 30s, you’ll have enough money for a down payment on your house.
5. Look for ways to increase your income
For most of us middle-class salaried people, there is only one source of money (i.e. monthly salary). At most both husband and wife work, so in such cases two sources of money come. The number of ways money goes out is always greater than the number of ways money comes in. Consider your income and expenses as an inverted funnel. Every successful person understands that in order to save money, you need to create additional sources of income.
There are many ways to create an alternative source of money. You can consider starting a blog, YouTube channel or simply affiliate marketing. You can start an online business and make good money if you have done proper research. There are many online videos that you can use to learn about online business.
You don’t need a significant investment to start any of these activities. All you need is a laptop and some time. There is a TedX video on YouTube that says you only need 20 hours to learn a skill to a satisfactory level.
Your budget consists of two parts: money coming in and money going out. You will get the best results if you make improvements on both sides.
Set up a savings bank account for down payment and consider it untouchable. Barring a dire emergency, don’t even entertain the idea of spending any of that money until you’re ready to buy a home. It’s easier to keep your emergency fund out of limits if you set up a separate account dedicated solely to that purpose.
Treat this bank account like a black hole with light going in but nothing coming out.
Here is a video with more money saving tips