“I don’t have enough for a down payment.” If I had a dollar for every time I have heard that, I would have a down payment! And guess what? Almost all of the people who have said that to me are home owners now.
Real estate has changed. You no longer need 20% down before you can even think about buying a home. There are programs out there with as little as 3% down needed, and even some with zero. No, they are not those “bad” loans we remember from years ago. These are legitimate programs from legitimate lenders. Sound too good to be true? It isn’t. But, if you are one of those that wants to go the traditional route to home ownership, saving for a down payment isn’t what it used to be either.
Let’s use $500,000.00 as a purchase price as an example. We know prices can be higher than that, especially in southern California, but there are many areas where you can buy a very nice home for much less than that, so for the sake of this example, we will use that number. $500,000.00 x .03 (3%) = $15,000.00, which means you will need $15,000.00 for a down payment.
Great! Now, how do you get there?
We all know your savings is not going to grow by leaps and bounds like it might have 30 years ago. All this means is that you will need to make little sacrifices. Let’s start with your Starbucks habit. At an average cost of $4.50/drink, that is almost $1500.00 in one year. I lost you, didn’t I? Don’t want to go the next sixty years without coffee? I don’t blame you. I don’t want to go the next sixty minutes without it, so I wouldn’t expect you to. That is okay though, there are other ways to save that you may not have thought of.
• Cable – at almost $300/month now, cutting out cable television could save you $3600.00 in one year.
• Coffee outside the home – If you make coffee at home, you will spend an average of $15/week, assuming you buy good beans and creamer of some sort. Compare that to the $30.00 for your daily latte, and you are saving another $750.00 in one year. Also, let’s be real here…we know some days there is more than one latte, so lets bump that up to $1000.00
• Cancel the lawn service and the cleaning lady. You can do anything for one year. After that, go back to it, but cleaning your own house and mowing your own lawn will save you $6000.00 in one year. Yes, really.
• Razor blades – this is a ridiculous expense. You can spend $60 or more on one month on razor blades. Sign up for Dollar Shave Club instead. You can get a razor and good blades for as little as $3/month. If you have to have the best, the Executive razor and blades is only $9/month. That is $600.00 in one year.
These things alone are $11,200.00 in one year. Pretty close to that $15,000.00 mark, isn’t it?
Now, let’s look at a few more.
• Alcohol – how much do you spend on alcohol? I bet it is around $500/month, when you total what you drink at home and everything you spend going out. Let’s be conservative and say $300/month. That is $3600.00 in one year. Now, if you stopped altogether, that is the balance of your down payment. However, I know that is unrealistic. What if you had one less when you are out with friends, and cut in half what you drink at home? There is another $2300.00 each year.
• Uber – your Uber budget? You can cut it in half with UberPool. I can’t put a number on this because I don’t know what it is, but you can add accordingly.
• Dining out – cut it out, with the exception of twice a month with friends. It stinks, but it is called sacrifice for a reason, and it’s a small one to make to get to that $15,000.00 number. This could be what does it.
So there you go. Zero to home owner in one year!
Can you do it? I challenge you! 😊