Guide to Building a Down Payment

If you target this goal, know upfront that you’ve given yourself a serious challenge. Building a savings fund of $50,000 in 12 months will require you to set aside $5,000/ month, and this will take some extreme measures to make it happen. First, look at every single dollar you can cut from your current spending. Here are a few ways to aggressively trim your expenses.

Move in with a friend or family member to cut rent:  Offer to do work around the house in exchange for room & board.

Sell Assets you May Not Need Anymore:  My friend recently moved back to the city, and has decided to rent for a year.  Living in the heart of West Loop means a car is not necessary anymore especially with all the public forms of transportation available.  Plus the savings on car insurance as well.    

Get rid of expenses you don't need: That can include everything from services like Spotify and XM Radio to impulse shopping for new cloths are gadgets.

Downgrade services for cheaper options. Perhaps you can reduce your insurance coverage and drop the cost of your monthly premiums. Other places to consider: your cellphone plan and your groceries. Your new rule should be “If I don’t need to buy it, I won’t.” Remember, you need to bank $4,167 every month. Many people’s total monthly budgets don’t add up to the amount you’re trying to save!

In addition to saving, you’ll probably need to consider earning more to meet your goal. Take on additional work or get a second job to generate more income. While this might not be sustainable for years, doing so for 12 months could give you the boost you need to save that 20%.

Get rid of cable, and switch to a streaming service: The average cost of cable is around $100.  Skip the premium channels, and opt into a streaming service that'll only cost you on average $7/month.

Eat out less: Check out my POST HERE that'll really show you how much you save by cooking your own meals at home.

Eliminate expensive entertainment. Even one date night to the movies per month can put a dent in your efforts! Two tickets, sodas, and a large popcorn typically cost about $35. In comparison, a rental from a video kiosk (or your streaming service) that you can enjoy at home with microwave popcorn? Maybe $5.

Cut back on your vices. Beer, wine, and cigarettes don’t come cheap. If you’re used to buying a bottle of wine and a six-pack at the store each week, you may be spending close to $65 per month on alcohol alone. 

Work out at home. There are countless alternatives to a pricey gym membership, from fitness communities to printable workouts to YouTube videos and more. You can slim down both your body and your budget for a monthly savings of $60 per month.

Negotiate your bills. Call your service providers, insurance companies, and cellphone carriers and ask about lower-cost options. You can switch to a more basic service, request discounts, or consider cutting the service altogether. This can add up to a monthly savings of $50 or more!

This timeline gives you the most flexibility in saving for your $60,000. You’ll need to save about $1,000 per month to meet this goal. It’s still a lot of money but completely doable if you’re willing to cut back in places you currently spend. Use the tips above to help you cut costs and free up more cash for your down payment.

The biggest challenge in saving $1,000 per month for this length of time is staying focused, but in the end when you have the keys to your own home you will know how much it was worth it after all.