How to Save Money for a House Down Payment While Renting

When you’re renting an apartment or house, it can be frustrating to know that the money you pay each month isn’t earning you any equity. For many young people, it’s a priority to save money to buy a house, so they can stop renting.

Many of our Addition Financial members come to us for guidance about how to save for a house. They want to know how to save for a downpayment and what they can do now to be ready to become homeowners.

Saving isn’t easy, but here are some things you can do to help you save money for a house.

Deal with Your Debt

Perhaps not surprisingly, one of our best tips about how to save money for a house is to deal with your existing debt.

Why? High credit card balances and payments can limit your ability to save. You can start by:

  • Making a spreadsheet listing your debts, interest rates and monthly minimum payments
  • Research transfer and consolidation options
  • Focus on reducing your debt and monthly payments

Not only will it help you save money to lower your monthly payment and reduce your debt, it’ll also make it easier for you to qualify for a mortgage when the time comes.

Cut Back on Discretionary Spending

One of the best ways to set money aside for a down payment is by reducing your discretionary spending.

Think of discretionary spending as anything you don’t need to survive. Saving a bit here and there can make a big difference and it doesn’t mean your quality of life needs to suffer.

Here are some ideas:

  • Cut back on your cable bill or get rid of cable. With so many streaming options, you could get an annual subscription to Netflix and Hulu for less than you pay in a month for cable.
  • Cut back on your cell phone data. If you’re using much less than you’re paying for – and if you’re usually connected to WiFi when you’re surfing – then you can probably cut way back and put what you save toward your down payment.
  • Switch to brown bag lunches. Bringing lunch to work is an easy way to save money. When you consider that lunch out probably costs you close to $10 a day, you could easily save $35 or more every week simply by bringing your lunch with you.
  • Get one or more roommates. There’s a reason so many young people share their living space with friends and acquaintances. Splitting your rent is a good way to keep your monthly expenses under control and build your savings to buy a house.
  • Negotiate your rent. It might sound crazy but some landlords will offer rent reductions to good tenants, particularly those willing to sign a longer lease. Even saving $10 or $20 per month can help you in your quest to be a homeowner.

The Millennial Playbook to Paying off Debt & Saving for the Future

Save on Insurance

If you’ve got car insurance, renter’s insurance and other policies with various carriers, you can probably save some money by consolidating with one carrier.

A lot of insurance companies offer bundle discounts. It’s worth calling each of your carriers to see what they’ll do for you for a chance at handling all your insurance needs.

Get a Side Gig

Is there something you like doing you can get paid to do? If the answer’s yes, then getting a side gig and saving the income you earn doing it is a good way to save up for a down payment on a house.

Some examples might include freelance photography, tutoring or selling your handmade goods on Etsy. Any extra income you use can make it easier to reach your savings goals and get the money you need to stop renting.

Set up a Down Payment Fund

One way to save money is to gamify your savings. By that, we mean making it a challenge to see how much you can save.

For example, you might throw any loose change in your purse or wallet into a jar. While you’re watching television, roll the coins and then bring them to the bank and deposit them. You’ll be surprised at how fast it can add up.

Another option is to save every $5 bill that comes your way. Any time you’ve got one in your wallet, put it toward your down payment.

Put Your Savings in a High Yield Savings Account

Finally, you can build your savings by putting whatever you save into a savings account with a high interest rate. You’ll probably need to maintain a minimum balance but using this method can help you maximize your savings.

For example, Addition Financial offers an Insured Money Market Account that combines the benefits of an investment account with the security of a savings account. You can get higher interest rates and still be able to access your money if you need it.

It’s not easy to save money for a house down payment while you’re renting. However, with some careful budgeting and creativity, you can find the extra cash you need to become a homeowner.

Want to maximize your savings and buy a house? Click here to learn how Addition Financial can help.

Topics:

Mortgages