SAVE FOR A DOWN PAYMENT IN ONE YEAR SERIES

ellis+co real estate
Aug 18, 2017
7 min read

Even if you don’t plan to buy a house for several years, you’ve probably started thinking about how to save for a down payment. And these days with a new iPhone every year and cable prices rising every year, most are living paycheck with little to no savings and almost nothing in our retirement accounts. And even worse, that 3-5% increase in your wages that you may or may not receive each year is simply keeping up with inflation. Your milk is getting more expensive and so is the bread. It’s not your imagination. It’s called inflation.

And even worse, when we can’t make ends meet, we go into credit card debt, paying 10-30% in interest each year. On $10,000 of ongoing debt, that is an extra $1,000-3,000/yr in interest. Imagine the vacations we could go on each year with that money. Before you save one dollar toward your dream house, pay down and hopefully totally off, your credit cards. Not only will you save thousands and thousands in mortgage interest (because you will get a lower interest rate than those with lots of credit card debt) but you will also qualify for a nicer home. Debt is your enemy. Use some of if not all the items in this series to try to pay off your debt first before planning for a down payment.

Ultimately, there is really only two simple ways to save money. Either you cut your expenses or you make more money. It truly is that easy. Figure out how to cut some of the silly expenses, for only one year or figure out a way to make some money on the side (the side hustle). Or let’s face, do both. Do it all. Work your ass off for one year and save the money you need to buy the dream house.

In this three part series, we look at cutting expenses, finding a side hustle, and exponentially growing your savings of both.

CUTTING EXPENSES

We will start with expenses since it is the easiest to understand and something you can do immediately. The first step is to figure out where all the money is going. Not in your head, on paper. Print your bank statements and credit card statements for the last 12 months. Where did you spend your money? Where is all that ATM cash going? Why are the credit card bills growing instead of shrinking? Is most of our money every month going to debt? Figure out exactly where you are spending your money and only then can you dig into where you can cut your expenses.

Once you have figured out exactly where you are spending your hard earned cash, you need to start cutting the miscellaneous stuff you don't really need or use, and then come up with new habits for even more ways to save money. Below are a few bigger ideas on where you may be spending your money that you may be able to cut:

Lottery Tickets - I know you have to play to win but the average American spends $300/year on the lottery. If you invested that $300/year in 30 years, with compound interest you would have over $62,000. But unfortunately for most, they have $0.00 after 30 years. Don’t play the lottery, at least not this year.
Avoid Convenience Stores: They may be convenient but the items inside are 3-10 times more expensive than the grocery store when you buy in normal bulk size. Think about it: A soda at the convenience store is $1. You can buy a 12 pack of soda for $4, sometimes as low as $3. If you take a soda with you instead of buy a soda every day, you would save $240 per year. Add in a small bag of chips, or candy. Double, triple that savings. SAVE: $240-$750
Avoid eating lunch out. I know going out to lunch is so much easier than bringing your lunch and kinda fun, but at an average of $10 per meal, you are spending $2,600 on lunch per year. The key is to make it simple. Plan your lunch menu on Sundays. What do you normally eat when you go out to lunch? See if you can simply replicate those meals at home. The first few weeks may be a challenge, but if you even cut out half of the lunches each week, you will save $1300.
Avoid tolls. I live by the motto that time is money, but when I really think about it, taking the Selmon Expressway costs me about $1 one way, and I get home 5 minutes quicker. Or I could have saved $260 this year by taking Macdill home instead. This isn’t always practical, but if you don’t have anywhere to be, taking the side streets might be the better route to save some money.
Avoid picking up coffee. I know we have all heard this before but truly you need to think about Starbucks as a special occasion instead of a daily event. You will appreciate it more and easily save $1000 a year for the regular user.
Movies($20) vs OnDemand movies($5) vs Redbox($1)
Gym Memberships/Yoga/Bar classes – get outside or you tube them for free in your living room.
Brand names vs store brands
Never go to the grocery store when you are hungry. You will always end up with stuff you don’t need.
Use cash when you shop and only use that cash in your pocket as budgeted
Consider turning off your cable and using the bazillion of other TV and movie streaming services
Bank fees: There are a million banks out there begging for your business. If you are getting charged bank fees you need to consider changing banks. Monthly fees and ATM fees should never, I mean NEVER happen.
Change our thermostat two degrees. Your body will eventually adjust.
Avoid all in-purchase apps. Be with your family instead of in your phone.
Make sure your tires are regularly inflated. It saves on gas mileage.
Avoid coupons, unless you normally and regularly buy those items. Most coupons are meant to make you spend more money in the long run for stuff you don’t need.
Wash your hands every hour or so. The healthy you are, the more money you can make. Also the less money you have to spend going to the doctor and paying for cold medicine.
Double check all your personal care products. Are there less expensive items you can buy instead, or are there products in there that you don’t even need?
XM radio - remember when regular FM radio was okay. That $200 might look better in a savings account.
Fabric softener – forget about it! Dryer sheets – waste of money when you need to save.
Energy drinks – avoid them because 1. they are expensive 2. they make you more tired about 30 minutes after they give you energy. When you are tired you can’t function to make money. You will also spend more money because tired people like to eat. Avoid energy drinks, save your life and some money.
Avoid bottled water: Refrigerators with filtered water are just as "healthy" as most bottled water. And it’s almost free. Or get a $30 filter for your sink water, and fill a pitcher for the refrigerator. Worst case, get the 5 gallon jugs of filtered water.
The Lady Tax: Most items that both men and women use are usually more expensive for women. Razors, for example, are more expensive when marketed as “For Women” when a man’s razor is the exact same thing. Deodorant, shampoo, hair products, etc. Consider buying the men’s version next time.
Extend your hair appointments a week, two weeks or three if you can do it.
Extend your nail appointments or don't have them at all. At $20-30 per nail visit and another $20-30 for your toes, you are looking at about $1000 per year for nice hands and feet. There has got to be a something you can save here.
Never go to the grocery store more than once per week. Eat what you bought and if you run out, be creative with the weird stuff in the pantry. We all have canned foods and bags of rice, beans, pasta and tuna in our pantry. If you go a second time your budget is going to get all thrown out of whack and you will end up with random stuff you really didn’t need.
Avoid any and all cleaning wipes. A paper towel and generic glass cleaner will clean almost anything.
Avoid pre-sliced foods. Vegetable, melons, cheese. All the pre-sliced items are more expensive. Take the extra few minutes to slice it yourself.
Buy frozen vegetables and fruits when they are not in season. You can get a lot more for the same price if you buy frozen.
Don’t ever miss a credit card payment. Not only does it make it more difficult when you buy a home, but the late fees can be $35-60. Be more organized and keep a monthly schedule. If it is your first time missing the payment, call your credit card company and ask for the fee to be removed. They usually will do it once.
Expired foods. I’m the worst at this. I hate to eat food if the date on the package has expired. But most of those dates are precautionary more than definitive. Most of the foods can last a few extra days if not weeks. Think about not throwing out food if at all possible.
Avoid paying for parking costs. Even free valet costs a few bucks. Sometimes it is unavoidable but really just try avoiding those place for now. It is one year! You can do it!
Don’t buy any books this year. I’m a huge fan of books, but they cost me easily $10-$20 each. The library has all the books you will ever need, and they are free. Check it out.
And needless to say, gambling, alcohol, fast food, cigarettes, marijuana, speeding tickets, parking tickets, etc. should all be avoided, at least for now.

Next week, we will talk about how to land a side hustle… All you need is an extra 10 hours a week. It is time to make some real money that we can invest and compound.