I remember like it was yesterday it was on a first date which i'll admit i don't
get many of and my new female friend and i were laughing and having a good time
things were going well and then she asked me if i had my own place i slowly
sank in my chair and admitted that at 27 years old they still lived at home with
my parents the second i said this her mood instantly changed and about five
minutes later she excused herself and walked out on the date it was at this
moment that i realized i needed to get serious about buying a house all i had
to figure out was how i could amass enough money for a down payment so with
that being said let me share with you the five steps i took to do just that
step number one develop an income stream have you ever heard the saying don't put
the car before the horse well i'm a horse expert but what i can tell you is
that this saying also pertains to saving up for a down payment before you can
start to save up for a down payment the first thing you must have in place is a
means of generating income for most people this income stream will come in
the form of a job now there's nothing wrong with having a job except for
basically all the limitations that come with having one what are those
limitations let me explain saving enough enough money for a down payment is no
easy feat chances are you're gonna have to amass well over a hundred thousand
dollars to get yourself into that home you want now for some people the
prospect of saving up six figures is an easy proposition but i would guess that
for most saving up this amount of money seems rather daunting in fact i know it
probably seems like an impossibility for most simply based on the savings amount
the average american has as of late 2020 the median savings of americans with
just 3 500 which is a far cry from the 100 000 more you would need to get
yourself a house you can blame these lack of savings on poor spending habits
or the rising cost of the grocery store but the real cause of these lackluster
savings figures are insufficient incomes it's pretty hard to save any money when
you're barely making any to begin with unfortunately your job may not cut it
when it comes to earning the income you need to save up for your down payment
which is why i always recommend you integrate a side hustle or a psi
business into your income mix as such when i say that step one is to develop
an income stream what i mean to say is that you want to develop multiple income
streams so you can amass that down payment before you're 90 and in adult
diapers given that you're probably curious what other income streams i
recommend you develop i will briefly share a few right now the first income
stream you must develop is an online business to most people's surprise the
internet isn't just a place to share memes and cringe at your aunt's
embarrassing facebook posts it's actually a money maker's paradise with
the ability to offer value at scale right at the tips of your fingers the
other way you should start to make money especially as you're building up your
online business is to get a part-time job i recommend this approach to people
for two reasons first it will allow you to start making money right away second
when you get those lackluster paychecks it will only motivate you further to
find more time efficient ways to make money which will not only serve you on
your quest to save for a down payment but will promote your growth of your
wealth over time step number two identify your target down payment
requirement now that you have some money rolling in the next step is to figure
out how much you'll actually need to save for your down payment while these
rules seem to change all the time i still think that saving up at least 20
for your down payment is a good idea now i know that some people right off the
bat disagree with this advice many people argue that saving up 20 simply
takes too long or puts you in a position where you're passing up on greater
returns by allocating so much of your free capital towards your down payment
these are all fair points but they overlook three factors that i believe
are in fact more important first when you don't put down 20 you're going to
subject yourself to pmi or private mortgage insurance this is an insurance
cost you pay upfront on your loan which typically ranges from 0.5 to 1.5
therefore while you could squeeze out a bit of extra returns not putting down 20
you can also sidestep private mortgage insurance instead second by assuming a
smaller mortgage you'll end up cutting down your interest rate risk as you know
interest rates are not static and if you get into a situation where you can
barely afford your payments when rates are low then you may be in serious
trouble when they rise which can be partly avoided by putting down more
money finally we already have enough expenses to deal with on a monthly basis
and by putting a bit more money down you can lower your payments easing your cash
flow situation now that i've solidly defended my stance on having a 20 down
payment all there's left to do is to calculate how much that 20 will be in
real dollars for instance on a 500 000 home you'll need a hundred thousand
dollars saved and this amount changes as you raise or reduce your housing budget
speaking of budgets let's now move on to step number three step number three set
up a budget as i always say a goal without a plan is just a wish and in the
same way that i wished i had a house back when i was dating you will wish you
had set up a budget years ago if right now you find yourself looking to buy a
home now it's not lost to me that people hate the budget some people dislike
budgets because they can feel overly restrictive for others who can't make
change for a quarter just the math behind a budget can be daunting however
regardless of the excuses holding you back i can almost guarantee that if you
don't have a budget then you will ultimately fail in your quest to buy
your next home if you ask me the two most important reasons to actually have
a budget in your down payment savings efforts are for setting expectations and
maintaining progression when it comes to setting expectations it's good to know
how long you're likely gonna need to save to get to a point where you have
the down payment you'll need to finally get into the home you want for instance
if you determine you'll need a down payment of a hundred thousand dollars
and right now you're saving on average twenty thousand dollars a year then you
can set your sites on a potential purchasing date five years into the
future however maybe five years is too long for you to wait and you want to buy
a house in two years instead no problem this just means that your new goal will
be to save up fifty thousand dollars a year instead which you can break down
into monthly savings targets and adjust your spending to meet by breaking down
your savings efforts in this way you can ensure that if you meet your goal every
month then you are making strides in a positive direction ultimately ensuring
that you achieve the progression you'll need to buy your home when the time
comes step number four deciding where to store your savings at this point you're
making money and know exactly how much you need to save every month to amass
your future down payment the question is where do you put all that money i wish i
could give you a silver bullet answer to this question but the reality is that
there are truly no best responses only a few options worth considering when it
comes to where to store your down payment funds you really have three
choices under your bed at the bank or in the market now storing your cash gender
or matches may look cool but it will probably lead to back problems so that
really just leaves us with storing it in the bank or placing it in the market if
you ask me which to choose comes down to how long you expect to have to save
until you've reached your savings target for instance if you only need to save
for a year the returns you'd get versus the risk you'd have to expose yourself
to investing probably doesn't make any sense why risk a major market downturn
to gain a couple extra thousand dollars in returns alternatively if you're gonna
need several years to save up your down payment then your risk will be spread
over a longer period of time and the overall returns can be much greater plus
some investment accounts will allow you to take out money for your home
purchasing buying free of tax so this is another plus of entertaining this
savings route however if you have a shorter savings timeline or simply want
to avoid risking your down payment nest egg then i think saving is the way to go
there's something comforting knowing that at worst you only lose a bit of
your money during inflation well the majority of it stay safe as you continue
to pile it on every month through your diligent savings efforts step number
five speeding up the process if you're like me and had an immediate need to buy
a house after facing numerous rejections then you probably want to speed up your
path to home ownership while there is merit in being patient in life sometimes
we need to speed up the clock especially when it comes to reaching our loftiest
of financial goals one of which is buying a house the truth is that the
only real way to make significant leaps in your down payment savings process is
to make more money sure you can cut out a coffee here and miss a night out there
but is that gonna move the needle on your down payment savings efforts no
however while making an extra two thousand dollars a month for the next
year speed up your savings timeline absolutely i probably sound like a
broken record at this point given how much i talk about income being your main
driver of wealth but i talk about it because it's true there will always be a
limit to how much you can reduce expenses but the sky's the limit with
earning i know in my own home buying journey if i would have only relied on
my 9 to 5 income i would have still been saving to this day fortunately i had the
foresight many years ago to start creating alternate streams of income
like this youtube channel and my online freelance business which provided me the
extra income i needed to buy my house year sooner now for those looking to buy
a house in the next few years i would probably stay away from building an
online business for house saving purposes because from my experience in
the experience of my peers it usually takes a couple years for this kind of
business to really gain traction however fortunately there are other business
models that i use and that you can adopt that can help you get on your way one
business to consider is drop servicing this involves sourcing client contracts
finding freelancers to complete saved projects and collecting the difference
in profits many businesses operate using this model it can assert to make you
money as soon as you close your first deal alternatively you can sell your
skills and expertise in the ever-growing world of online freelancing this is what
i've done to make a few extra thousand dollars a month for the last couple
years what i find great about this means of making extra income is that for one
learning a skill you can sell can be rather inexpensive you can literally
watch tutorials on youtube and gain enough proficiency to get your
freelancing business started not to mention with the help of sites like
upwork finding clients can be easier than you'd expect however i know that
starting a business can be intimidating for some especially for those who have
yet to start making money online which is why i created my course side hustle
success in the course i show you exactly how to build a freelance site also from
scratch by developing a high income skill that you can use during a thousand
dollars or more a month if this sounds like it's for you then check out the
link in this video's description for more information on how you can join the
side hustle success course today this is all to say that there are definitely
ways to make extra income and when you find one that works for you and combine
it with the steps i previously shared you'll be signing on your home's
ownership dotted line in no time hey it looks like youtube thinks this next
video is the one that will change your financial life forever give it a watch
and let's see if they're right