Saving for a down Payment

Whether it be for a house, automobile, boat or other big ticket item, down payments are the beginning process of the purchase, and customarily, range from 10% to 20% of the cost. For a $15,000 car or boat, that would correlate to a $1,500 – $3,000 down payment. A $200,000 house on the other hand, would be $20,000 – $40,000 down. Either way, the steps are the same.

One For The Money

Ask the seller how much the payments will be. That house note, for example, might run somewhere in the neighbor hood of $1,800 a month. The car or boat on the other hand, might be closer to $350/month. 

If you haven’t already, set up a detailed budget. Include all you monthly bills, as well as things like, food, gas and entertainment. Add them all up, and then subtract that number from you monthly wages. What’s left is your discretionary income, and should make up the bulk of step three.

Two for the Show

Set up an account somewhere. It can be in a bank, a shoebox or an envelope hidden in your closet. Now, take the monthly payment you will be expected to make, and put it into that account or envelope. This will not only build up money for you, but also give you confidence, that you can in fact, make the expected monthly payments.

Three To Get Ready

So where is that extra money going to come from each month? Remember that discretionary income left over each month? Ideally this ‘left over’ amount each month, will more than cover the amount of your expected monthly payment. If need be, examine your budget for additional discretionary expenditures that you can trim down, or even out. 

•Do you visit the local coffee shop in the morning? Just two or three cups of coffee everyday at $3 a pop, quickly adds up to $100 or more a month. Consider drinking (GASP) office coffee instead. Sure, it might taste like burnt rubber, or worse, but it’s free. And who knows, you might even like that office coffee, heaven forbid.

•Do you eat on the run? Fast food joints and sit down restaurants can also be expensive, not too mention unhealthy. Biscuit in the morning? Burger and fries in the afternoon? Pizza for dinner? These are all areas that can be harvested for that next monthly payment. Trimming out just a few of these expenses each week can easily bring another $100 a month to the table.

•Make some change, and have a yard sale. Extra TV’s and VCR’s, as well as clothes, tools, CDs, furniture and other things you don’t use anymore, can easily generate several hundred dollars for your down payment. What about those loose coins? Is there a pile spread out on a corner table somewhere, from when you empty your pockets at night? Set up an empty coffee can or milk tub to catch all that loose change and occasional bill. Check that change too, you never know when you might come across a coin worth it’s weight in silver or gold.

•Consider Coupons. Maybe you think going through the check out line at your local grocery store with a bunch of coupons to be embarrassing, but it doesn’t have to be. Instead, it could be a bragging right. Imagine telling folks that you get $300 worth of groceries every week or month for less that $50 bucks. There are numerous websites that offer step by step instructions on which coupons to clip, and when to use them, to get the best deals. Either way, it’s an additional $250, or more, towards your down payment each month. 

Four To Go

After 6 months of pretend payments, along with any other cash raised from yard sales, hobbies or odd jobs, you should have built up enough money to make your down payment. Take some time and re-evaluate your position, check and make sure you are still comfortable with the purchase and the monthly payments you will be expected to make. If everything is still a GO for lift off, then Great! Go for it! and enjoy your new purchase.