Pay Down Debt
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If you have an outstanding credit card, student loan, or car finance debt, you probably can’t bear to look at the amount you’re paying for the interest rates alone. It can feel like you’re making zero progress when most of your repayments are paying off the interest, not the debt amount.
The solution? Pay more.
That’s probably not what you wanted to hear, right? You may be wondering, “How can I possibly save more by spending more?”
The simple truth is the faster you pay off your debt, the less interest you get charged in total.
Let’s say you have a $10,000 student loan outstanding at a 6.8% interest rate and a 10-year repayment period. Your standard monthly payments should be around $115 a month. But if you pay extra each month, you can save a lot.
Making just $100 extra payments each month could save a huge amount of interest. It could even cut it almost in half! If you can’t pay an extra $100, or $200 each month, even $20 a month can make a HUGE difference. See for yourself by calculating your savings using this calculator.
If you’re still having trouble getting out of debt, you may want to check out my article on how to get out of debt fast.
We all work in different ways when it comes to money. There’s rarely any one-size-fits-all approach to spending, saving, and cutting expenses. So this is where setting money rules for yourself comes in.
If you know you have a particular bad money habit, set a rule for yourself to help avoid it. For example, if you’re an online shopping addict or an impulsive spender, a simple money rule could be to always wait 24 hours before making a purchase if it’s over a certain amount.
Maybe you also put away the same amount you spend into a separate savings account. That way, you’re down double the money. So the next time you want to buy something, you’ll think twice about it.
Setting rules for yourself is the best way to curb your bad habits and reward your good ones.
Cutting your expenses is a great start. But remember, while there’s a limit to how much you can cut, there’s no limit to how much you can earn.
Before you roll your eyes and skip this step, it is ALWAYS possible to earn more. Even if there’s a recession, even if you’re broke, busy, or don’t know where to start.
The good news is that there are several ways to start earning more. You can ask for a raise at your current job, find a higher-paying job, start a business, or pick up freelance work. And, by the way, if you are worried about a recession, read what I said about protecting your money ahead of a potential recession in this recent article with Business Insider.
Many people will just take their salary, grumble quietly about it, and nothing changes. But did you know that one of the simplest ways to get more money is to… just ask for it?
With just a five-minute conversation, you can make thousands more, and what’s better, the gains add up year after year.
This is one of the best ways to make money through a single conversation. It’s essentially quick money that—unlike taking surveys or selling your body to medical studies—gives you a LOT of money over many years.
Check out this chart demonstrating the effects of ONE $5,000 raise:
For some actionable tips for negotiating your salary, check out this comprehensive post on how to negotiate your salary. It’s got a ton of information, and the steps are easy to follow.
Of course, it isn’t always that simple. Some bosses and industries have set salaries with minimal wiggle room. In that case, your next move is to…
If your boss isn’t interested in paying more money, the natural next step is to look elsewhere. Staying at a company for 10 or 20 years is a thing of the past for many people now. Sadly, loyalty and longevity at a company aren’t rewarded like they used to be.
So the next solution is to land a higher-paying job. But how?
Should you change jobs? Change industries? How do you know whether to stay put or to take a risky move that may result in more money?
If you find yourself in this situation, we have a ton of great resources on finding a better job on YouTube.
Finding a new job or changing careers takes time. But in the next few days, you can set up your first side hustle. Once you get your first paying client, it’ll be easier to get more clients and make more money.
First thing: Many websites will tell you to troll for freelance gigs on places like Fiverr or Mechanical Turk. These places work if you want to compete with people all over the world in a race to do the most work for less. No thanks.
Instead, look at what you’ve already got. 95% of jobs can translate into some sort of side gig. Ask yourself:
What do I enjoy?
What do I do with my free time?
What do people ask me to do because I’m so good at it?
Start by assessing the skills you use every day at home or work. Remember, people pay for solutions, not your skills. How can you take your skills and turn them into a solution for someone else’s problem?
Here’s a very simple example:
Skill: You’re good at math
Problem you can solve: With schools shut down in most states, many parents are struggling to help their kids with distance learning and would happily pay for tutoring
Your New Side Hustle: Tutoring kids in math over Facetime or Zoom
Now imagine if by tutoring for a few hours a week, you suddenly had an extra $500 a month.
That money can go straight to savings without reducing any of your spending. And this is just one small-scale example, it can work for virtually any skill. That’s why earning more is one of the best ways to save money.
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3. Reduce Expenses Or Cut Out A Bad Habit
Reducing or entirely cutting a single bad habit can help you put away hundreds of dollars a year. Consider quitting these unhealthy habits and divert more of your monthly take-home pay to your down payment fund.
Impulse Buying
If you're prone to impulse shopping in person or online (who doesn't love getting deliveries?), you may consider cutting down on those purchases. Try to unsubscribe from marketing emails so you don't constantly see deals in your inbox. You'll save money and avoid piles of clutter around your home. Canceling subscriptions for services that make impulse purchases easier, such as those that offer free and fast shipping, might help.
Eating Out
There's no denying that takeout and fast food are quick and easy. But they’re not so easy on our wallets. To save a bit of money, try cooking a few meals at home each week instead of ordering out or paying to have food delivered to you. Not only will you be able to save some money, but you may also notice some added health benefits.
4. Ask For A Raise
Do you have little money left over to save after you get paid? It might be time to ask for a raise.
The best time to ask for a raise is during your annual performance review or after delivering a big win. Your attitude during your salary discussion meeting is just as important as what you say. Be confident in what you’re asking, but also be grateful and enthusiastic.
5. See What Other Employment Options Are Out There
While it’s not always possible, switching jobs and landing a higher-paying salary can help you save money for your down payment.
Browse job posting sites and salary comparison websites to see if you earn as much money as people who work in similar roles. If you discover your salary is below average, consider using your findings as leverage to ask for a raise or inquire about a promotion at work.
If you aren’t in love with your job or you can’t get a raise, consider searching for higher-paying positions you qualify for.
6. Skip A Vacation
Exploring a new destination can be an amazing experience. Unfortunately, it’s also often an expensive one. The average family of four spends about $4,500 on vacation – that’s a big chunk of cash. Consider storing that money for a down payment and enjoy a staycation in your city instead.
7. Pick Up A Side Hustle
In the on-demand “gig economy,” it’s easier than ever to earn money on your own time with a lucrative side hustle. If your schedule allows for a little extra work, here are a few ideas you can use to get started:
8. Chop Down Your Debt
If you’re on a mission to buy a home, diverting your extra income toward your debt might seem counterintuitive. However, one of the first things lenders look for when they consider you as a mortgage candidate is your debt-to-income ratio (DTI).
A higher debt-to-income ratio can impact your ability to qualify for a mortgage in the first place and may influence the interest rate and amount that your lender will be willing to offer. This can mean that you’ll pay more in interest and have a higher down payment requirement.
Take some time to reduce your debt before you apply for a mortgage loan. Look at exactly how much you owe on your credit cards, student loans, personal loans and auto loans, and create a plan to tackle it.
9. Rent Out Your Spare Room, Car Or Parking Space
Do you have an extra bedroom in your apartment? Is your car collecting dust since you’ve transitioned to remote work? If so, consider listing them on websites like Airbnb and TURO to leverage your assets to receive a consistent monthly payment. Be aware that rules and regulations for renting property differ across the country, and you might live in an area with significant restrictions.
Both platforms let you approve dates and guests ahead of time and only rent out your car or spare room when it’s convenient. You can even block out dates when your rental isn’t available, or when you know you'll need your car.
If you live in an urban area where parking is at a premium, consider renting out any of your assigned parking with an app like JustPark. JustPark lets you rent out your parking space just like you’d rent out your spare room on Airbnb.
If you live in a tourist destination or heavily populated area, these sources of extra cash can make a huge difference in how much down payment money you can save each month.
10. Ask For Help
There’s no shame in requesting assistance, especially when you’re saving up for something as large as a down payment on a home. More and more home buyers are crowdsourcing their down payments through websites and apps.
You may want to ask relatives and friends to skip physical gifts on holidays and special occasions in lieu of money. This is becoming more common practice at events like weddings and baby showers.
Keep in mind that there are special rules on how you can use gift money to pay for your down payment. Know your mortgage loan types and read about the rules surrounding gift money and down payments before you accept money for your new home’s down payment.
11. Automate Your Savings
If you’re the type of person who’s prone to impulse shopping, you may want to consider automating your savings. Here’s how it works: first, decide how much you want to save per month for your down payment.
Contact your bank and authorize an automatic withdrawal from your primary account into a separate savings account. Your bank will automatically take money out of your account each month and put it into a separate account.
This can be useful for people who have trouble managing their money. When you make your money less accessible, you may be less tempted to buy things you don’t need. Just remember to schedule your withdrawal on your payday or when you know you’ll have enough money. Overdraft fees can put a serious dent in your down payment fund.
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