How To Save for a Down Payment From Scratch Without Setting a Budget

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Trying to save for a down payment on a house isn’t easy, considering the swift rise in housing prices over the past few years. The median sale price of a U.S. home is now $402,523 according to the latest Redfin data, up over 5% from the year before. If you want to put 20% down — a common amount to avoid paying extra for private mortgage insurance (PMI) — then you’d need to save a little over $80,000.

But what if you’re not good with budgeting, or you feel overly constrained by tracking every dollar you spend? Is it still possible to save for a down payment, especially if you’re looking to save tens of thousands of dollars?

It might be easier to save if you have a clear picture of your finances and have a specific goal regarding how much you need for a down payment, based on factors like your local housing market. But you don’t necessarily have to follow a strict budget to get there.

Consider the following steps if you want to save for a down payment, without setting a day-to-day budget:

1. Set Up Automatic Transfers

One way to save without traditional budgeting is to set up automatic transfers from one bank account into another. For example, you could set up your checking account to make an automatic transfer on a set day every month into a separate high-yield savings account so that you have that money set aside. If you transfer $1,500 per month every month, you could save over $90,000 in five years, not counting extra money earned from interest on your savings.

Or you could make the automatic transfer into a brokerage account if you want to invest those savings, which could potentially help you reach your down payment goal sooner if you experience investment gains. Of course, that comes with the risk of losses too.

By automatically transferring money, you can break the cycle of seeing how much you have left over at the end of every month and only moving that amount into savings. Instead, you get used to that automatic transfer and can learn to live on less.

2. Split Your Paycheck

Similar to the concept of using automatic transfers, you can also split your paycheck into different accounts, such as one for your main expenses and one for your down payment savings.

If your employer allows it, you might be able to split your direct deposit into different accounts, or if you’re paid by physical check, you could alternate between depositing a paycheck in your regular account and in your account geared toward a down payment.

If you share finances with someone else, such as your spouse, you also could have one partner deposit their paychecks into one account while the other puts their paychecks into the down payment account.

3. Follow a Conscious Spending Plan

Ramit Sethi, author of “I Will Teach You to Be Rich,” has a system called a Conscious Spending Plan. The idea is that instead of following a traditional budget that tracks every expense, you break your income into four main buckets: one for fixed costs like rent, one for investments, one for savings, and one for what he calls guilt-free spending.

With this plan, you can allocate a percentage of your income toward saving for big goals like a down payment, while knowing how much you have leftover to spend however you want.

Let’s say you want to go out to dinner, but you’re not sure if you should be putting that money toward your down payment. Well, if you’re following a Conscious Spending Plan that feels good to you and have automatic transfers set up, then you can relax knowing that you’ve already allocated money toward savings, and you have a bucket of money to spend freely.

As long as you haven’t gone over the guilt-free spending amount that month, then you don’t have to feel guilty about going out to dinner, as you’re still on track for your savings goal.

4. Sell What You Don’t Need

Lastly, if you’re not good at following a budget, you might need to come up with a larger chunk of cash that you can immediately put into savings. Some Redditors, for example, shared in a thread about saving for a down payment that they sold items like their cars to reach this goal.

If you’re married, maybe you and your spouse could share a car, at least temporarily. By selling a vehicle, you could quickly gain thousands of dollars to put toward a down payment. You could also sell items like furniture, jewelry, clothes, video games, any collectibles you might have, etc.

The amounts will vary depending on what you’re selling, but you’d be surprised how much you can come up with. And while selling items you don’t need might not be enough to cover a down payment, it can build positive momentum and encourage you to start saving more, rather than feeling stuck at $0.

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