Feeling stressed about soaring interest rates, rising home prices, and a low number of homes available for sale but still motivated to purchase a home? Then likely, you are looking for ways to accumulate cash to meet your upfront costs and ways to minimize your monthly housing payment.
Follow these 5 Extreme Money Hacks and accumulate the funds you need quicker than you thought possible while being able to lower your monthly housing payment.
These are not shortcuts; achieving big results requires big actions and goals. You will need a vision of yourself at the finish line. Visualize what will happen when you get to your goal. Also, visualize what happens if you fail because you weren’t up to doing the needed work. Your goals dictate the strategy and resources required, but a clear picture of the destination will spark your focus, effort, and creativity and keep you motivated when the going gets tough.
Start with the big rocks – Housing, Food, and Transportation. You can save by cutting one Starbucks coffee at a time, but these three biggies are the bulk of everyone’s budget. If you want to save big, start here.
Live With Family or Take in Roommates
According to a Pew Research Center report, the number of households with two or more adult generations has quadrupled over the past five decades. Housing is the biggest expense in most people’s budgets, and consolidation of two households under one roof, while maybe not permanent or ideal, can cause a lot of money can be saved.
For Gen Z’s, there may exist the ability to consolidate back into the family home and apply that ridiculous rent you were paying towards savings for your home’s down payment. If you were paying $1,000 a month for rent, that’s 12,000 before utilities!
If you are on your own, consider sharing an apartment or home with someone compatible that can offset the rent. An extreme example would be to buy a 4-bedroom home in an affordable area such as Superior Township, then rent out 3 of the bedrooms to friends and family.
Get By With One Car
In Ann Arbor, it’s tough to get by without a car. However, for households with 2 cars, if you can get by with one car instead of two, you can save big. According to AAA, for vehicles driven 15,000 miles a year, average car ownership costs were $10,728 a year, or $894 a month, in 2022. That figure includes depreciation, loan interest, fuel, insurance, maintenance, and fees. While not for everyone, extreme savers with a high level of motivation can save big.
Reduce, Eliminate or Defer Everyday Expenses and Purchases
Now we’re getting down to the small stuff that together adds up to big bucks. It’s sneaky because a 5 dollar daily habit purchase here or a $30 auto pay is not felt, but its death by a thousand cuts. We fail in life not by major mistakes but by a thousand small decisions.
You will need to be mindful, have accountability, and revisit your vision-your big why daily. Your reward comes when you see your credit card debt evaporate and your savings grow. You will be amazed how quickly you can cut 10 percent of your expenses and, with extreme tactics, much more.
Get real – look at every potential purchase and ask if I can reduce, eliminate or defer this expense. Does this expense get me closer or further from my vision? Make it a habit of being mindful about every purchase.
Try these tactics
- Buy a small size instead of a large one. Buy a cheaper brand, Shop at a cheaper store, Take a day off from that habit, and buy used instead of new. Go on a less expensive vacation.
- Quit a bad habit – smoking or drinking alcohol, for example. Eat at home instead of going out.
- Report a credit card lost, then every auto-pay will need to be reviewed and re-setup. You may be surprised – gee, I have two Hulu accounts! I haven’t been to the gym in 3 months, I have three data storage accounts. I am sure you know what I mean.
- Use apps to track your budgeting, or try cash-stuffing, a Gen-Z trick where employees take their paychecks in cash and then distribute it into envelopes labeled, for example, “Rent”, “Groceries”, “Eating Out” to budget. Whether you need the paper money or an app is sufficient, sticking to your budget is rewarding. By using cash, you are forced to stop spending when the cash runs out!
- Defer – Can an expense be deferred a day, week, month, or three months? When shopping, our brains convince us we NEED this. Well, maybe not. What you really need is 50 grand in the bank! Wait and see if the feeling goes away. Maybe you can repurpose what you already have, buy it used, or just not buy it. Be creative. Impulse buying decisions can be eliminated this way.
Get a Side Hustle
How serious you are about accumulating funds will determine how far you go with this. $200 a week turns into $10,000 in a year. Your side gig may even lead you to a new career. There is the typical door dash and Uber gigs, but there are endless other options for the determined, creative mind to make additional money on the side.
Bank of Mom and Dad
Someone has to pay for all those downtown bank buildings, you know. Why not cut out the middle man and save the bank fees by borrowing from the bank of Mom and Dad. Assuming your relationships are in good shape, mom and dad probably have your best interests at heart, are aligned with your big plans, and may have available funds.
Consider low-interest or no-interest loans, equity investments, and gifts as ways to save money on bank fees and loan interest. Get with your tax advisor and attorney for guidance here.
Use funds to avoid PMI. If you buy a $300,000 home, for example, you could be paying somewhere between $1,500 – $3,000 per year in mortgage insurance.
An additional $10,000 towards a down payment will reduce your monthly payment by about $55 per month. More importantly, it will reduce the interest paid on a $300,000 mortgage over the life of the loan and may make the difference between qualifying or not qualifying for a loan.
Final thought. This problem is yours and yours to solve. Take extreme ownership of the problem: “When a team takes ownership of a problem, that problem gets solved” (Jocko Willink). Solve it your way, and don’t worry about what others may think or say. People will push back, drag you down, and want you to quit. Marketers are after you every minute of every day, and they don’t care if you spend 110 percent of your income as long as you buy their product.
“To be successful, you must be willing to do the things today others won’t do in order to have the things tomorrow others won’t have.” — Les Brown