After careful research and mental preparation, you have decided that a rental property is what you want to invest in. Now, saving for the downpayment is the next thing to do. To some, this seems to be an uphill battle, especially if you have debts to take care of. Do not be discouraged, though, as it is doable as long as you are willing to stick to a game plan, which entails money saving techniques and a lot of discipline.
There are a lot of creative ways to save money even when you are on a tight budget, but the most important thing is to find a tactic that you are capable of and willing to stick with. Here are a few tips you may want to consider:
Know your cash flow and employ a budget tactic that suits you. Before you can figure out how much to save on a regular basis, you need to know where exactly your money is going. List down all expenses and see what percentage goes to your fixed expenses such as rent, loans, car payments, etc., and to your non-mandatory or discretionary monthly expenses such as Netlfix subscription, dining out, gym membership, etc. A popular budgeting technique called 50/30/20 is a good guide in saving a regular amount or percentage of your take-home salary. Fifty percent goes to fixed expenses, 30% goes to discretionary or non-fixed expenses, and you save 20%. Remember that this is just a guide, so figure out what percentage works for you, just make sure that you have a decent percentage going to your savings.
Compute, compute, compute. For sure, you are already eyeing a particular property and you have an idea as to how much you will be needing to pay for the downpayment. However, the downpayment is not all you have to pay for at the beginning. You have to factor in the closing fees and a contingency fund. Add these to the downpayment and compute how much should be your target monthly savings, depending on your timeline or the number of months or years you plan on saving for it.
Cut on your current discretionary expenses. When you’ve figured out your target monthly savings and see that you’re coming in short, you need to adjust your discretionary expenses. Look at every item under this category and see which ones you can downgrade or totally eliminate. Find a cheaper subscription to Netflix, for example. Review your gym membership, as well as your e-commerce subscriptions, and see if you can let go of some of them. Negotiate bank fees, too. Plan ahead for events that usually require you to buy new clothes, and shop sales and second-hand items.
Boost your income. If cutting back is not enough, consider boosting your income by selling old clothes and other stuff in your apartment. Your wardrobe is due for a clean-out anyway, for sure, so this hits two birds with one stone. You have eBay or Carousell to help you sell your preloved items. You may also consider getting a side-job to boost your income. There are a lot of online jobs now that you can do at home that can add to your current cash flow.