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How I Saved 40K In 5 Years For A Down Payment
Dated: November 20 2018
When I graduated college, I landed my dream job as a crime reporter at a daily newspaper. No hyperbole: As a kid, I had pretended to be a reporter, pecking away at a typewriter while wearing a fedora with candy cigarettes hanging out of my mouth, embracing cliches like "I'm on deadline!" when my mom would call me for dinner.
But dream salary at my newspaper job? Ehh, not so much. I was earning a $38,000 annual salary in idyllic (read: expensive!) Boulder, bringing home $1,030 paychecks after taxes and the like. Factor in inflation, and it's possible I had a more lucrative gig selling articles to my grandmother when I was a kid.
Still, I was committed to doing this whole newspaper career thing, and, I also wanted to be a homeowner, partly because I was worried about eventually getting priced out of Colorado's rental market. (My apartment jumped from $950 to $1,200 a month over five years; newspaper reporters were prone to pay cuts). So, I took a side job bartending for about 20 hours a week to create a home savings account.
It took me five years, but I saved $40,000 for a 20 percent down payment. I purchased a newly constructed three-bedroom, three-bathroom townhome for just under $200,000 in Westminster, which is close to downtown Denver and Boulder. Thanks to Colorado's booming real estate market (hi, all you newcomers!), my home has appreciated by a little more than $100,000 in six years. My mortgage, taxes, and HOA payments combined are now only $1,305, comparable to what I was paying in rent in a one-bedroom apartment, with a small office nook.
While having to sacrifice a lot in my 20s, I'm ultimately so grateful that I decided to work a second job and save for a home. Here are the five most important lessons I learned:
1. Find a side hustle that makes sense for you
Admittedly, I entered the moonlighting market before apps like Uber and Taskrabbit existed and I so would have appreciated the flexibility of making my own schedule. I chose bartending at a restaurant as my side hustle. It was strategic; a restaurant closes earlier than actual bars and bartenders tend to make more than servers. I also chose a restaurant across from a convention center because it meant steady year-round business and, frankly, people who used company credit cards and tipped well. I pulled in anywhere from $100 to $200 a shift. Plus, I gained a cool party trick: I know how to make just about any cocktail and being on the other side of the bar has come in handy as I'm a freelancer now, often writing about cocktails. Of course, there were downsides. I had to request shifts off weeks in advance if a friend invited me to a birthday party. A dorky visor was part of my uniform. And, to this day, I turn bright red just thinking about leading "happy birthday" songs. It took me a year to figure out, but the workaround for this was paying $5 per birthday song request to the most extroverted co-worker.
2. It's not as much of a sacrifice as you'd think.
I did have to sacrifice some of my personal time. For instance, I won an award for investigative reporting but couldn't go to the awards ceremony because I couldn't get my bartending shift covered. I also would rarely go out with bartending co-workers because, well, I was tired, and it's also way too easy to spend cash on a round of drinks at the bar!
But, overall, saving for a down payment wasn't entirely a lesson in delayed gratification. The money I earned from bartending went into a separate savings account, but I would use some of my tips to supplement my reporter income. For example, I needed to get a new car because I needed reliable wheels to get to reporting assignments, so I borrowed some cash from my bartending savings. I also planned to get a dog once I bought my house, so I saved an emergency savings fund if something were to happen to him as well. I'd also treat myself to a surf trip each summer. It was important to me that I never felt like I was completely depriving myself.
2. Waiting five years to buy is dicey.
Avoiding Private Mortgage Insurance (PMI) and having lower monthly mortgage payments in the future were my primary motivators in patiently saving for five years. This worked for me because while I was saving, the housing market tilted in favor of buyers. But I found out saving for so long isn't a financially wise decision all the time. For example, bucking up for PMI expenses would have easily made sense if housing prices and interest rates were steadily rising or if I was facing steep year-after-year rent increases.
3. Having 20 percent down will likely help your offer.
While I kept loose tabs of housing prices in my area to make sure they weren't passing me by, I had to stop myself from going to open houses or browsing homes for sale online because it induced major FOMO. I didn't want to fall in love with a house that would be snapped up before I was ready to make my down payment.
This ended up being a smart strategy because once I was ready to buy, a new townhome had just popped onto the market. From what I heard, the original buyer had lost her job on the day of closings. I put in a competitive bid in—what my real estate agent said was a couple thousand dollars under another potential buyer. My real estate agent was fierce (I knew this because she told me her favorite color was leopard) and she told the seller I had 20 percent down and good credit, and it was highly unlikely my financing would fall through. I sailed through closing, tossed my no-slip bartending shoes and visors, packed up my apartment and was in my new townhome within a month.
4. Your 30s will likely be more comfortable.
Yes, I sacrificed a lot of Saturday nights during my 20s, but I have a bachelorette pad I love and my affordable mortgage has given me some freedom with career choices. Since I've bought, the housing market in the Denver metro area has become daunting. Rental vacancies are consistently low, so rent is high. In fact, rent in Denver went up by 48 percent between 2010 and 2017. Buying has become more tough, too. A May 2018 report from online mortgage company HSH.com estimated that Denverites need to earn a salary of just over $87,000 to afford a home in the Mile High City.
Also by achieving this milestone relatively early, I had a lot more confidence to take risks in my 30s. Having an affordable mortgage was the nudge I needed to quit my job and give full-time freelancing a go. I've been able to build a career around writing about things I love—tequila, adventure travel, and the latest health research—something I wouldn't be able to do if I was saving for a down payment now, like many of my friends.
5. Working so hard for a down payment gives you a new appreciation for your home.
There's so much I love about my home and neighborhood, starting with the way the sunshine filters in each morning casting a glow prettier than any Instagram filter. The brick exterior is reminiscent of row homes and my front door is a cherry red. My next-door neighbor is a bakery; I live within a block of a library; and the burrito cart vendor I cross paths with nearly every morning tells my Boston terrier "no begging" before flipping him a chunk of sausage. The best part, though? A Light Rail station opened within a few blocks from my house. The transit line can zip me to downtown Denver in under 10 minutes, where I get to be on the other side of the bar, enjoying spicy margaritas.
Source: Anas, Brittany, November 20, 2018. How I Saved $40k in 5 years for a Down Payment
Katie Yancey, REALTOR | The Glover Team, Inc. | United Real Estate Premier
My name is Kelly Combs and I am a native of Fredericksburg, Va., born and bred. I grew up in the 80’s when Fredericksburg was a small rural town, and I had the joy of evolving from a child to an adu....
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