Extreme Budgeting Tips: Save Up a Down Payment Fast

by | BiggerPockets.com

You can’t (or at least shouldn’t) borrow every penny to buy investment properties—or a home, for that matter.

So, you need some of your own cash in the game. But where does it come from?

From saving, of course! From not spending every fricking penny you earn, demonstrating some discipline.

Below I outline a few ways to go about it. Some of these tactics are more extreme than others, but all of them require you to shape up financially and quit coddling yourself.

Cut the excuses, quit the whining, and start saving hardcore to achieve the fastest results.

How to Grow Your Savings—Fast

1. Get Rid of Your Housing Payment

Housing is the largest expense for nearly everyone. That’s actually good news, because you have plenty of options to eliminate it: one move to instantly save you 25 to 50 percent of your budget!

House hacking is an option of course. But you don’t have to move into a multifamily to pull it off. Options include housemates, Airbnb, and accessory dwelling units or casitas—whatever you want to call them.

Alternatively, you can find a job that offers free housing. My wife and I did that, moving overseas to Abu Dhabi, where her job at a school provides us housing. (And living here is awesome, by the way. Forget your stereotypes.)

2. Alternative to House Hacking: A Live-In Flip

Another option is doing live-in flips. You can live in whatever kind of home you want, don’t have to change jobs, and can gradually make home updates and repairs on your own schedule.

Of course, it means moving every year or two, as you complete your home repairs and sell it. That gets old.

It also means living in a constant construction zone—equally annoying.

But it’s an option, and you can take advantage of cheap financing through the FHA 203K program.

Related: The Top 10 Ways to Finance Your Next Property

3. Get Rid of Your Car Expenses

Transportation is the second largest expense for most people. It’s up to you to find a way to reduce it to its bare minimum.

According to AAA, the annual cost to own a car is nearly $9,000 for the average American. I can see you shaking your head right now and saying, “I don’t spend that much on my car each year!”

You probably do, between car payments, insurance, gas, parking, maintenance, and repairs. It all adds up.

You need that $9,000/year back. One option is selling your car and going carless. “But,” you splutter, “how will I get around?!”

You’ll walk, bike, take public transportation, carpool, take Ubers or taxis, and borrow cars when needed. It might require you to move to a home with easier access to these forms of transportation.

This is extreme budgeting, remember?

There is one alternative that allows you to keep your car. But you still can’t use it as much: you can short-term lease it to others on Turo, often described as “Airbnb for cars.” So, sometimes you’ll have access to your car (whenever it’s not being rented). And other times you won’t have access to it, so you’ll need other ways to get around.

Bike and walk everywhere, ideally. You’ll get in shape faster as you save money.

4. Stop Eating Food Not Prepared at Home

If it wasn’t made at home, you can’t eat it. Period.

No more restaurants. No more take-out, delivery, lunches out with friends. You’re in my world now, Grandma.

Learn how to cook. Batch your meals in advance. Brown-bag your lunches. Make enough for leftovers.

Any food not prepared by you is an entertainment expense, not a food expense.

And once again, you’ll get healthier as a by-product of this change. Save money, eat more nutritious food, lose weight. Win, win, win.

5. Stop Drinking at Bars or Restaurants

If you have to drink, do it in private homes.

Bars and restaurants mark up their drinks four times above cost on average. You’re going to stop paying to line business’s pockets.

‘Nuff said.

Group of four male friends drinking beer and eating pizza at home.

6. Stay for Free When You Travel

When you travel, stop staying at hotels.

Ideally, stay with friends or family. If that’s not possible, housesit to stay for free. Try TrustedHouseSitters.com and MindMyHouse.com.

Or do a housing swap. Reputable options include HomeExchange.com and LoveHomeSwap.com.

If you must pay to stay somewhere, find somewhere inexpensive on Airbnb.

7. Buy Used: Everything But Consumables

We can all agree there are some things you shouldn’t buy used. Groceries and toilet paper come to mind.

But nearly everything else you should buy used, if you have to buy it at all.

Furniture is a perfect example. It loses a massive amount of value as soon as it leaves the showroom and becomes the private property of its first owner.

Other home goods and appliances you can also buy used for pennies on the dollar.

Clothes are another example. Channel your inner Macklemore and hit up the thrift shop.

A few exceptions that you should buy new include linens, underwear, workout clothes, and workout shoes. Otherwise, your first thought should be, “How can I buy this used?”

8. Quit the Gym & Work Out at Home

A study published by Statistic Brain found an appalling 63 percent of gym memberships go unused.

Why? Because to cancel it is to admit that you’re not actually going to turn your fitness around and start going to the gym every day. And no one wants to admit that to themselves.

So don’t. Commit to a home workout routine instead, and cancel your gym membership. Right now, this second—stop reading this article, pick up the phone, spend 60 seconds on the phone with your gym, then keep reading. This article will still be here 60 seconds from now.

There are about a million free home workout routines on YouTube. I have a couple home yoga videos I do every week. I run every week, as well—also free. (I lift weights at the gym, too, but my gym is included for free in my apartment building, which I get to live in for free, as outlined above.)

The only cost you should incur for working out is your shoes and maybe a yoga mat. Any other costs demonstrate a lack of creativity on your part.

9. Ditch Cable & Other TV Subscriptions

Your mom had it right: TV rots your brain (and your body, and your marriage, and your social life, and your wallet).

Call your cable TV service right now and cancel it. If you absolutely must, allow yourself one—one—online streaming service, such as Netflix or Hulu or Amazon Prime. No more.

But you’d be better off getting rid of your TV entirely.

10. Put a Moratorium on Pampering

You may not pamper yourself until you’ve purchased your next property. No massages, no manicures, no pedicures, no facials, no spa days, no self-indulgent luxuries of any kind.

Do your own nails. Get your significant other to give you a back massage.

All pampering expenses are off-limits until you’ve reached your savings target and bought your next property. You can reward yourself after that.

gas, water, utilities, townhomes, multifamily, rental

11. Minimize Your Thermostat Usage

The greatest energy expense in your home is your climate control—heat in the winter, air conditioning in the summer.

Set your thermostat to the bare minimum acceptable usage. Yes, that means you’ll have to wear a sweater at home in the winter and throw an extra blanket on your bed. Get over it, and be grateful you live in an era of easy climate control in the first place.

12. Hang Your Clothes to Dry

Clothes dryers also use a lot of power and produce a lot of heat—a particularly wasteful process in the summertime.

Hang your clothes on a rack to dry instead. You’ll save on electricity, doing a favor for both the planet and your wallet. Again, it’s a win-win.

13. Buy Generic Brand Groceries and Drugs

Generic drugs, both prescription and over-the-counter, have the same active ingredients as their name-brand counterparts.

The only difference? One of them spends a massive amount of money on branding, ads, and research and development.

Likewise for groceries. In many cases, the generic brand products are literally manufactured in the same factory as the name-brand products, and the only difference is the packaging. It’s the most efficient method of mass-manufacturing, after all.

Related: How to Slash Your Food Bill in Half (AND Support Good Health)

14. Refuse to Pay Monthly Financial Service Fees

If you paid a monthly maintenance fee on a bank account last month, or any credit card interest whatsoever, you’re doing it wrong.

Close your bank account if they charge a monthly maintenance fee. Seriously—checking should be free. Open an account with Chime Bank or something similar instead.

And if you’re not paying off your credit card in full every month to avoid interest charges, you have no business messing around with real estate investing yet. Paying your credit card in full every month is Personal Finance 101, and you need to start doing it as of this month. It’s a higher priority than buying real estate, saving for retirement, investing in stocks, or anything else, because credit card companies charge more in interest than you’re likely to earn from any investment.

15. Automate Your Savings

This list is full of tips and tactics that all require a lot of discipline, which is a serious problem because most people just don’t have that much of it.

And what discipline we can muster today may not be there when we reach for it tomorrow.

So, don’t rely on discipline. Remove the temptation to spend, by removing the ability to spend.

Set up automated savings transfers to take place every single paycheck. The very first “expense” that goes out on your payday should be the transfer to your savings or brokerage account.

One option is recurring bank transfers, but you can also take advantage of automated savings apps like Acorns or Chime Bank’s app.

Final Word

“Average” and “normal” ain’t gonna cut it.

If you want to build above-average wealth, you need above-average spending and saving habits. If you want to build exceptional wealth, you need exceptional spending and saving habits.

This isn’t little league t-ball. They don’t give out participation awards in the game of building wealth. It’s absolutely, positively, 100 percent up to you to change your habits, stop spending so much money, and maximize your savings rate.

My goal for this year is a 65 percent savings rate! I’m currently at around a 50 percent, so I have a ways to go. I hope you join me in this financial boot camp!

What’s your target savings rate? What habits do you need to change to get there?

Let me know in a comment below.

About Author

G. Brian Davis

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their living expenses. Through his company at SparkRental.com, he offers free rental tools such as a rental income calculator, free landlord software (including a free online rental application and tenant screening), and a free masterclasses on how to reach financial independence within 5 years.

12 Comments

  1. Farris gosea

    lol, exceptional wealth isn’t going to come from cutting a gym membership sorry to burst anyones bubble. It comes from good knowledge in a field, maybe a good job, good business and planning. Then putting that into action in real estate. Sure you can’t live lavishly when your young, myself and my wife are 25 and 22 and make around 300,000 a year and put it all into real estate. However we still have gym memberships lol. If you are thinking this can make you super wealthy – 20 million plus its not going to happen saving a couple dollars here and there.

    • G. Brian Davis

      Yes, earning $300,000 a year helps. But the focus of this article isn’t how to earn more – that’s a whole separate topic.
      Most people spend too much of their income. This is an article about maximizing your savings rate, and going to extreme lengths to do it. In case the title didn’t make that clear 😉

  2. Dave Rav

    Thanks for the post. I know this is an “extreme” budgeting article, but I want to debunk and maybe refute some of this.

    You mention giving up car. Cars are so very helpful to the REI. Allows you to look at (and FOR!) properties. How would you cover significant ground efficiently driving for dollars? And what about hauling materials for that home? Lastly you cited $9k a year from that source as car expenses. If you have a bonafide biz, accounting deductions likely apply. So, savings apply.

    Gym expenses. Not (or don’t have to be) expensive. Therefore I wouldn’t call this an “extreme” tip. Some gym memberships are like $10-15 a month. Heck, it gets you out of the house and keeps you healthy. Go 2x a week and it easily pays for itself. If youre concerned about that $15 a month, IDK pick up two extra hours a month at your job and it’s paid for! Not worth the hassle of “cutting it out”.

    Lastly the house hacking. Never been a fan. I would have ONLY considered it up to my early twenties. Now, more mature and with a family, I have zero desire to live WITH my tenants OR move every 1-2 years. Firm believer of keeping my business and personal lives physically separate. When I’m home, I can “rest easy” and “away” from my biz. Home is my home, not a biz jaunt. That’s just me

    • G. Brian Davis

      I hear you Dave. Don’t get me wrong, I would pay for a gym membership, even if I didn’t get it for free. But then again, I go several times a week. But as mentioned above, almost 2/3 of gym members don’t go to the gym – ever. They basically subsidize the gym for people like you and me who actually use it.

  3. Tracy Williams

    Great tips on ways to reduce expenses, thereby minimizing slow leaks in the budget and using the “found” money to help build wealth. I particularly like the tips around making more meals at home and reducing visits to the bar, as yes, there are huge mark-ups there! And automation is king! Been doing it for 20 years, and haven’t had a single regret!

  4. Stephanie Robison

    Quite possibly the best article I have read on cutting your costs and saving money. Much better than the usual give up your daily Starbucks article I’ve been reading. Most of these suggestions are simple and doable if you want to badly enough. I’m going to be thinking long and hard about giving up the car and the bars!

    I have more work to do to really maximize my savings but I just bought my first investment property out of state and I really want to do this again. Here we go!

    Thank you for writing this. Really!

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