Saving for a down payment

Saving for a Down Payment: 5 Tips From a Millenial

Last updated on January 1st, 2021 at 05:17 pm

Saving for a down payment on a home is one of the biggest challenges young adults face today. Whether your looking to buy a condo, a townhouse, or a detached house, saving up even 5% can be extremely difficult. In this article, I’ll share how I saved over $180,000 for a down payment while living in a high cost of living city.

Down Payment Saving Tip #1: Set a Down Payment Saving Goal

Everyone looking to enter the real estate market always starts with a goal. For me, this goal was to own a detached house. Nothing too fancy, nor too expensive. I wasn’t hoping to buy in a downtown core, or live in a fancy neighborhood. My goal was to save for a down payment in 3 to 5 years, depending on the markets, and be able to enter the property ladder on a high rung.

There were a few reasons why I adopted this as my goal. The first being that I simply never liked living in apartments or townhouses. I disliked sharing walls with my neighbors and not having enough space. I considered pursuing a condo to be counterproductive. My end goal was to own a detached house, so in my mind it was a waste of money to purchase a condo only to sell it a few years later. For these reasons, I decided to set my goal higher – I wanted to buy a detached house.

Down Payment Saving Tip #2: Avoid Student Loans

Now before you say it, no, I don’t come from a rich family – not even close. So, unfortunately for me, my strategy for avoiding student debt was a lot less ‘sexy’ than receiving cash from the bank of Mom and Dad. I can break down my strategy into two main steps:

Live at Home, Not on Campus

For a bit of context, post-secondary education in Canada is actually quite affordable. Our taxes contribute a lot to help keep tuition low (that’s why tuition for university students is so high – they pay the “full price” for tuition). Whenever you hear about a Canadian with a huge student debt burden, more often than not that person lived on campus. By committing to living at home I was able to avoid paying rent and saved a huge amount of money on food, internet, and other essentials.

Work Early and Often

I started working quite young, while I was still a junior in high school. My passion for saving allowed me to start university with over $10,000 of my own savings. I continued working evenings and weekends throughout university. First with local department stores and restaurants, and later in small roles at the university. I eventually landed a co-op job placement in my field and was able to earn what felt like significant money. Finding that co-op placement was so helpful because it allowed me to pay off my last year of school and graduate with a nice cushion of savings.

Down Payment Saving Tip #3: Climb the Corporate Ladder

I was able to find a decent, entry-level job in my field after graduation. This wasn’t without some enormous efforts on my part. I spent an entire semester writing cover letters, tweaking my resume, and preparing for interviews. I was flown across the country multiple times but somehow landed a job in my province. Even though I didn’t start with a very high income, it was enough for me to save a decent amount of money each month. Soon after finding that job, I moved out to be closer to work and began to enjoy my newfound freedom as a fully-fledged “adult”.

But it wasn’t enough to be working in my field. If I was ever going to buy a home I would need to be earning more. To accomplish this I stayed late, took on extra responsibilities, and did anything I could to become a more valuable employee. Slowly, this paid off. After a few promotions, I found myself earning a decent salary for my area. Here’s what that progress looked like over the past 6 years:

Annual raises saving for a home.
Earning more helped me save for a down payment.

Down Payment Saving Tip #4: Save With a Partner

When my girlfriend and I moved in together it provided an opportunity to save even more money. Living together allowed us to split some costs, including rent. Working as a team of DINKs (dual income, no kids) we were able to rough it out in our tiny apartment and save thousands of dollars each month. To give you an idea, here’s a simplified breakdown of our average living expenses before we purchased our home last year:

Budget while saving for a down payment.
Our budget while saving for a down payment.

“Food” here includes groceries, dining out, coffee, and fast food. “Vehicle & Transit” covers our car payment, insurance, gas, and public transit. “Other” is for odds and ends like personal items, alcohol, fun activities, and gifts. Given all this information, you can see that our savings rate hovered around 65% while we saved for our down payment. By having such a high savings rate, we were able to accelerate our savings to approximately $5,000 per month in our last year of renting. We had some months where we saved over $6,000 towards our financial goal!

Down Payment Saving Tip #5: Avoid Lifestyle Inflation

Normally after getting a raise, or moving in with a partner, the desire is to get a better car, a better apartment, or go on a fancy vacation. It took a lot of patience to avoid these temptations and not let them reduce our ability to save. This meant continuing to drive our old car, vacationing locally or not at all, and planning our wedding very carefully to avoid it becoming too onerous of an expense.

In the end, the most important thing was to be persistent. Saving for a down payment – something that takes years – is truly an exercise of delayed gratification. Without being persistent and sticking to our goals, we’d still be years away from saving enough for a down payment on a home.

What I Would Have Done Differently

Looking back, there are quite a few things I would have done differently when saving for a down payment. First of all, I would have bought the first condo I could have afforded with 5% down… Just kidding! But had I done that, I probably would have reached my down payment goal much sooner. Back when I graduated from university I remember visiting an open house for a $300,000 1-bedroom condo in Burnaby, British Columbia. Similar condos in that building are now selling for over $500,000.

Saving for a down payment is a race against time.
Saving for a down payment is a race against time.

Now, “leverage all you can into real estate” probably isn’t sound financial advice. But it does give you some perspective as to how decisions like that, whether through foresight or luck, can have huge impacts on your financial future.

What I’d Actually Do Differently

Something I definitely would have done differently is that I would have avoided working so much in early university. At the time it seemed like the best thing to do, to work part-time so I could graduate without any student debt. Now I know that the time I spent at those part-time jobs unrelated to my career would have been better spent improving my grades, earning scholarships (although, I did earn some), and trying to make connections to mentors in my field.

Another thing I would have done differently is I would have lived at home for much longer. Instead of moving closer to work and paying rent, I should have lived at home and saved for a few more years. During that time I could have accumulated even more savings which would have helped me reach my down payment goal close to a year earlier. Alternatively, in those early years, I should have sought out roommates to help me save on rent.

A final thing I would have done differently is I would have avoided buying a new car. That’s right, I committed the cardinal personal finance sin. After getting a decent paying job I realized how much I hated taking transit to work (especially in the rain!). I ended up financing a modestly priced, new Toyota for approximately $250 per month. Now, it wasn’t all bad as this car has been extremely reliable. I can also credit it with allowing me to show up every day to work with an abundance of energy and a positive mindset. But at the end of the day, I would have benefited from purchasing a used car or at least moving closer to work. Alternatively, I could have moved closer to some of the main public transit arteries in my city.

Successfully Saving for a Down Payment

I’m quite happy with how I was able to reach my savings goal and purchase a home last year. Now that I’ve accomplished my goal, I can look back and think about how I would have navigated life a little differently. If you’re saving for a down payment like I was, I hope you can read about my experience and apply some of what I learned to your own life. I know that with a little knowledge and a lot of persistence, you too will be able to reach your financial goals.

I hope you enjoyed my little trip down memory lane! If you have, please leave a comment and sign up for my monthly newsletter! Follow me on my journey as I strive to reach financial freedom. Or read some of my other popular articles, like my tutorial on the best way to save money on Amazon or my review of the best Canadian dividend ETFs!

Are you saving up for a down payment? Or have you already bought a home? How did you save up for your down payment, and what would you have done differently? I’d love to chat with you in the comments below!

4 comments

  1. Great job saving up that much for a down payment. One of the most important parts of our journey was joining our finances and pooling our savings for the down payment. It seems more and more that to make it in a HCOL area, it takes two people dedicated to saving and living within ones means. Easier said than done, as most relationships don’t start with a financial audit!! LOL

    1. Thanks Money Mechanic! I totally agree… Finding a good partner in crime seems as necessary as getting a good job if you live in a HCOL area. And that’s not easy! It can be so hard to find a stable partner these days – my friends are constantly complaining to me and sharing their war stories. It’s even harder to find one that shares the same financial goals (and means).

      It’s either find a good partner or rely on your family. Otherwise it just takes sooo long to save up for a substantial down payment. And often, by the time you have, the market has moved away from you.

  2. Congrats on the success and blueprint for others.

    Hindsight is 20/20 and all, but sharing some thoughts about how you might have approached it differently is helpful! I wonder if you could have been close enough to skip transit and go straight to biking (or even walking!) to work?

    1. Hi Chris, I certainly think that could have worked. Moving much closer to work might raise my rent by $300 or $400, but my all-in car expenses were approximately $750 – financing, gas, insurance, regular maintenance… So I definitely left some additional savings on the table. Plus I’ve always wanted to be able to bike or walk to work. Now that I live even farther away from work I can say that ship has sailed!

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