I saved $50,000 in 2 years for a down payment on my first house, thanks to a smart savings strategy we implemented from day one

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The author, Sarah Li Cain, wanted to save a 20% down payment for a home in Jacksonville, Florida.
She decided to work backwards. First, she and her husband did their research on home prices in the area and decided how much they’d want to spend. Then, they broke down that total into weekly savings amounts.
They also temporarily ramped down their retirement savings and discretionary spending to divert more money toward their down payment.

When my husband and I first moved to Jacksonville, Florida two years ago, we weren’t sure how long we were going to stay.

My husband had gotten a new teaching gig and we were excited to be in a place with warmer weather and close proximity to the ocean. We decided to rent and learn about the area, as we always do when moving to a new city.

Long story short, we loved it and made the decision to purchase a home in a neighborhood we liked. Both of us were nervous as I’m self-employed and we weren’t sure how the mortgage process was going to go. We also wanted to make sure we had plenty of cash for related purchases like closing and moving costs, so we made a goal to get really aggressive with our savings.

Less than two years later, we’d saved $50,000 — a 20% down payment for our first home.

We figured out our goal first, then worked backwards

My husband and I wanted to reach the 20% mark because we thought having enough cash for a down payment would increase our chances of getting a better mortgage, and we didn’t want to pay private mortgage insurance.

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Before we determined how much that 20% would be, we did some research. We started by visiting sites like Zillow and Realtor.com and setting up weekly alerts to see new homes for sale in the area we wanted. We also sought out open houses in our ideal neighborhood and looked at our preferences within different price ranges.

This research ended up being a crucial step, because it gave us a chance to assess how big of a house we really needed.

In the end, we realized we weren’t interested in a large house, which helped reduce our housing budget — a.k.a. lower the amount we needed to save for a down payment. Looking at homes before we were ready to work with a realtor helped us to solidify our goals for a home and how much we were willing to pay. It made it easier when it came time to set a goal for saving 20%.

We diverted our other savings temporarily, and automated them

Knowing our savings goal of $50,000 was helpful, but it also felt intimidating. The good news is that as a self-employed person, I can hustle and earn more if I want to. However, saving $50,000 still seemed like a faraway goal, so we sat down and broke down our savings goal into weeks to make it feel less intimidating.

We were already living off my husband’s paycheck and using mine for retirement savings and entertainment, so we decided to put my earnings towards our new house. At this point in my career I had some steady income, so we automated those savings each month by putting them, plus any extra cash we happened to have, in an Ally high-yield savings account we opened specifically for a house fund.

We had been saving aggressively for retirement, putting 35%of my paycheck towards my husband’s IRA and my solo 401k account. To divert more money into savings, we temporarily cut those savings back to 15%. We knew that once we had enough for a down payment, we would ramp up our retirement savings again. We also cut out some things from our budget such as eating out, buying new clothing, and movie tickets, knowing that it was temporary.

In about two years, we saved enough for our $50,000 down payment, plus managed to set aside an additional $10,000 for moving and closing costs. As we’d planned, we didn’t have to pay PMI, and our mortgage rate is about 4.2%.

We learned throughout this process that no matter how overwhelming a financial goal may be, breaking it down and being clear on what you’re trying to achieve helps, and it’s useful to look at what else is going on — it’s sometimes worth delaying process on one goal to make room for your current one, like we did by decreasing our retirement savings to increase our house savings.

Now that we’re closing on our first home, I’m happy we got so aggressive with our savings. My family and I are excited to move in a few weeks and turn our house into a home.

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