What is a sinking funds 101 - Frugl

Sinking Funds 101: Everything You Need to Know About Sinking Funds

From all-inclusive vacations and purchasing a new car to home renovations like that kitchen upgrade you’ve been dreaming of and even getting ready for family celebrations, there are so many different things that every single one of us plans for which usually comes with a price tag.

But how exactly can you and should you be saving for these types of planned purchases? 

The answer: sinking funds

Having a sinking fund, or even multiple sinking funds can play an extremely important role in your financial life. By using a sinking fund, you’re essentially making it easier for yourself to prepare for future expenses by tucking away a small amount of money on a recurring basis until you’ve saved enough to either cover the full cost or hit some relative “saving goal”. 

Sinking funds go above helping you save for small and large planned expenses, they can also help you improve the way you manage your overall finances by keeping you motivated, focused, and picking up new money habits along the way. 

Ready to learn more about sinking funds and how you can leverage them? Don’t stop reading here.. Keep going 🙂

“What the heck is a sinking fund and how do I start  one?”

By now, I’m sure you can tell that we’re big fans of sinking funds around here. There’s a good chance that you also likely have a general idea that sinking funds come with benefits. But… you’re still not sold, right? No sweat, that’s what we’re here for. 

Keeping it as simple as we possibly can, a sinking fund is a dedicated, usually separate, type of savings account or “fund” (hence the name!), that allows you to put money aside for purchases and expenses that you’re planning for in the future. future planned purchases. Your sinking fund(s) usually align with what your priority savings goals are—saving for a trip to Mexico? Create a sinking fund for that. Saving for your wedding dress? Create a sinking fund for that. Saving for a… you get the point!

Sinking funds “work” in a similar way to other types of saving funds or even investment accounts that you’re familiar with; usually by saving a small amount of money on a recurring basis, which usually ends up being monthly, for a specific amount of time until you’ve reached your goal. By the end of this ‘period of time,’ you should, fingers crossed,  have enough saved to either cover the full cost of the expense or at least enough to cover the amount you were hoping for. 

Here’s how to calculate how much you should be saving

The question then remains, “how much money do I need to be saving monthly?”. Just like everything else, it depends.

In this case, it depends on two numbers. 

  1. The total amount you plan on spending (or thus needing to save); and 
  2. The amount of time you have until you are considering making the purchase. 

Once you have those two numbers figured out, your math becomes really simple—take the total amount you plan on spending and divide it by the number of months, weeks, or even days you have left until you plan on making the purchase. 

The number you’re leftover is the amount you’ll need to save on a daily, weekly, or monthly basis to reach your goal. 

Mexico here we come…in 12 months

Let’s have some fun and use an example of saving for a trip to Mexico to illustrate some numbers. For the purpose of this example, let’s assume that you’re planning on booking an all-inclusive, $3,000 trip to Cancun, Mexico in exactly twelve months from now. 

Using that simple formula above, we would divide the total amount of the trip ($3,000) by the number of months you have left until you need to make the payment (12 months), which gives us a number of $250

Based on those numbers and that timeframe, it looks like you’d need to save $250 every month over the next 12 months to reach your savings goal of paying for your $3,000 trip to Mexico.

“Why do I need a sinking fund?”

There are several reasons why you need a sinking fund or why you would at least consider using one… But the number one reason is this; because life happens

It’s inevitable that there will be purchases you either want to make or need to make in the near future. Without a sinking fund, you might just find yourself being “forced” to pay for those expenses by resorting to other sources such as pulling money from your emergency fund, dipping into your retirement savings, or even busting out your nearly-maxed-out credit card. Resorting to those options doesn’t do you any good, in fact, it means you’re jeopardizing your financial situation and compromising your future financial health. 

That’s what makes sinking funds so amazing— they allow you to plan for large (or even small), expected purchases without compromising your finances while still remaining on track in other areas of your financial life, such as your retirement. Taking advantage of using sinking funds can help you stay out of debt while avoiding feeling even the slightest pinch on your monthly budget. 

By using a sinking fund you can:

  • Save for large upfront costs without feeling anxious or intimidated.
  • Plan and save for those dream items.
  • Importantly, save and spend your money without regret.

“Are there different types of sinking funds?”

There really are no rules when it comes to what your sinking fund(s) should or shouldn’t be used for, that’s entirely up to you and your goals. However, every sinking fund can be placed into one of two categories: 

  1. Large planned purchases. Most sinking funds will fall into this category as this is the most common use of a sinking fund. Saving for that trip to Mexico we talked about above, your dream wedding, and a down payment on a new house are all examples of large planned purchases.
  2. Small planned purchases. Next, are the smaller planned purchases that a sinking fund can benefit. This would include things such as family birthday celebrations, home decor, camps and weekend retreats, or even saving for back-to-school clothing for the kids. 

When you break out your funds into these categories, it makes saving for and planning for just about everything else so much easier to understand what you’re working towards.

“What’s the difference between my sinking fund and my emergency fund?”

We get this question asked ALL the time. So, are there any differences between your emergency fund and a sinking fund?

While there are similarities, there is also a very distinct difference. 

Your emergency fund is a reserve of money used for unplanned and unexpected expenses that come your way–in other words, for “emergency” occurrences. This can include things like the sudden loss of unemployment and income, your furnace or air conditioning unit breaking down, or getting a steep medical bill that you didn’t expect. 

Sinking funds on the other hand, are explicitly designed to help you pay for those planned, expected expenses you know you’ll either need to make or want to make in the future. Examples include saving for family birthdays and celebrations, saving for an engagement ring or wedding dress, or even saving for an annual family trip or vacation.  

So, the important takeaway is this: your sinking fund is for the known, while your emergency fund is for the unknown. 

“Where should I create and keep my sinking fund?”

NOW this is what really excites us.. for obvious, slightly biased reasons 🙂

With that being said, best practice will tell you that you should be keeping your sinking funds in liquid savings accounts where you are earning a small amount of interest while knowing that you can access and pull your money at any time. 

It’s totally up to you how you structure your savings and your sinking funds. You can use one account for everything you’re saving for as long as you track how much money you’re assigning to each planned purchase or savings goal. While that works, it can become a little messy pooling your money together.

We recommend creating separate sinking funds (savings accounts) for each different item or savings goal that you plan on saving for. So, if you’re saving for that trip to Mexico we talked about above, a small down payment on a car, and a nice anniversary gift for your partner, then we’d recommend using three distinct, separate accounts so that you can allocate different amounts to each account while being able to track your progress separately.

Moving forward with your sinking funds

Here at FRUGL, we make it easy to create new savings accounts based on your savings goals, categorize them, create your total saving goal amount, along with the time you plan on reaching those goals. Once your accounts are set up and making automated contributions, you’ll be able to easily track your progress to see just how much you have left to save for each goal. 

20 Cheap Travel Destinations Across America For Fun-Filled Vacations - Frugl

20 Cheap Travel Destinations Across America For Fun-Filled Vacations

91% of Americans are looking to practice better money habits. So when it comes time for a vacation, don’t drain all your savings, or even worse, go into credit card debt. With over 19,000 cities in America, there are many fantastic places for a vacation outside of expensive towns like Waikiki, San Diego, Washington D.C., or Chicago. Below are 20 Cheap Travel Destinations across American to inspire your next fun-filled and budget-friendly vacation.

Before we dive into the 20 destinations, it’s important to remember that if you’re planning on saving for a vacation, Frugl has your back. We make saving for your next vacation, whether it’s to one of the 20 destinations below or not, extremely easy by giving you the right tools you need to create your savings goal, automate your savings, make monthly contributions, and improve your savings routines using science-backed, habit-forming principles. 

1. Florida’s Jacksonville

As the locals call it, Jax is located in the northeastern part of the state, making it a road-trip option for those in the southeastern United States. Whether you’re an explorer, historian, beach, or salt-life lover, Jacksonville has 22 miles of beach (the most of any city in the state!), an extensive park system, fishing, museums, and even a craft beer scene.

There are accommodation options for various budgets with 18,000 hotel rooms across chain hotels, inns, and bed & breakfasts. Also, you don’t have to spend a lot to discover Jacksonville’s beauty, vibrant arts, and culinary scene.  Bike along the Baldwin Trail, a lush, shaded path, before making your way over to Jacksonville Beach, a popular seaside destination where swimming and sandcastles await on its white-sand beaches.

Stop by the Jacksonville Farmers Market, one of the oldest markets in Florida, where seafood, fresh produce, and local delights line the streets. Afterward, walk The Riverwalk, take a scenic stroll along the St. Johns River before dropping into the Riverside Arts Market, a weekly arts festival free to visitors that features live entertainment. Finally, make sure you check out the city’s many fish camps (casual, inexpensive waterside fish restaurants) and try Mayport shrimp, chowder, and other authentic Florida seafood.

2. Florida’s Ocala

If you’ve ever dreamt of sleeping under the stars, add Ocala in Marion County, Florida, to your bucket list! Full of picturesque campgrounds, R.V. parks, charming cabins, and other budget-friendly accommodations, it’s one of many cheap travel destinations that might not be on your radar.

Ocala has so many free things for visitors to do! Stroll through Tuscawilla Art Park in the historic Art District, and enjoy the sculptures throughout nature. Then take yourself on a historical tour of the area, walk around the Ocala Historic Downtown Square or explore the Fort King National Historic landmark. After working up a sweat, kids can cool down at Lily’s Splash Pad or Citizens Circle Splash Pad. Finally, wrap up your trip by attending one of the many local events hosted by the Ocala Recreation and Parks Service, such as monthly outdoor movie screenings and line dancing events at the community center.

3.Florida’s Orlando

While pricey amusement park tickets could bust most vacation budgets, it may be surprising that Orlando actually belongs on a list of cheap travel destinations. With almost 500 hotels in the city, there are many travel deals to be had and tons of free activities. That’s why USA Today ranked Orlando the #1 Most Affordable Vacation Destination Among Top U.S. Cities.

You can get your Disney, LEGO, or Universal Studios fix for free at Disney Springs, Disney Boardwalk, or Universal City Walk, all chock full of tourist attractions.  Nature lovers can explore The Nature Conservancy’s Disney Wilderness Preserve and downtown’s 43-acre Lake Eola Park with no admission fees. Or enjoy free admission to The Charles Hosmer Morse Museum of American Art, Cornell Fine Arts Museum, or CityArts.

4. Idaho’s Twin Falls

Known as The City of Waterfalls, Twin Falls has over 30 of them, including The Niagra Falls of the West, Shoshone Falls, which is even taller than its New York counterpart. While you could spend your entire trip swimming, hiking, boating, or relaxing in Shoshone Falls Park for less than $10 admission, this affordable destination has a long list of free hiking and outdoor sites. For thrill-seekers, activities are reasonably priced, such as renting Snake River kayaks for as little as $15.

According to Idaho Tourism, hotel rates on average are $120 a night, with options even under $100 a night. With lava fields, summer fairs, historical sites, and cowboy culture, there’s something for almost everyone in Twin Falls.

5. Iowa’s Council Bluffs

Perfect for those looking for cheap travel destinations for a family vacation, visitors call Council Bluffs a pleasant surprise. Located on the east bank of the Missouri River, across from the city of Omaha, Nebraska, it’s a great alternative in the region. With 25 hotel options in Council Bluffs alone, there are accommodation options for a range of budgets as well as free and inexpensive things to do.

If you’ve always wanted to stand in two places at once, take a stroll over the beloved Bob Kerrey Pedestrian bridge connecting Council Bluffs to Omaha. Train-lovers will enjoy the free-of-charge Union Pacific Railroad museum featuring 150 years of history and interactive exhibits. Or enjoy budget-friendly family vacation classics like disc golf, mini-golf, bowling, indoor go-karts, public art, and bike trails.

6.Iowa’s Mason City

Architectural lovers and fans of Frank Lloyd Wright will enjoy a getaway to Mason City, one of America’s relatively unknown cheap travel destinations.  Select nights are available for $150 at the Historic Park Inn Hotel, the last remaining hotel designed by Frank Lloyd Wright in the world.

Another Wright-designed property, the Stockman House, is also open for tours for only $10 a person. Or enjoy a self-guided walking tour through The Rock Crest & Rock Glen neighborhood, showcasing the largest group of Prairie School-designed homes on a unified site.

7.Massachusetts’s Berkshires

The Berkshires in western Massachusetts include part of Vermont’s Green Mountains and over 30 towns. Nature lovers, or those looking to escape the hustle or bustle of Boston, or New York City, will fall in love with all the region offers. See why it’s been named one of The 12 Last Great Places by The Nature Conservancy. While the region has luxury resorts and high-end hotels, it is also one of the Northeast’s cheap travel destinations with a wide range of accommodation options.

Besides a nature-lovers paradise, it’s also known as a mecca for the visual and performing arts. Between the MassMoca, Tanglewood Music Center (the Summer home of the Boston Symphony Orchestra), Barrington Stage Company, and the longest-running dance festival, Jacob’s Pillow, there’s so much to see!

You can save money for performance tickets by booking a condo resort stay on Tripbeat by Wyndham, starting at $210 for an entire week. Take your pick of resorts in South Lee, Lenox, Hancock, and Great Barrington. With a fully equipped kitchen, you can cook some of your vacation meals yourself to afford even more concert tickets.

8. Missouri’s Branson

Branson is not only the #1 best value in U.S. travel according to Trivago but is described as the Orlando of the Midwest for its Disney World meets Nashville vibe. Drawing vacationers for over a century to its stunning scenery, outdoor activities, warm people, and a wide range of things to do, it’s not a surprise that 9 million people a year visit Branson.

With 16,500 guest rooms across resorts, brand-name hotel chains, independent inns, cabins, condos, timeshares, and vacation homes, you can find accommodations for your budget. Like other cheap travel destinations on this list, cities with tons of hotel rooms often have great deals available.

While Branson does have over 100 live shows that could empty your wallet, it also offers tons of free things to do. Explore historic downtown Branson on the hop-on-hop-off trolley, check out Branson Landings’ hourly water spectacular show, take in Ozark Mountain views at scenic overlooks, or explore all that Table Rock Lake State Park and Lakeside Forest Wilderness Area have to offer.

9. Missouri’s St. Louis

Home to the iconic Gateway Arch, St. Louis boasts an abundance of free fun and reasonably priced accommodations perfect for those looking for cheap travel destinations in cities. With more than 40,000 hotel rooms ranging from $54 to $248, the average hotel room price in St. Louis is a wallet-friendly $93.

Explore the Gateway Arch National Park and its surrounding grounds or explore the recently renovated Museum at the Gateway Arch, a free hands-on experience. Then, spend the day at Forest Park, where visitors can stop by the St. Louis Zoo,  the St. Louis Art Museum, the Missouri History Museum, or the Saint Louis Science Center. Visitors can stroll through the Laumeier Sculpture Park, one of the country’s first and largest sculpture parks. Every single one of these St. Louis attractions is free, with no admission charge.

10. Nevada’s Las Vegas

With super affordable hotel accommodations, all-you-can-eat buffets, and local casual restaurants, plus a long list of free activities, Vegas is another one of the urban cheap travel destinations on this list.

With over 150,000 rooms in town, there are always travel deals available. With many large resort casinos not relying on room rentals to make money, you can find hotel rates at fantastic resorts for under $100 a night.

Fill your day in the Entertainment Capital of the World touring attractions without paying for admission. Whether it’s seeing Chihuly’s stunning blown glass sculptures, touring a botanical garden, or catching the infamous water fountain show, it’s all available free of charge at the Bellagio Hotel. At night head to historic Fremont Street to watch the pedestrian area studded with more than 14 million lights come alive and check out one of the city’s free concerts with acts like Three Doors Down and Plain White T’s.

11. New York’s Catskills

A go-to escape for centuries, there’s always been magic in a back-to-nature Catskills vacation. Less than 2 hours from New York City and about 3 hours from Boston, you’ll feel away, even if you’re close to home. See for yourself why it’s a Lonely Planet Top 10 region in America.

Long gone are the resorts depicted in Marvelous Mrs. Maisel,  as millennial entrepreneurs, hoteliers, and restaurateurs from New York and other cities help modernize the region once again.  From hotel chains, cabins, small inns, and hotels, there are many budget-friendly options in the region, such as Jesse’s Harvest House Restaurant and Lodge. Opened by former staff at the best restaurant in the country, Michelin-rated Blue Stone at Stone Barns, you can stay in a room for around $125 a night and enjoy a delicious, elevated meal for a fraction of the price.

From month-long free Octoberfest Festivals to hiking infamous Kaaterskill Falls to exploring small towns like Tannersville, NY, and their no-cost Mountain Top Arboretum, there’s so much to do. Art lovers can step into the infamous Hudson River School of Art by visiting the exact public locations of their paintings from 200 years ago. Three of the Art Trail locations are in North/South Lake, a 1,000-acre state park named “America’s First Wilderness” with so many activities you could spend a weekend there alone.

12. North Carolina’s Fayetteville

Known as America’s Hometown for decades, it’s not just one of the most accessible cities on the East Coast (located halfway between New York City and Miami), but its low cost of living translates into a great vacation on a budget.

In Fayetteville, there’s something for everyone. It’s home to two regional parks, more than 1,000 acres of recreation space, trails, lakes, and a new minor league ballpark with affordable tickets.  Chock full of historical sites like The Airborne & Special Operations Museum,  The Fayetteville Area Transportation and Local History Museum, and The African American Heritage Trail, all of which have free admission.

13. Oklahoma’s Chickasaw Country

Tucked into the rolling hills of south-central Oklahoma, Chickasaw Country is a low-budget destination that provides a high-quality outdoor experience. In addition to an abundance of picturesque campgrounds and R.V. parks, the area boasts a wide array of charming boutique accommodations for a serene, romantic getaway.

Couples can stay at Cedar & Stone, Pecan Valley Inn, or Acorn Vacation Homes, with hotel rates under $200 a night on average. The Arbuckle Mountain Range provides not only stunning vistas but plenty of free or low-cost outdoor adventures to keep visitors busy. Hike, bike, or run through the endless miles of trails found in the Chickasaw National Recreation Area to catch glimpses of nearby natural wonders, including the Lake of the Arbuckles, Turner Falls, and Veteran’s Lake.

14. Pennsylvania’s Lancaster County

Located in the heart of Pennsylvania Dutch Country, Lancaster County is a great value destination and within driving distance from Pittsburgh, New York, New Jersey, Washington D.C., and Virginia. There’s a wide range of lodging options with many motels, hotels, farm stays, country bed and breakfasts, and house rentals in the $100 to $150 a night range. Cheeky couples can stay in one of the many accommodations in the town Intercourse, PA.

There really are enough things to do in Lancaster to keep busy for months. For starters, learn about the Amish way of life at Kitchen Kettle Village or Lancaster Central Market, the nation’s oldest continuously operating farmers market. Bike ride along the 14-mile Northwest Lancaster County River Trail or explore Lancaster County Central Park. After you’ve worked up an appetite, go out to dinner at one of the many Pennsylvania Dutch all-you-can-eat reasonably priced smorgasbords like the family favorite Good ‘N Plenty.

15. Pennsylvania’s Pocono Mountains

For more than 50 years, the Poconos Mountains welcomed honeymooners to their famous heart-shaped tubs. But its proximity to major metro areas, endless natural beauty, year-round activities, and wide range of accommodations lands it on this list of cheap travel destinations for families or group trips as well.

The large region offers a range of budget-friendly accommodations from camping, glamping, inns, resorts, and vacation rental deals. You can rent a cabin at Promised Land State Park for about $40 a night or score condo resort rental deals for as low as $87 on Tripbeat.

Featuring many national, state, and local parks, bring a picnic lunch and explore Lehigh Gorge State Park, Prompton State Park, Promised Land State Park, or Tobyhanna State Park, to name a few!

16. South Dakota’s Hot Springs

Escape to this small town that offers so much! Located in the Southern Black Hills, take in all the landscape offers from the historical Mammoth Archaeological Site, Angostura Reservoir State Recreation Area, and Wind Cave National Park.

There are options for every budget with a wide range of chain hotels, R.V. sites, KOA cabins, small inns, and bed and breakfasts.  Couples will love to get away and relax in the mineral health spas and can enjoy adult-only budget-friendly accommodations like Bluebird Mesa Cabins that offers glamping, teepee, and cabin rentals at affordable prices.

17. South Dakota’s Yankton

Both outdoor enthusiasts and history buffs will enjoy the small town of Yankton. Located along the Missouri River, take your pick of water recreation activities, fishing, or exploring the Lewis and Clark Recreation Area, one of the state park system’s most popular parks. Located on the northern shore of the 31,400-acre Lewis and Clark Lake, it features over 20 budget-friendly activities.

The downtown is bursting with history, budget-friendly dining, and breweries and offers a range of accommodations giving South Dakota at least two cheap travel destinations for you to consider.

18. Tennesee’s Smoky Mountains

The Smoky Mountains ranks among the Top 10 Most Affordable Travel Spots by Lonely Planet, only one of two American cities to make the list. Home to not only the most visited National Park in America but the family favorite Gatlinburg and Pigeon Forge towns, it’s one of the most popular cheap travel destinations on this list.

Smoky Mountains National Park not only contains some of the tallest mountains in North America, including Clingmans Dome, Mount Guyot, and Mount LeConte, but all of its 500,000 acres can be explored free of charge!  The region is also home to the iconic amusement park Dollywood, a TripAdvisor Best Amusement Park in the World, and Budget Travel’s Best Value Theme Park. Meaning you can make thrilling family memories even on a budget.

19. Tennessee’s Chattanooga

One of the most popular cheap travel destinations for families in the Southeast, it’s been named by Lonely Planet as one of the Best Destinations in the U.S and a New York Times Top 45 Places to Go in the World. While outdoor enthusiasts have been coming here for decades, a recent urban revitalization has drawn a growing number of people to this city tucked between mountains along the stunning Tennessee River.

There are accommodations to meet a wide range of budgets from hip modern hostels, cabins, romantic bed and breakfasts, chain hotels, and even railroad sleeper cars. Explore the city on a bike, pedaling over the longest pedestrian bridge in the world to reach Coolidge Park, or hike the stunning mountains at  Point Park or Coker Creek Falls.

20. Virginia’s Shenandoah Valley

Even in high-cost of living areas, you don’t need to go far to find cheap travel destinations! If you’re one of the 6 million people who live in the Washington D.C. metropolitan area, you don’t need to spend an arm and a leg for a weekend getaway or fun-filled family vacation. About 75 miles from D.C., the Shenandoah Valley features a national park, caverns, history, water parks, music, art festivals, wineries, breweries, and distilleries.

Go on a day-long road trip along the 105-mile Skyline Drive to marvel at the Blue Ridge Mountains and its vistas. Next, explore the Shenandoah National Park’s 500 miles of hiking trails or 200,000 acres of protected lands for $30 a car. Then, retire back to a wide range of chain hotels, cabins, campsites, or resorts like Massanutten, the Mid-Atlantic’s Premier Four Season Resort Destination, where you can score condo rental travel deals from a timeshare owner for as low as $100 a night.

These 20 Cheap Travel Destinations will be waiting to welcome you on your next road trip, couples getaway, family vacation, or honeymoon!  You don’t need a lot of money to make memories. There’s no need to blow your hard-earned savings to explore our beautiful country. Instead, you can save money by visiting off the beaten path towns, booking resort deals, or filling your days with inexpensive and free activities!

This post originally appeared on Savoteur.

How to save for your first home - Frugl

How to Save for a House: 10 Ways To Make Your Biggest Purchase Ever!

Buying a home may be the biggest purchase a person can make. And, with home prices rising, it can also feel intimidating or even impossible, especially for a first-time home. However, there is no need to fret. If you’re wondering how to save for a house, you’re in the right place!

Before you start looking for a real estate agent, take some time to self-reflect on your current financial situation to develop a plan for success. Here are ten ways to help you save for a house and make your biggest purchase ever.

What Are the Costs When Buying a House

According to the National Association of REALTORS the median existing-home sales price for March 2021 was $329,100. Unless you have hundreds of thousands of dollars to spend, you most likely will work with a bank to finance your home purchase. Thus, the two main costs you need to save up for are down payment and the closing costs.

Down Payment

A down payment is an out-of-pocket expense a homebuyer will pay when financing a purchase. The amount is usually a percentage of the purchase price, which can vary depending on the type of loan.

For example, a 10% down payment for a purchase price of $200,000 is $20,000. Therefore, a homebuyer would need to bring $20,000 when signing closing documents while the bank will finance the remaining balance of $180,000.

Closing Costs

When financing a home purchase, there are several closing costs, such as an appraisal fee, termite inspection, and escrow fee. However, unlike a down payment, a homebuyer won’t know the exact dollar amount due until a few weeks or days before closing on the property.

Therefore, as a safe estimation, the closing cost is usually about 2% to 5% of the loan amount. For instance, homebuyers with a loan amount of $180,000 can estimate to pay about $3,600 to $9,000 in closing costs.

Moving Expenses

Although moving expenses are not as large as a down payment, it is still a cost that buyers should save up for. If you have a small family and only have small items, you can save a lot of money by transporting your family’s personal belongings in your car or a friend’s truck.

However, if you have larger and heavier items, you can rent a moving truck or hire a moving company. According to Moving.com, the average cost of a local move is $1,250 and $4,890 for a long-distance move.

How Much is Down Payment?

The down payment amount is usually a percentage of the purchase price. However, depending on the loan program, the percentage can vary. Determining which loans you qualify for is one of the first steps on how to save for a house. The requirements can change every year. So, be sure to check with a mortgage professional to get the latest details.

FHA Loan

The federal government insures a Federal House Authority (FHA) loan. However, the government doesn’t provide the loan to homebuyers. Instead, this program allows lenders to offer a low down payment requirement. The government will ensure the loan in case the borrower stops paying.

According to U.S. Bank, the minimum required down payment for an FHA loan is only 3.5% of the purchase price. Therefore, a 3.5% down payment for a $200,000 purchase is $7,000.

203k Loan

A 203k loan is a subset of an FHA loan based on section 203(k) of the National Housing Act. This program follows the same rules as an FHA loan and includes rehab expenses as part of the loan. Thus, homebuyers can buy a distressed property in need of significant improvements but at a meager purchase price.

VA Loan

The U.S. Department of Veteran Affairs created the VA loan, which is similar to the FHA loan. This loan’s critical difference is exclusively for U.S. service members, veterans, and eligible surviving spouses.

A VA loan doesn’t require any money down nor private mortgage insurance. Additionally, a VA loan allows a seller to pay 100% of the closing costs, unlike an FHA limiting a seller to 3%. Therefore, a homebuyer who qualifies for a VA loan doesn’t have to save up for a down payment.


A USDA Loan is short for the “USDA Rural Development Single Family Housing Guaranteed Loan Program.” Like a VA loan, this program also allows a homebuyer to fully finance a home purchase, which means a down payment isn’t required.

The property must be a rural single-family home and low to moderate-income homebuyers based on the county’s median income to qualify for this program. Speak with a mortgage professional within your area to check your eligibility.

Conventional Loan

A conventional loan is a loan that is not part of a specific government program. The down payment ranges from 5% to 15%. Therefore, a 5% down payment for a purchase of $200,000 is $10,000.

Why Do People Want a 20% Down Payment?

Home borrowers that make a down payment of less than 20% are typically required to pay for private mortgage insurance (PMI). This insurance is not the same as home insurance. Instead, the purpose of a PMI is to protect a lender if a borrower defaults on their payment.

Thus, on top of the mortgage payment, property insurance, and property taxes, some homeowners will also have to pay for PMI. However, some homebuyers don’t mind paying the PMI because they prefer a lower down payment.

Some loan programs don’t allow you to remove the PMI. On the other hand, some programs will allow PMI removal when the balance is 80% of the original purchase. Homeowners can make extra payments towards the principal balance to accelerate the debt service payment. Alternatively, homeowners can refinance the property and take advantage of the house’s appreciation.

How Much Can You Afford?

Before you start looking at potential houses to buy, it’s essential to know how much you can afford. The general rule of thumb is that the mortgage payment should be no more than ⅓ of your monthly household net income. For example, a person with a monthly net income of $2,500 should aim to have a mortgage payment of no more than $833 a month.

Although this rule of thumb is a quick and easy way to calculate a rough estimate of how much you can afford. Any homebuyer needs to review their financial situation in detail thoroughly. Mortgage payments can easily vary due to property taxes and home insurance and can quickly increase your monthly expense.

Where to Save Your Money

It’s best to save money in a high-yield savings account, such as a money market account. Your account may not accrue a lot of interest. But, you avoid risking your savings by not putting it in an investment account, such as stocks or REITs.

10 Ways to Save For a Down Payment

1. Track Your Expenses

Before you can start putting away money for your down payment, you first need to identify and track all your expenses. Whether the cost is paying for utilities or entertainment, track it all.


With the help of online banking, you can see all your transactions in one place. Reviewing your expenses might even surprise you with some items you were unknowingly paying for. Knowing how much you spend on expenses will give you an accurate idea of how much you will have leftover from your paycheck.

2. Create a Budget

After you track all your expenses, it’s crucial to create a budget. A budget does not mean taking the fun out of your life. Instead, a budget is the best way to make sure you have enough money every month. For example, you budget $100 a month for dining out. If you already have exceeded that amount for the month, you will have to postpone any dining plans until next month.

3. Automate Savings

Creating a budget is a great way to be fiscally responsible. However, it can be tempting to spend your paycheck once it hits your checking account. To help overcome this temptation, you can set up automatic transfers to your savings account.

Talk to your payroll department to have them transfer a certain amount or percentage to your desired account. As another option, you can set up an automatic transfer with your bank. Automating your savings is a simple way to keep you honest with your savings.

4. Reduce Expenses

If you don’t have much money, an easy way to start saving is by reducing your expenses. For example, instead of buying lunch when you’re at the office, consider bringing your lunch.

Also, get rid of unnecessary expenses. That’s fantastic you signed up for a gym membership after the new year. But, if you’re not using it, you’re better off canceling it to keep more money in your pocket.

Consider living stingy and downsize, if possible. You’re not cheap. Instead, you are more intentional with your money. For example, you can trade in your car for a more affordable vehicle or change your cell phone plan. Or move into an apartment with more affordable rent while you work on building up your down payment.

5. Increase Your Income

Aside from reducing your expenses, another way to save for a house is to increase your income. One way to accomplish this task is by requesting a raise from your employer. However, be sure to back up your request with data to justify a promotion.

If you’re unable to get a substantial raise from your main hustle, consider a side hustle to create a second income stream. Depending on your current career, you can leverage that to your advantage to make money in your spare time.

Additionally, if you have an extra bedroom to spare, you could house hack your current residence and rent out the room for extra income. Be sure to consult with your landlord before advertising for a roommate.

6. Postpone Major Activities

You might call me a killjoy, but another option to save for a house is to postpone significant activities or events, such as a family vacation or concerts. Saving on travel alone can save you hundreds and even thousands of dollars.

Remember, I said “postpone” and not “cancel.” There will always be another opportunity to live that experience. At least once you have your house, you can hang those memories in your new home.

7. Get Rid of Debt

Getting rid of debt is another excellent way to help you buy a house. Not only does it reduce your monthly expense, but it can also make you favorable in the eyes of your lender.

According to Experian, two of the four significant factors mortgage lenders consider are payment history and credit utilization ratio. Lenders want to make sure potential borrowers have a good track record of paying on time.

Also, lenders use the credit utilization ratio to determine how much a borrower’s balance is compared to their credit limit. The lower the ratio, the more favorable a borrower, is to a lender. Therefore, it pays to pay down your student loans and credit card debt.

Additionally, lenders will also check a borrower’s debt-to-income ratio (DTI). This ratio compares how much a person owes to how much they earn a month. The better your DTI, credit utilization ratio, and other factors will help qualify you for a loan program to your advantage.

8. Save Your Windfall Income

There will be moments you’ll unexpectedly receive extra income, such as bonuses, gift money, tax refunds, and stimulus checks. Instead of splurging that surprise money on consumer products, save that extra cash in your separate savings account to help you get closer to your goal.

9. Sell Your Things

Another way to boost your savings is to sell items you no longer use. For example, if you’re no longer planning on having kids, you can sell that Spectra S2 to another mother in need. Not only can you make extra money, but you’ll also be reducing your belongings, which can have a positive effect on moving expenses.

A few options to sell your items are holding a garage sale or listing items for sale on Facebook or Craigslist. Aside from selling your TV or video game console, you can go as far as selling your barely used vehicle.

10. Pause or Reduce Retirement Contribution

It’s essential to make regular contributions to your retirement account, especially when you’re young and have time on your side. However, if you need a little more capital to save up for a down payment, you can temporarily pause or reduce your contribution to your 401k or IRA.

Keep in mind that you’ll lose the tax benefits of not contributing to these retirement accounts. Thus, it’s crucial to weigh the pros and cons of pausing or reducing your contributions. You may find more profitable avenues to save more money or may just need to extend your timeline when you can reach your savings goal.

Final Words

Owning a house is a great way to create generational wealth. So, as early as now, start reaching out to various mortgage professionals. A seasoned mortgage lender can help you navigate the financing process and help identify mortgage loan programs that work well for you. They can also let you know what credit score to work towards to get a better interest rate.

While you work on saving up for your down payment, also focus on building good money habits and practice budgeting for monthly payments. So, once you’re ready to make an offer and buy a home, you’ve already developed a habit.

This article originally appeared on Your Money Geek and has been republished with permission.

The Everything Guide to FRUGL- A Money Saving App that Helps You Save Money Fast

The Everything Guide to FRUGL: A Money Saving App that Helps You Save Money Fast

Reach your financial goals quickly while you live your life. 

Want to finally pay off your student debt? Need help planning how to save money for a house or how to save money for a car? Looking to save for an amazing vacation? 

FRUGL is a savings goal app that will set you up for success and make you feel pretty darn confident in your financial future. 

Here’s why: Saving is the first, most important step to financial self-care. And FRUGL makes it effortless to budget and save money fast.

Forget fancy investment apps, credit cards with points and flashy cash-back incentives. While they have their benefits, your first priority should be paying off debt and accumulating wealth. 

The most crucial part of any financial plan is putting money away — money toward your student loans, your credit card debt, your TFSA and your RRSP, toward that new pair of boots that keeps popping up in your Instagram feed. 

And once you have your savings plans in place, you will feel good

That’s why we’ve created FRUGL. Our money saving app allows you to set up all your savings goals clearly — and plan the strategies to meet those goals — in one place thanks to our mobile-first technology. 

We’ve developed a system where you can choose ways to save that fit with your lifestyle, where you’ll no longer have to guess how much you’ll need to put away and for how long. You can monitor your progress easily in one place. You’ll even learn and adjust along the way. 

The first step: Set up your saving money GOALS

Once you’ve quickly set up an account using your phone number (for security only — we will never spam you), FRUGL will prompt you to set up goals that are important to you. 

Choose as many as you’d like. Think: debt payment, retirement, emergency fund, a dream vacation. 

Let’s say you choose a vacation goal (why not?). You opt for Thailand (why not?). You know you want it to be epic so you decide to save $3,000. Great. Set your GOAL’s profile pic to a palm tree and you’re ready to start planning how — and when — you’ll meet your goal. 

Before we jump to STRATEGIES though, let’s take you through some of the more, err, serious savings goals. We know how important it is to get the details of your end goal right. Whatever your goal, FRUGL will guide you toward choosing the right amount so you are set up for success. If you want to save toward your retirement, for example, FRUGL will ask you what age you want to retire, your income and with what amount. If you opt to add a debt payment goal, FRUGL will calculate the time it will take based on the debt amount and its interest rate. House down payment? Yup. We’ll take you through that process, too. 

Choose your STRATEGIES (the real secret to how to save money) 

Now, here’s where the fun starts. Every goal needs a solid strategy. So, we’ve tailored different ways for you to grow your savings that suit your lifestyle (and make it fun along the way). You can pick and choose as many as you wish. 

Cruise Control: Save the same amount every single month. (Ah yes, the ol’ tried and true.) 

Pay Yourself First: Save part of every paycheck you get — either an amount or percentage, up to you! 

Loose Change: FRUGL rounds up every purchase and puts the spare change into your savings automatically . (You’d be surprised how fast this can accumulate.) 

Treat Yourself: Choose a store you love to shop at (and that, consequently, makes quite a dent in your paycheck). Instead of cutting it out completely, match your spending at that store with automatic savings. Live your life and save at the same time.  

Skip your Coffee: Pick a few days a week to skip buying your coffee (don’t worry, you can make it at home) and put that money into your savings.

Healthy Rewards: Every time you hit a certain number on your step counter you commit to moving a specific amount into your savings (say, $10 every 10,000 steps).

Set as many of these STRATEGIES as you like — the more you choose, the faster your savings will grow and the less you’ll have to compromise your lifestyle. Then FRUGL will give you a projection on the timeline based on your choices. Feel free to tinker back and forth to adjust.

Once you’re satisfied, sit back and watch your savings grow and your goals get closer to reality. 

Save Money Fast and Securely through Automatic Transfers from your Bank 

Once your GOALS and STRATEGIES are in place, connecting FRUGL to your bank is easy and safe. 

Each of your GOALS has its own CDIC-insured high-interest savings account.. There are no sneaky fees, no limits on withdrawals and no minimum balance required. And you can easily monitor each transfer through the app. 

We’re not a bank, but we do work closely with banks and we use bank-level security (256-bit encryption). 

How to Save Money Today for an Awesome Tomorrow: Sign up for FRUGL 

We have goals too! We strive to be the top money-saving app in the United States and Canada, and we’re currently looking for early beta customers who will be able to use FRUGL completely free! We’ll be the best app for your saving money-goal — sign up today and watch your savings grow. 

Visit FRUGL and start saving today

How to avoid awkward money situations this holiday season

How to avoid awkward money situations this holiday season

There are so many wonderful things about the holiday season: the music, the cookies and cocoa, the lights, and of course, all of that time with your loved ones. But, the holidays also bring some pretty awkward situations, especially when it comes to money.

Let’s take a look at a few awkward holiday encounters that you should aim to avoid this holiday season.

You waited until the last minute

It’s no secret that 2020 has done a number on Canadians’ savings accounts and budgets. According to new statistics, 45 percent of Canadians surveyed said they plan to spend less on holiday shopping this year than in past years. So, family gift-giving may be particularly awkward this year if you have little room in your budget for extra spending.

One way to avoid the awkward situation altogether is to put aside a special savings account early for holiday gifts. You can decide how much money to set aside out of every paycheck, depending on your family’s size and how many gifts you will need to buy. Come the holidays; you can dip into your holiday account without worrying about going into debt or not being able to get Cousin Johnny that new Playstation game that he wants so badly.

Another tip to avoid an awkward morning under the tree is to set a family gift budget every year. Gifts are a huge part of the holidays, especially for the kids. But as our families grow, unfortunately, our budgets don’t grow with them, nor does every family member have the same budget. A family budget will ensure that you don’t gift cousin Drew a $10 gift card while he gets you a $300 pair of earrings. This allows an even playing field for all family members. If you have a large family and you can’t afford to buy gifts for 15 cousins and 20 nieces and nephews, consider a family Secret Santa gift exchange. You can set a dollar amount and stick within your budget by only worrying about getting a gift for one extended family member.

The bottom line is, setting a budget well in advance and putting money aside throughout the year will make your holiday spending a lot less stressful and a lot merrier. If you’re not sure how much you’ll need, there are online budgeting tools you can use. Then, you will be able to actually have fun with your holiday spending, knowing that you already have the money set aside and without worrying about going into holiday debt. Nothing ruins the Christmas spirit faster than a huge credit card bill that you can’t pay.

You keep getting pressured to donate to a charity 

With approximately 86,000 registered charities across Canada, and with so many ways to give, there’s no shortage of options for Canadians for charitable endeavours. Around the holidays, there is tremendous pressure to donate to charities.

Whether you can’t afford it, you’ve already donated to several holiday charities, you don’t believe in the charity’s mission, or you simply don’t want to, saying no can be awkward and leave you feeling like the Grinch. A survey by CouponCabin.com found that 34 percent of respondents said that being pressured to donate to a charity by a co-worker, family member, or friend is the most awkward situation.

Just like we recommend setting aside a special savings account for holiday gifts, you can avoid having to turn down your co-worker’s son’s charity donation request again by saving up throughout the year. Create a savings account, especially for charitable donations. You don’t have to add to this account as regularly as a typical savings account or your holiday gift account. But even throwing $20 in there every few months will ensure that you at least have something to give when the charities come calling this holiday season.

Then, if you go over your charity budget, you have a legitimate reason why you can’t donate.  

Someone asks to borrow money from you

The budget gets tighter than Santa’s pants for most of us around the holidays. But, it may be even tighter for your cousin Joey who lost his job this year. So, he asks you to borrow some cash. Awkward.  

Experts agree that you should never give money you can’t afford to lose. But if you can afford to help a family member and you are basking in the holiday spirit and want to do so, give them money as a gift, not a loan. The holidays are a great time to ensure that you are clear about the fact that it is a gift, and you expect and will not accept repayment.

Once again, if you are using a holiday savings account, you can take money from there to give to cousin Joey instead of scrambling to come up with the cash or having to say no. Another area where a savings account benefits in this situation is, if someone asks to borrow $1,000 from you, but you only have $500 in your holiday budget, you can tell them straight up that’s all you have in the budget without having to come up with excuses or seem heartless and deny their plea for help.

The bottom line to avoid awkward holiday money encounters is to be prepared ahead of time. That will ensure you always have at least something when holiday spending needs pop up, whether it’s gifts or charities. 

At Frugl, we’re committed to helping Canadians reach their full potential by providing a tool that makes saving money effortless and effective. Our mission is simple: to give Canadians confidence in their financial future. Learn more today.