If you happen to be renting, then saving money for a property deposit might seem out of reach, but that shouldn’t stop you from trying.
If you plan on putting down about 20 per cent of the property value as a deposit, then you’ll need to save quite a bit of money at the same time as budgeting for utility bills, rent and living expenses. Remember every little bit you save and every penny you pinch will help to get you closer to the final goal: owning your very own home.
The following tips will help reduce wasted time and money, and make saving for a home deposit easier and more efficient in the long run.
Do the math.
First of all, you’ll need to know exactly what amount you’ll need for the deposit, stamp duty, building inspections and other up-front expenses that come with buying a new home (i.e. removalist, renovation or redecorating costs). To work out what you can afford ask yourself: ‘how much do I already have in my savings?’, ‘how much can I realistically save each month if I set my mind to it?’ and ‘do I have any family or friends that could chip in or would consider co-ownership?’. When you have a figure in mind use a mortgage calculator to get an idea of how much you can borrow and what the monthly mortgage repayments would be like.
All of these factors will help you determine what kind of expenses you’ll need to cut back on and the amount of money you’re aiming to save a month. This will also help indicate at the very least if this is a long term or a short term savings plan.
Create a dedicated deposit savings account.
If you end up putting money away each month in a general savings account for a rainy day or emergency, paying tax bills or saving for retirement, it can be unclear how much you have saved for deposit purposes. Opening a dedicated account for saving towards buying a home can be very motivating when you’re renting, as you’re able to watch your home savings grow month by month. To get the most bang for your buck look around for saving accounts with low or no fees and ones that offer the best interest rates.
Get rid of unnecessary expenses.
Most of us often buy things we really don’t need, whether it happens to be a great piece of hand crafted furniture or a Foxtel package you don’t have time to watch. You should carefully consider luxury items and daily expenses like these. You could trade in your barista made morning coffee for the instant coffee at the office or adjust your mobile plan to a cheaper one with less data. Little changes and cut backs can give you much more money to work with. You’ll be surprised how quickly little expenses here and there add up over a year.
Another great way to supplement your savings account could be to make some investments with the money you do have. Think about purchasing some shares or investing in a mutual fund. Depending on which shares you purchase, you can end up increasing your earnings at a faster rate than with a savings account with a good interest rate. However, you should always pay your due diligence and do your research before jumping on any investment or ‘get rich quick’ bandwagon.
Cut the monthly rent.
Rent is most likely one of the largest monthly expenses you’ll ever have. One way to go would be house sharing in a less sought-after area to split the cost of rent and bills with housemates while you save. Alternatively, you could move back to your parents home to fast track your ability to save or try house sitting for rent-free accommodation. Remember the living circumstances while you save will only be a temporary means to an ends and will make putting all the money you need to save into your deposit fund easier, not to mention faster.
Keep utilities under control.
Some simple tricks such as turning off the lights when you don’t use them, turning off the tap when you’re brushing your teeth, hanging clothes outside rather than using the dryer, installing water saving shower heads, switching to appliances with better energy ratings and similar energy-efficient home solutions will make your life easier and help you save on utilities.
Don’t feel like you must settle for huge bills while you’re renting. Try negotiating with your electricity, gas and internet providers for a better deal. If they want to keep you as a customer they might be open to knocking a bit off the price. After all you’ll never know if you never ask. If they aren’t willing to give you a cheaper price shop around for another provider who is.
Some foresight, planning and careful monitoring of all your expenses will put you on the right path to saving your 20 per cent house deposit in no time. Happy saving!