By Simone Date-Chong
First Home Buyer
The biggest obstacle to any first-time buyer is getting together the deposit to buy their first property. It’s like the biggest cover charge ever to get into a life size game of Monopoly right? For some, the price is just too high - with years of scrimping and saving and no overseas adventure as reward at the end of it. Then committing yourself to decades of debt afterwards - who would choose THAT?
Well if getting into the property market has become something you want more than anything else, not only can you choose that, but you can fast track it. With a decent chunk of dedication and these 7 tips on how to save for a home deposit, you could be house shopping by next Christmas.
1. Hustle Your Rent
Now you don’t need to move house completely of course, but maybe there’s a way you can reduce your current rent. If you have a spare room, you could get a housemate, or an overseas student in for 12 months? Or maybe it’s possible to move in with family and sublease your place for a while? If you have approval to do so in your current property, why not dip your toe into the sharing economy? A nicely furnished room in a good location could earn you a couple of hundred dollars extra per month on Airbnb for example, while you visit friends and enjoy a weekend away every now and then. Another thing you can do if you have the cash flow is round up your rent. Taking it from $1750 to $2000 a month may be easier than you think, especially if you trick yourself into thinking it’s rent from a budgeting perspective, but sneakily drop that extra amount into your savings.
2. All the Small Things
We’ve all had the Eureka moment of digging through the back of the sofa, or hunting around in the car and discovering a bounty of cash we didn’t realise we had, right? Well this applies in everyday life too but you’re spending it! Spontaneous coffees, extra purchases at the petrol station, going with the flow with tips, when dining with friends and falling prey to ‘buy 2 get the third free’ deals - when you didn’t even need one of whatever the thing is. Manage this spending by allocating yourself a set amount of spending money each week. The key to good saving is to not deprive yourself though, so allow a couple of coffees per week, find the budget movie sessions and don’t stray from those small treats. Saving gold coins can also help your savings grow quickly. Empty all those $1 and $2 coins into a money box each night and you could add a couple of thousand to your deposit by the end of the year. Or, sign up for a rounding account like Acorns, to round up your spending and funnel your virtual loose change into savings too.
3. Budget, Budget, Budget
There are most definitely things in your current budget (if you have one) that you do not need. If you don’t even have a budget then that’s your first job – write a budget. It’s great to have a budget that shows you real time balances too. Find yourself a good budgeting app, or go old school and make a spreadsheet. The important thing is that your expenses are less than your income, then you can try to increase that difference each month and shuffle the extras into your savings like it never existed. A personal budget can be great fun, as long as you find a good balance and be sure not to deprive yourself of everything. You may choose to take the extreme option and buy nothing for a year, or give yourself a modest quarterly budget for clothes and non-essential things. Keep it realistic though and remember that deciding to spend $1000 a quarter on shoes will take you $4000 away from your goal.
4.Change Your Spending Habits
Go through your budget diligently and see where you can cut back. There are training colleges for all manner of personal grooming needs, that offer services at a fraction of the cost of your usual salon and it’s only for a year remember! If you have a regular brunch date with friends, why not suggest rotating it around people’s houses instead? Or everyone bringing something small for a picnic brunch, in one of your city or town’s gorgeous parks. You can also look at where reductions might be possible in your regular bills. You could downgrade the viewing options on your Netflix account, or talk to your phone provider about shifting to a cheaper plan. Start focusing on outlet or online shopping over boutiques and department stores and maybe suspend your gym membership for the summer, if you know you can get outside more in the great weather.
Calculating and comparing costs of things can be surprising. Maybe car services, registrations, petrol and parking are costing you much more than you realised and the commute with public transport can give you much needed reading time. Remember it’s only for a year! Today’s ‘paypass’ lifestyle doesn’t help either. Allocating yourself pocket money and physically having that cash in your wallet can be useful because you have a visual experience of what’s available to you. Once it’s gone it’s gone, so if you see you only have $20 left for the weekend you’re less inclined to make big plans or buy random things you don’t need. If paypass works for you, have a dedicated bank account for your weekly spending that only has your budget in it.
5. Make Your Choices and Stand by Them
This is a tough one but it can be really helpful in more situations than you would realise. Often, we end up going to things we’re not really interested in. Or doing things we get talked into, when really it was just easier to go along with it, than to have to let someone down. But your goal right now is bigger than that and the good people in your life will support that. You’ll be surprised how many people will have your back if you are open and honest with them about what you want. Everybody’s trying to make their finances work after all, we just all pretend we’re fine for the sake of social graces. What you do with your time is your choice and saying ‘no, sorry I can’t – I have plans’ can be really empowering. Watching Netflix at home is actually plans after all. Or simply saying ‘no thanks, but you enjoy’. Start to pay attention to the excuses you hear in daily life and try to eliminate them from your language choices. And get yourself the equivalent of a swear jar where you have to pay $1 every time you say sorry! Embrace #sorrynotsorry
6. Look for Additional Income Sources
Stage one of budget hell is seeing that your income is way less than your expenses. Stage two is cutting back all the fun and finding there’s still no money. So, stage three is finding more income. There are the classics like walking people’s dogs, or looking after people’s kids, but they are not for everyone. As mentioned previously, the sharing economy is a great way to make some extra cash. Airbnb is just one option, as is Uber. There are numerous car sharing platforms now that allow you to rent your car out at an hourly rate for a few hours or a weekend as you choose.
Many people have benefited from the minimalist lifestyle recently, so why not sign up for an eBay account and give it a try? You may have thousands of dollars sitting under your nose in unused appliances, or designer clothing that no longer fits. You could sell that bike you never use before the rust sets in too. If you’ve invested in valuable items such as artwork or antiques, get a valuation and decide if they are still a contributing part of your collection. Every little bit helps and spending a month or two spring cleaning and selling stuff can be the ideal way to get your nest egg started and motivate you to action your budget in the year ahead. It also clears out the cupboards for when you move in a year!
7. Put Your Money in Good Places
This is one of the most important steps to take, because not only do you want to save your money when you get it, but you want to maximise your opportunities for its growth too. Interest is another income source and the more you save the more you’ll earn, so take some time to work out where your savings will go and make sure you put your money in good places.
A high interest savings account with no card access and a delayed transfer time is very useful (i.e three days before the cash clears after transfer) for your immediate savings. You can manage your monthly budget through your normal accounts and then transfer your savings every month (including your ebay sales, gold coins, share economy income etc). Having a good system of accounts also helps you have short term goals – you have a monthly transfer to look forward to but you can also set a goal of $5,000 or $10,000 increments and transfer to a good short-term deposit – say 3 or 6 months – when you reach those goals.