With today’s economy and the current job market looking as sad as last night’s beans on toast, it’s no wonder milliennials are struggling to scrounge up enough coin for a house deposit. The financial demands of everyday life can be overwhelming and the bills pile up before you’ve even paid off the last lot. If this is you, then saving for a home is probably on your list of goals somewhere between ‘buy my own island’ and ‘marry Kit Harrington.’ However, saving for a home isn’t necessarily a lost cause. It just requires a bit of sensible budgeting and a whole lot of willpower. These are our bulletproof budgeting tips to save for your first home.
1. Analyse your spending
The first step before you do anything is work out exactly how much you spend… per year. This accounts for all those irregular expenditures, like trips to the hairdresser, trips to the cinema, or even trips to Bali; stuff you don’t do all the time but contributes significantly to your spending. To work out your grocery expenses, collect your dockets for a month, add them all up, then multiply by 12 to get an approximate yearly total. Now divide by 52 to get your average food spend per week… the results will probably make you as depressed as those soupy salad veggies rotting in the bottom of your refrigerator. So, how much is that tub of gourmet ice cream really worth to you?
2. Set a financial goal
This means, work out how much you actually need to save to secure a home deposit. Contact a bank or mortgage broker and find out what percentage of the deposit you’ll need to come up with yourself and go from there. It’s important to note that your first home is probably not going to be ‘the dream’ house, so don’t be disheartened if you find you need to lower your expectations. It’s a lot easier to upgrade to a better home once you’re already in the market than it is to start from the bottom and make the giant leap to mansion-on-the-beachfront status. Now that you know how much you need…
3. Set a budget
Setting a budget holds you accountable for your spending. No budget means no measurable way of knowing if you’re staying on track, and without knowing where you’re at financially, you’re not really being proactive about achieving your home-buying goals. Saving for a home isn’t the kind of idea where ‘whatever is leftover after payday will do,’ it’s a full commitment process that requires and persistency and consistency. Prioritise your spending by placing high ranking things on the top of the list, like bills and food, and lower ranking extras, like gym memberships, dining out, alcohol, coffees etc. at the bottom. Each pay day, withdraw cash for the lower priority expenses so you’re not tempted to blow out your budget. When the cash is gone, it’s gone.
4. Start saving
Surprise! Saving for a home means you actually have to save. Save real money. In a real bank account. Where you DO NOT TOUCH IT. Okay, that’s all good and well, but how exactly do you save? Here’s a few cost-saving tips that will send your bank balance skyrocketing.
- Cut your phone plan
- Save dollars on petrol with fuel dockets
- Reduce your power bill by switching off lights and appliances, and be water wise. Utilities add up out of laziness rather than necessity
- Shop at Aldi and discount stores, or buy the more expensive items only when they’re on special
- Downgrade your car – a car is a depreciating asset and can cost a fortune in insurance, registration, maintenance and running costs. Drive an expensive car or own a house? You decide.
- Sell your stuff. Have a garage sale and get rid of all those items cluttering your storage that you probably won’t miss anyway.
- Save a percentage of your pay check, even 15% will rack up thousands in just one year.
- Lower your current rent and save the difference – this may mean downgrading your living standards, but this is only temporary!
5. Get on top of current debts
With all that money you’re saving, throw it towards any debts you currently have. Consolidating your debts can be a smart way of keeping loose ends in check and working out an effective, manageable repayment plan. Not only will it feel amazing when that final payment is made, but it will show you that progress is really happening and your goals are actually achievable. Also, the fewer debts you have, the more favourable your situation is when it comes to applying for a home loan. You don’t need to those pesky repayments hanging over your head, just get rid of them and focus on the big picture.
Even after you’ve hit your target – don’t stop! There are multiple benefits to having funds in your savings account, whether it be for renovations, repairs or maybe even upgrading to your dream home a little sooner than expected. Sticking to a budget is a great life skill to have and you will ultimately reap the rewards tenfold.