With First Home Buyers snapping up all the Government grants, we thought we would put together what we think are the 10 best tips to help you save for a deposit. The process of saving and buying your first home can take years but with the right mindset and tools it doesn't have to.
1. Review your current situation
First things first before you start saving and forgoing avo on toast you need to know what position you're currently in and what goal to aim at. There are two key factors for getting finance, one is having a deposit and the other is the ability to service a loan. You need both parts to be successful and the deposit amount needed is governed by how much you can borrow. This will help you work out what the magic 5% deposit figure actually is.
The best place to start is talking with a broker, they can quickly review your situation and let you know a rough estimate on how much you can borrow. They can also give you some hints and tips on how to improve your situation to borrow more.
If for example, you can borrow $500,000 then as a rule of thumb you need to save 5% deposit which is $25,000. So $25,000 would be your saving goal. Don't forget though you still need additional money to cover buying fees such as Solicitor costs, mortgage fees, removal costs etc.
2. Make a budget
Yes, this might be the obvious one but knowing where and what you spend your money on is vital. This doesn't have to be difficult or time consuming. With the use of modern tech and some clever apps they will help you filter your expenses into categories and make it easy for you to see where your money is going and what you can cut back on. Some banks already have this service on their online banking platforms so that would be a good place to start.
Did you know if you buy a coffee at an average value of $5 every day then over the course of 1 year you have spent (or could have saved) $1,820. That could be just over 7% of your savings target to reach $25,000!
3. Automate your savings
With your newly formed budget and plan in place automate your regular savings to automatically transfer your savings into your savings account. This way you won't have to spend any additional time on it and more importantly you won't forget to do it. A good time to do this is when you first get paid, if you leave it to the end of the month it's more likely you would have spent it already.
4. Find a savings account with a good interest rate
When it comes to saving rates higher is better. This rate is basically how much money the bank will pay you for keeping the money in that account. This means you don't have to save as much as the bank will also be paying money in for you. Just be careful of any monthly fees as some lenders will offer a higher rate but charge you for it.
5. Consider investing in The First Home Super Saver scheme
If you are looking to save over a longer term then consider using the Government's First Home Super Saver scheme. Like Tip No:4 this is a way to potentially get access to the higher interest rates you generally get in your Super rather than a standard savings bank account. To work out if this is right for you then get in touch with a Financial Planner who will be able to assist and help you forecast potential earnings.
6. Create a second source of income
Do you have a part time hobby you could make money from? Enjoy buying/making items and selling them on eBay? Or it could simply be pulling some extra shifts at work. It might not be the answer you wanted to hear having to work harder but if you wanted to fast track your savings this might be the quickest way to do it. Just earning an additional $150 a week is $7,800 per year.
7. Pay off bad debts
If you are paying off a loan or credit card then look at paying these off first. The high interest rates on some credit cards means you would never actually clear the debt making the minimum payments every month. So you are basically just throwing money down the drain. Plus by clearing any loans or credit cards it will also help increase your borrowing capacity.
8. Sell some items
What's the bet you have a wardrobe full of clothes or a cupboard full of toys and gadgets you never use or ware. Not only is this a good way to boost your savings it also means you have less to move when you do buy your first home, it's a win win.
9. Look for bargains
If you do need to buy something then spend 5 minutes quickly searching the internet. You may be able to find it cheaper elsewhere or simply keep an eye on it and wait for a sale to come on. You could also shop at discounted centers such as DFO or charity shops. Just remember if you didn't plan to buy something while out shopping even if it's in a sale then this is an impulse purchase, ask yourself 'do you really need it and is it going to help me save for my new home?'.
10. Review your subscriptions to find better deals
In today's world there's no such thing as customer loyalty. If you haven't called around every year to find a cheaper car insurance deal or even your utility providers then chances are you are overpaying. This is generally the fastest way to quickly save money which could be hundreds of dollars.
Our clients use Myconnect to help them save money on utility bills. They offer a free service and can compare the market for you to find you a competitive rate, plus the best thing is that they handle all the paperwork and organise it all for you. Check them out HERE and see how much they could save you.
If you need help reviewing your current situation then CONTACT US today where we would be more than happy to help you put a plan in place.