Saving for a home loan deposit can be hard work – especially if it’s your first time. You might be scratching your head wondering how on earth you’ll save that kind of money. Thankfully, there are some effective strategies you can adopt to get the home deposit you want.
Remember, a strategy is all about the long-term approach to getting what you want. You need to make some genuine changes and commit to them. You’re not going to magically afford a deposit just by cutting out your daily coffee – think bigger.
1. Be smart with your money
The best strategy you can put in place to save for a home loan deposit is to get ‘money smart’. If you’re serious about saving for a home, you need to make some changes to how you spend your money. On that note, it is important to decide that buying a home is what you want. You need to commit for this to work.
Firstly, consider what you are spending your money on. Spend only what you need and be careful of any expense outside the necessities.
Secondly, get rid of what you don’t need. We all have stuff we once loved that now sits in a corner gathering dust. Sell unwanted goods to make some extra cash on sites like GumTree.
Finally, ask yourself a few important questions every time you want to buy something outside your everyday expenses. Do I need this? Do I already own something similar? Will it make my life better? A great tip is to put the money you would have spent into a savings account instead. You’ll be practising better money habits and will thank yourself later.
2. Have multiple savings accounts
Separating your savings into multiple accounts is an effective way to manage your money. The main reason to open more than one account is to make it easier to track how much you have saved towards individual goals.
Obviously, the account for your home loan deposit will be a savings account you do not touch. Additionally, it’s a good idea to set up other smaller accounts that you can touch if necessary. Consider keeping an emergency fund, car fund and a fund for any other short-term goals you might have. Set yourself a minimum amount you would like to have in each and stick to it.
The great thing about separating your savings is you will be less tempted to dip into it. On top of this, you will be far more motivated when you see the accounts grow each month.
3. Look at your bank statements
Online banking is amazing because we have total access to our finances at our fingertips. So please do yourself a favour and use it.
Download your bank statements from the last couple years and import them into Excel. This is one of the easiest ways you can look at your expenditure and see where your money comes from and where it goes. You might start to back away at the idea of numbers and a spreadsheet but stop and think for one moment. If you are serious about saving for your home loan deposit, don’t you want to spend the time working it out?
Nowadays, lenders are forensic with bank statements so spend your money wisely. A better picture of where your money is coming and going will help you notice where you can cut down and save.
4. Use an app or keep a spreadsheet
Keeping track of all your bills and expenses is a lot easier if you have a record. These days, there are countless apps to help you plan and budget your spending. You can always go old school and use a spreadsheet if you want.
The best thing about a record is you are consciously writing down each transaction. In a world of cashless payments, this conscious yet simple act will help you think about how you spend your money. You can also compare what you spend vs what you planned to spend within a monthly budget.
Sometimes it’s the little transactions that left unchecked create the biggest expense. Food and drinks can be a killer to your budget, so consider creating a meal plan. You might start to recognise the need for minor lifestyle changes like having one less coffee per day or packing your own lunch.
5. Think about how much you want to borrow
By now, you should have a general price range you are willing to spend. If not, consider what you want to buy and look at similar properties currently on the market. This will give a good idea of the loan deposit you should save for.
A good exercise you can do is to think about how much you want to borrow and calculate the monthly repayments. This hypothetical exercise can give you a good idea of whether you are in the right financial position to afford a mortgage. If you want to take it up a notch, use that monthly figure and set that aside every month. Pretend you are paying a mortgage but to your savings account.