It can be hard to stay motivated if your savings goal seems elusive. Managing your everyday expenses and putting money aside for a future expense is challenging, but planning ahead and staying committed is key. So, to get you closer to saving for a deposit, check out these hacks that will have you stashing cash away and getting your home deposit together in no time.
1. Understand Your Savings Goals
The first thing you need to do is get a true idea of how much you need to be saving for your deposit. Your First National Real Estate’s website has an online mortgage calculator that will run you through some questions and instantly tell you how much you can afford to borrow, and what your monthly loan repayments would be. From there, you can calculate the deposit you’ll need. It might also be helpful to do a quick search on a real estate website for properties anywhere in Australia in that price range. This will give you an idea of the current market and motivate you to take the next step – either start saving for your deposit, or adjust your finances to improve your borrowing power. You might also find it helpful to visit a mortgage broker who can give you up to date and personalised advice based on your circumstances.
2. Budget, Budget, Budget!
Now that you understand your goals, it’s time to do some creative number crunching to help you to achieve them. A budget is nothing to be scared of and, in fact, most budgets fail because they aren’t realistic. A true budget will include all of your normal expenses – from rent to utilities, coffees to haircuts and everything in between. Start by making a list – rent, transport, food, bills, health, beauty, clothes, entertainment, parking fees, gym memberships etc. Then add in the average amount for each item you currently spend per month, with a sum at the bottom reflecting the total of all of that, deducted from your income. Ideally the balance is positive and you can add ‘home deposit savings’ to your list. If it’s negative, then you need to go through the list and work out where you can cut back.
3. Manage Your Current Expenses
You have a bigger priority in your life now, so it’s time to cut back on your spending. Reducing your incidental costs is the easiest – eat out less, cut back on coffees and try to change your transport choices to cheaper alternatives. You can try to increase payments on short term debts, to free up cash down the track for increased savings too – for example, if you currently pay $200 a month off a $1,000 credit card debt, increasing it to $350 a month clears the debt 2 months earlier and you can put those payments towards your house deposit savings instead – oh and cut up that credit card! If those changes aren’t enough, consider ways to reduce the rent your currently pay – can you take in a house mate, or maybe move in with family for a while? Anything that allows you to channel current spending towards saving for your deposit will help; you just have to choose which makes the most sense.
4. Look for Additional Income Sources
Even those who work full time can find extra ways to make a little cash on the side. There are very few minimalists amongst us, so dig around in your cupboards and exchange some of that clutter for cold hard cash. Old snowboards, appliances you never use, that piano that you inherited but can’t actually play - it all adds up. Also online platforms such as Airbnb are a great way to make extra cash if you can work it into your lifestyle. If you travel for work, why not make some cash renting out your place while it’s empty? Or if you have a friend or relative close by who you could stay with here and there, it’s well worth checking out the options - even if only for a few nights a month. Sites like Ebay are useful too - turn something you’re passionate about into an online earner – sell off old stamps or coins you find at flea markets, or offload that enormous CD collection that you never listen to anymore.
5. Maximise your Savings
Now that you are in control of your cash flow, you need to maximise the money you do save by putting it into the right kind of account. Investigate high interest savings accounts and consider small savings goals that you can then transfer to a term deposit when reached. For example, transfer savings as often as you can into a high interest savings account and when you reach $5,000, transfer it into a term deposit. Then you get regular boosts to keep you motivated as well as a double shot at earning interest! When considering a term deposit, make sure you choose something with a good rate, low fees and flexible choices for withdrawal at the end of the term. The other advantage of a term deposit is that it removes the temptation to spend your home deposit on bright shiny things as you watch your savings balance grow.
6. Grants and Rebates
If you are saving for your first home, then you may be entitled to the First Home Owner Grant (FHOG). The eligibility criteria and amounts vary from state to state but the detail in common is that eligible first home owners are entitled to a payment to help them purchase or build their first home. This can make a big difference to your savings time frame so is well worth investigating. Getting advice from your accountant or tax agent may also be useful to fully understand the tax rebates and entitlements you may be missing out on that can also contribute to your savings goals.
Home ownership is a priority to many people and can seem like an impossible dream, but remember, most homeowners were like you once too. It does require sacrifices and an unwavering commitment to achieving your goal but the reward is great, and once you make your first step into the property market you won’t look back.