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Entering the property market is a distant dream for many young Australians, which is a shame, because the toughest slog is always getting that first home, after that it becomes a lot easier. It’s apparent that difficulty in saving for a home lies at the heart of the issue, and with today’s economy and crowded job market, it’s not hard to understand why. So if increasing your income is not as simple as just getting a new job, how can you save enough money for a house deposit? Well, it requires a bit of planning and a whole lot of perseverance, but the task itself is not as hard as you think. Here’s five easy ways to save for your first home.
1. Analyse your spending
You can’t work out how much you can afford to save until you know how much you spend. The most effective way to get an idea of how much you spend is to average it over a one-year period. That way you can include things that you don’t do regularly, but still impacts your bank balance, such as trips to the hairdresser, the cinema, or even the occasional weekend away. To find an average for grocery costs, collect your dockets for a month, then add them up and multiply by 12 to get a yearly average. Now divide that total by 52 to get your average grocery spend per week. The results will probably shock you, but it’s a highly effective method of determining exactly what you choose to put into your trolley.
2. Consolidate your debts
Carrying around a lot of debt is one of the biggest hindrances to saving for a home. Not only are they hurting your pocket, they also don’t look good on a home loan application and could be the difference between being a lender approving or denying you a loan. Get smart about what you owe and consolidate the debts, then work out a realistic and manageable repayment plan. This is a great way to track your progress and it’ll feel really good when you make that final repayment knowing there’s nothing left hanging over your head.
3. Set a financial goal
Your financial goal is how much you need to save to secure a home deposit. For this, you’ll need to contact your bank or mortgage broker to find out what percentage you’ll need to provide towards the property. This is also the part where you need to think realistically about what you can and can’t afford. Looking at properties beyond your price range is not only a waste of valuable time, it’s also disheartening and can make you feel hopeless about your situation. Very few people can afford their dream home first time round, so be prepared to make compromises on your expectations of what your first property will look like. Remember, getting started is the hard part, once you’re established in the market it’s a lot easier to upgrade later.
4. Set a budget
Setting a budget is the key for holding yourself accountable for what you spend. It’s the only way to track your expenses and without a budget, you’re really not serious about making a plan to save. Saving for a home requires more effort than throwing a few coins in the piggy bank or a ‘whatever’s leftover at the end of pay week will do’ type attitude. You must be committed to the cause and be persistent and consistent in your routine. Learn to prioritise your spending by ranking them in order of necessity. Things like bills and food should be at the top of the list, then filter down into things like gym membership, dining out, social events etc. Once you’ve paid the necessities, withdraw a cash amount for the lower ranking items and from then on, leave your card in your wallet so you’re not tempted to blow your budget. Once the cash is gone, whatever you want will have to wait until next pay – if finances permit.
5. Start saving
Now that you know how to cut back on spending, you can put that extra cash into a high-interest savings account and watch your deposit grow. It’s best to open an account that doesn’t use an access card, so it reduces the temptation to spend it. Need a few extra tips on how to save more money? Try these simple tricks:
- Cut your phone plan
- Use petrol dockets to save on fuel
- Switch off lights and appliances, and be water wise. Utilities add up out of laziness rather than necessity
- Shop at discount stores, buy budget brands, and only purchase the more expensive items if 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.
- Downgrade your house – you can lower your current rent and save the difference. This sometimes means lowering your living expectations, but just remember this is only temporary. Think of the bigger picture!
- Downgrade your stuff – host a garage sale and clear out any clutter that you no longer use or need.
- If you can, save a small percentage of your pay cheque. Even just 10-15% can equate to thousands of dollars in just one year.
See? Saving for a home doesn’t seem so far-fetched after all!