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How to Save for a Home Deposit
Saving for a house is a great dream, but deciding how, when, where and what to save can be daunting, especially if you've never saved for such a big goal or never saved at all (and I am constantly amazed at the number of people I come across who have never, ever saved up for anything!).
When I'm asked to help people who are wanting to save, especially for a house deposit, I have some questions I always ask them:
1. Do you have a regular income?
2. Do you have a written spending plan (budget)?
3. Do you have a grocery budget, written meal plan that fits into that budget and do you stick to it?
4. Do you have discretionary expenses you can trim while you save?
5. Do you know how much you need to save for the deposit?
They are in no particular order as they are all equally important in the final outcome - buying your own home.
Saving always seems difficult, especially when you are a parent and want to give your family everything good. But to save money you need to not spend it. To do so you need to decide what expenses are essential i.e. cannot be skipped or trimmed and what expenses are discretionary i.e. are not essential to maintaining life and can be trimmed or even deleted altogether. This is why you need a written budget - it shows you the true expenses and the money you are spending on things that aren't necessary.
Some essential expenses would be:
Rent (but you don't need to be paying top dollar - look for cheaper rent to give you more cash to save)
Food (again you are wanting to save so buy ingredients and skip costly convenience)
Medication
Gas/electricity/water/phone/internet (but aim to keep these bills as low as possible)
Car insurance and registration
Some discretionary expenses would be:
New clothes
Holidays
Magazines
Movies, concerts, theatre
Eating out
Professional hairdressing
Pay TV
Smoking
Drinking
I suggest that everyone getting started on a savings and budget plan track their spending for a month. This simply means recording every cent you spend, what you spend it on and how you spend it i.e. rent $240 direct debit, groceries $103.32 cash, tuckshop $30 cash and so on. A month of tracking will give you a good idea of where all your money really goes and you can use it to create your working spending plan and find areas you can use to save some money.
Once you can see where the money is going, you'll be able to trim the non-essentials. It is hard to give up things you love - coffee mornings, professional haircuts, eating out, magazines, holidays, new clothes, toys, movies etc. etc. etc. but if you have a goal - and you do, saving for a house deposit - and remember that you are only giving these things up until you have your deposit, and not forever, it is much easier.
Open a separate bank account for this purpose, one you can't easily access, and have at least $10 a week automatically transferred into it to get you started.
Once you have a working spending plan you'll know how much you can add to your savings account each week and set it up to be automatic. Throw any extra cash you get - gifts, bonuses, tax returns, overtime etc. into it.
The first $1,000 will seem to take ages because you are getting into the habit of regular saving with a purpose. From there to $5,000 will fly by, then the next $5,000 will seem to take ages. Once you have $10,000 in savings you'll be so into the habit that saving for the remainder will seem easy.
When all is said and done the only way to save money (for anything at all) is to not spend it and actually put it in the bank.
That requires sacrifice and not everyone is prepared to go without, even for a short time.
In the grand scheme of things, saving for a house deposit might take three or five or even ten years but once you have it you won't need to save it again and you'll have a lot of years ahead of you to enjoy your own home.
When I'm asked to help people who are wanting to save, especially for a house deposit, I have some questions I always ask them:
1. Do you have a regular income?
2. Do you have a written spending plan (budget)?
3. Do you have a grocery budget, written meal plan that fits into that budget and do you stick to it?
4. Do you have discretionary expenses you can trim while you save?
5. Do you know how much you need to save for the deposit?
They are in no particular order as they are all equally important in the final outcome - buying your own home.
Saving always seems difficult, especially when you are a parent and want to give your family everything good. But to save money you need to not spend it. To do so you need to decide what expenses are essential i.e. cannot be skipped or trimmed and what expenses are discretionary i.e. are not essential to maintaining life and can be trimmed or even deleted altogether. This is why you need a written budget - it shows you the true expenses and the money you are spending on things that aren't necessary.
Some essential expenses would be:
Rent (but you don't need to be paying top dollar - look for cheaper rent to give you more cash to save)
Food (again you are wanting to save so buy ingredients and skip costly convenience)
Medication
Gas/electricity/water/phone/internet (but aim to keep these bills as low as possible)
Car insurance and registration
Some discretionary expenses would be:
New clothes
Holidays
Magazines
Movies, concerts, theatre
Eating out
Professional hairdressing
Pay TV
Smoking
Drinking
I suggest that everyone getting started on a savings and budget plan track their spending for a month. This simply means recording every cent you spend, what you spend it on and how you spend it i.e. rent $240 direct debit, groceries $103.32 cash, tuckshop $30 cash and so on. A month of tracking will give you a good idea of where all your money really goes and you can use it to create your working spending plan and find areas you can use to save some money.
Once you can see where the money is going, you'll be able to trim the non-essentials. It is hard to give up things you love - coffee mornings, professional haircuts, eating out, magazines, holidays, new clothes, toys, movies etc. etc. etc. but if you have a goal - and you do, saving for a house deposit - and remember that you are only giving these things up until you have your deposit, and not forever, it is much easier.
Open a separate bank account for this purpose, one you can't easily access, and have at least $10 a week automatically transferred into it to get you started.
Once you have a working spending plan you'll know how much you can add to your savings account each week and set it up to be automatic. Throw any extra cash you get - gifts, bonuses, tax returns, overtime etc. into it.
The first $1,000 will seem to take ages because you are getting into the habit of regular saving with a purpose. From there to $5,000 will fly by, then the next $5,000 will seem to take ages. Once you have $10,000 in savings you'll be so into the habit that saving for the remainder will seem easy.
When all is said and done the only way to save money (for anything at all) is to not spend it and actually put it in the bank.
That requires sacrifice and not everyone is prepared to go without, even for a short time.
In the grand scheme of things, saving for a house deposit might take three or five or even ten years but once you have it you won't need to save it again and you'll have a lot of years ahead of you to enjoy your own home.