Saving for a deposit can be a difficult and daunting task, whether you’re a first home buyer or an investor. Fortunately, having an organised and creative approach to saving can make it simple.
Emotions play a big role in saving money and if you’re not happy you’ll be more tempted to spend. Rather than denying yourself every luxury, you’re better off developing a balanced and sensible savings approach.
With that in mind, the team at Kaboodle Finance has come up with some tips that go further than just telling you to cut spending wherever possible.
Work Out How Much You Need to Save
Create a detailed budget that outlines your income, debts and expenses. Set realistic saving goals and ways you can achieve them. It may be great to save a 20% deposit to avoid lenders mortgage insurance, but is it achievable in your time frame? Having an organised and realistic approach for your situation makes saving easier and having clearly defined goals is also motivating.
Be Smart with Money
Being smart with money goes beyond living on canned food and shopping at discount stores. Reduce your grocery expenses in little ways. If you like branded cheese, keep getting branded cheese. Cut grocery costs where you won’t care or notice the difference as much, such as milk, sugar and dishwashing detergent.
Save Commission or a Fraction of Your Income
If you work in a sales role or a position that affects the bottom line of the company, using your commission is a great way to save. The principle is simple; live off your base salary and put any commissions into a savings account.
If you don’t receive a commission, saving 10% of every paycheque is an old but reliable approach if you can stick with it. After you get paid, put your savings in a designated account where it is harder to access.
Spend Money on Non-Depreciating Assets
A lot of us spend money on things where the value disappears or significantly depreciates. A computer or game console that you buy today will be worth a third of the price you paid for it in a couple of years.
You can still enjoy spending by investing in things that retain or even increase in value, such as art, designer clothes, furniture, antiques and memorabilia.
Sell the Car
A car is probably the biggest example of an expensive and depreciating asset. The cost of running a car is estimated to be about $8,000 a year in Australia. Selling it today and using public transport means you can avoid those yearly costs and get extra money towards a deposit from the sale.
If you absolutely need a car, consider downgrading to a cheaper, second-hand car. You can always upgrade further down the track once you have your home.
Rent a Cheap House
If you’re renting a place for $600 a week, then moving to a place that costs $400 a week is a great way to save a lot of money. It might not be as nice, but it gets you more than $10,000 a year in savings. Another option is to move in with family or house share with friends to reduce costs.
Rent Out a Room
If moving isn’t an option, you could rent out a spare room in your house or even your garage. Depending on where you live, this could bring in around $50 to $200 a week ($2,600-$10,400 a year).
Sell Your Stuff
How many of your possessions do you really need? From unused clothes and jewellery to extra furniture and a second TV, you can make great progress towards your saving goals by reducing clutter.
Sell on eBay, Gumtree, or Facebook groups, or even have a garage sale. You never know what valuable gems you might possess that antique enthusiasts might pay big money for.
Create Additional Income
Almost everyone can find a way to create a second income for themselves. Writers and graphic designers could do some freelance work on the side. An accountant could help people with their tax returns. A mechanic could fix a friend’s car. Websites like OzLance and Upwork make it easy to find freelance work to do in your spare time.
As mentioned earlier, happiness is an important part of the saving process. You don’t need to remove every luxury from your life, but you can reduce costs here and there while still living a fulfilling life.
This could be replacing a tropical holiday with a camping trip, visiting the beach instead of an amusement park and packing a lunch instead of going out to restaurants and cafes every day.
Note that a couple of the tips mentioned in this article have legal and tax implications that haven’t been explored here. You should seek professional advice for a thorough exploration of the ways you could save on your home deposit.
Get in touch with the friendly team at Kaboodle Finance for practical and easy to understand advice about home loans and financial planning. We are a small group of financial service professionals based in the Greater Western Sydney area. We take a personalised approach that prioritises the best interests of our clients. We help to build saving strategies for singles, couples and families in New South Wales, whether it’s for your first home or an investment property.