Whether you’re squirrelling money away for your first home or are a seasoned property shark, the process of saving for a deposit can be a thrill or a challenge… depending on how you tackle it! But the most effective techniques for building a rock solid deposit involve injecting a few crucial money-saving techniques into your everyday. Before you realise how effective the following tips are, they may have built you the perfect diving board to jump headfirst into the property market.
Tip 1: Have a smart goal
When setting yourself a savings goal, be realistic – it’s not going to happen overnight. Give yourself a timeframe to keep you on track, for example: “I’d like to save $50,000 in three years.” Doing this will allow you to analyse all your outgoings and deduct this from your income to give you an idea of what you should be aiming for – and what is realistic – to save each month.
Tip 2: Separate your needs from wants
When analysing your outgoings, be ruthless –are these needs or wants? You can’t survive without food or electricity, but do you really need to spend half your income on updating your wardrobe? Sometimes wants are borne from habit and there is a psychological connection between payday and treating yourself to new purchases. For example, celebrating payday with a visit to Westfield. These habits need to be reevaluated when you’re serious about saving for a property.
Tip 3: Learn how to snowball
So many people struggle to make the connection between knocking over debts and saving money. Snowballing is the art of paying off debts in order of their size, as hitting smaller commitments first will knock them off the to-do list while simultaneously eradicating any interest or further obligations you have to them.
Tip 4: Set up auto-savings
A separate savings account with automatic payments will allow you to directly debit some money from your everyday account each payday. No matter how big or small, they key thing here is that you’re saving some cash regularly and watching your home deposit dream get closer to reality.
Tip 5: Cut down on coffee
Before you get all panicky and up-in-arms, the important focus here is to minimise your cafe-bought intake, not completely go without your java. Simply giving up one coffee a day (assuming your coffee is $4) could save you $20 each working week which, over the course of 12 months, will add more than $1,000 to your savings. Bringing your lunch in from home just twice per week could net you more than $2,000 in savings per year.
Tip 6: Lock it away
Want to fast track your savings? Term deposits are a great way to avoid the temptation to dip into your savings. The best bit? As well as keeping your money locked away for a fixed period, some have high interest rates, so you’ll be making more money just for being smart with your savings!
Tip 7: Don’t go it alone
Do you have a friend who is also planning on saving for a deposit? Or are you saving to buy with a significant other? Use each other for motivation and make a pact to keep each other on track. For example, if you and your partner each commit to saving $100 a week toward your deposit, you’ll not only have a dedicated savings plan, but any amount you put aside will be matched by the other person. Using the above example of $100 per person per week could leave you close to $1,000 per month closer to your dream home.
The days of simply putting your pennies away and hoping for the best are long gone. If you want to call yourself a homeowner, follow these strategic tips and make it happen sooner.
— Bessie Hassan is the editor at finder.com.au, one of Australia’s largest comparison websites. She’s passionate about real estate, renovating, and helping Australians find better.