With many off the plan properties requiring a 10% deposit upfront and property prices increasing in value, saving that deposit for your first home can be alarming and you may begin to think that it is an impossible task. However, there are many things that you can do to reach that budget to put you a step closer to owning your first home.
Make a Plan
Firstly, you need to take a long hard look at your finances. Do you have a savings plan already in place and do you know where your money goes? The easiest way to track your spending habits is to draw up a budget plan. This will include your weekly/monthly income as well as your household and personal costs such as rent, bills, travel and groceries amongst other things. You can then work out how much surplus cash you have left over each month and put this towards your deposit.
Make sure you take a look at our Budget Calculator to help you work these costs out easier.
Clear Your Debts
If you have any outstanding debts on credit cards or household items it is important that you clear these first to stop paying interest charges. Once cleared and you are debt free then the next step you should take is to look for a savings account.
Find a Savings Account
When looking for a savings account it is important to choose one that offers the best interest rates possible. This could mean finding a high-interest savings account or one that pays you a bonus. You need to make your money work as hard for you as possible. Interest rates do fluctuate so it is important to consider this within your plan. If your chosen account reduces its rates, it may be time to switch savings accounts.
Many people go straight to their own bank for a savings account, but it pays to shop around as your bank may not offer a great rate. There’s no need to stay loyal to your own bank as rates vary between all banks and you should certainly take advantage of any specials or offers that are currently available.
Set up a Direct Debit
Once you have decided on a savings account, the next thing to do is to set up a direct debit. By doing this, you have automatic payments coming straight out of your account which forces you to save without necessarily realising it. Just ensure that you choose a realistic amount of money that you can afford and stick to.
Revisit your Budget Plan and Alter Accordingly
You then should consider your budget plan again. How much are you realistically saving each month and how long will it take you to reach that 10% deposit goal? You might require a $40,000 deposit and initially wanted to achieve this in one year. Without any prior savings this would mean you need to save an average of $3,300 per month, which might not be possible. You therefore may need to change your plan for two years. However, this may still be difficult to achieve, especially if you are buying on your own.
If you want to have a deposit saved up within two years then you will need to look at alternative options. One option includes asking for a pay rise from work. If you’ve been with your company for over a year, you might be entitled to a pay rise or it might be time to find a higher paying job role or look to work extra hours. Extra cash from an increased salary should be put straight into your savings account.
If you can’t get a pay rise then another option many first home buyers turn to is to ask their family for some help. Quite often parents will assist their children with a sum of money to get on the property ladder. If you are really serious about saving for a deposit then you may have to move back home with your parents to help fuel your savings and cut down on your spending habits.
With house prices continuing to rise it is therefore important to have a firm plan in place and stick to it. It may be that parents will have to assist their children even more in the years to come and first home buyers will have to become smarter with their money and make short term sacrifices to achieve their property goals.