SIX tips to help you save for a deposit while renting

Saving for a deposit is one of the biggest hurdles to overcome when beginning your real estate journey. If you are renting, paying bills and trying to save for a deposit all at the same time, it can become very overwhelming.

Here are six easy tips to help you save for your home deposit, while renting.

1. Seek Professional advice

Typically, a home deposit will range from 5 to 20 per cent of the property’s value. This all depends on your income, credit score and budget and whether you’re getting someone to go guarantor. Either way, seeking the advice from a mortgage broker or speaking with your bank can be very helpful when creating a savings plan.

Many banks offer great options suited to your particular situation. You will need to work out how much you want to spend on a house and the deposit size in order to understand your borrowing power.

2. Create a separate account specifically for saving for your new home

Once you do all the critical research you should have a rough idea of the deposit size you need. If you open a savings account specifically for a down payment, this should make it easier to track your savings and will help deter you away from withdrawing money from the account.

Try find a bank that can offer a high interest rate and low if not NO fees for a savings account only.

3. Work out a budget

It’s always important to follow a plan or savings strategy to keep you on track.

Make time to sit down once a week or a couple of days before your next payment cycle, and thoroughly go through your bank transactions. Write down the date your bills come out so you know how much and when money will be withdrawn and you can figure out how much is left over for saving and spending.

When you’re tracking your personal expenses, the little details are important. To get a real understanding of your spending habits, take a look at your transactions over the last 90 days and do a self-audit. By categorising where you spend your money, you’ll be able to see where you can afford to spend less. Ensure you incorporate your budget for unexpected costs (ie car rego, dental, health, etc).

4. Cut your unnecessary daily spending

If you are prepared to sacrifice spending for saving, you will be surprised at the extra funds you will accrue over time. Even the small things like buying a coffee, going out for dinner and purchasing unnecessary snacks can add up to hundreds of dollars throughout the month.

Also, try cutting down on your usage of utilities at home like water and electricity, and you can also even minimise your rent by finding another house mate or moving to a cheaper area.

However, as a budgeter you will have a breaking point. Let’s face it, if you take away every last treat, you’re actually more likely to fall off the wagon and you’ll end up saving nothing. Pick one or two things every month that you’re not going to feel guilty about – a movie, a massage, a night out – and really savour it.

5. Set realistic goals

While saving for a deposit can feel like a long, intimidating process, it is important to keep everything into perspective. Don’t create unreachable goals that are inevitably going to set you up for failure.

Even though your priority has shifted to saving for a deposit, be sure to maintain some balance in your life. If you are too frugal and completely eliminate all social events and lifestyle habits, you’ll likely end up feeling overstressed to follow through to all the way to the end.

Set smaller interim goals along the way, have a date and saving target that you can tick off as you go. Once you start seeing you’re achieving your goals, while still being able to enjoy your life, you will only feel more motivated to continue.

6. Get rid of or swap out your credit card!

It can sometimes be a bit too easy to spend money on a credit card. Even if you’re aware you have to pay it off that month, it seems easier to swipe away with a credit card than it does with a debit card.

If you can, use that fact to your advantage and use a debit card instead. You might find yourself thinking twice before spending. After all, a debit card is linked to your everyday bank account, so your spending money is limited to your available balance. You also get to dodge the interest charges that come with a credit card, and you could avoid an annual fee altogether.

 

Disclaimer: Information contained herein have been sourced directly from reiwa.com.au. The article/s above have been slightly altered. Original Author: P&N Bank