10 Tips to Help You Save For a Deposit
Purchasing a home or investment property will likely be the most expensive purchase you will make in your life. Therefore, the deposit amount will likely be the largest amount of money you will ever need to save in your life.
Whilst saving such a large sum of money certainly won’t be easy, there things that you can do to ensure you have the best chance.
1. Delay Gratification
Living in a consumer based culture means that we are put under pressure to constantly upgrade and spend money on items so that we ‘have the best’ in order to ‘be the best’. A lot of the time we can get caught up with short term gratifications from purchases that do not pay off in the long term.
Instead, focus on delaying your gratification in the short term in order to reap the benefits in the long term.
2. Research
If this is your first deposit you are saving for, be sure to identify exactly how much you are wanting to spend on a property and all associated costs in the purchase process in order to come up with an accurate deposit amount.
Be sure to look into how much stamp duty, legal fees, taxes and other associated costs will be. Will you be looking to save a 10% deposit, 20% or other?
3. Budget, budget, budget
Setting a budget is a crucial part of the savings process and can be done in varied methods, from drilled down specific calculations to broader blanket costings. It is important to find a method that works for you.
A good place to start, however, would be identifying costs and expenses that are regular or fixed (phone, internet, rent etc.) and seeing how much you have left over each week or month.
Having a strong understanding of where your money is going will allow you to better allocate funds towards your savings goal.
4. Save first, spend second
Whilst it may sound obvious, this is where many people slip up when saving. As soon as your income/salary is deposited into your account, be sure to set aside your savings money first, pay off any expenses second and spend money on your lifestyle last.
Taking incoming money and putting it towards savings and expenses first will mean it will never tempt you in your everyday spending account. Money can’t be spent if it isn’t there.
5. Additional income
It will be incredibly hard to save for a deposit if there is no room in your income to set aside for savings once your basic costs are covered. If this is the case, look at ways that you can start earning more money.
Is it time to ask for that pay rise? Perhaps you could get a second casual job a couple of hours per week? Do whatever you can to help speed up the savings process. More money equals more savings.
6. Don’t get emotional
Impulse is a large part of human behaviour, however, try to avoid impulsive and emotional purchases. Unfortunately, this is easier said than done. It is ingrained in us that if we like something, we must have it. Remember your long term goal and be emotional about that instead.
7. Set a specific goal
Be clear about the amount that you want to save and focus on it. Know that each time you allocate savings from your budget, it is going towards that exact goal. Remind yourself of your goal regularly to keep yourself on track.
8. Know your ‘why’
Identifying the reason why you are saving for a deposit will keep you motivated in achieving it. Your ‘why’ may be wanting to live in a new area, moving into a larger home or stepping onto the property investment ladder. Whatever your reason is, the sooner you can recognise it, the sooner it will become a reality.
9. Be realistic
Setting yourself an unattainable goal will quickly lead to a feeling of defeat before you have even started. Set yourself goals that are realistic and within reach so that you can begin to see the progress from the beginning.
A good way to do this is to create levels of smaller goals towards the ultimate goal. Each time you successfully hit a new level, you will be motivated for the next.
10. Environment
Being in an environment where the people around you are supportive and understanding of your savings goal is crucial, particularly when it comes to your partner.
The people around you need to be on the same page. It can often be a huge roadblock when their goals do not align with yours.
