Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
“However, before you just start cutting back on all your expenses, you should come up with a definite savings plan and timeframe. In order to stay motivated you will need to strike a balance between starving and living miserably on the one hand and the temptation to overspend every time you go shopping, and the best way to do that is to decide on a specific amount to save each month and put that aside at the same time as you pay all your accounts,” says Kotzé.
“If you then manage to add to this minimum during the month, it will be a bonus, and as you get into the habit of saving, you will enjoy finding creative ways to reach your goal more quickly.”
The second thing to do, he says, is to speak to your bank or financial advisor about opening an account specifically for your deposit savings that offers you the best rate of interest and the lowest banking charges.
“Next, you need to work at paying off any credit card or store card balances as soon as possible, and then diverting whatever cash was going towards those debts into your deposit savings account. Keep one credit card for emergencies only, the one with the lowest interest rate, and stop buying anything on ‘budget’ terms or layby or hire purchase,” says Kotzé.
“Aside from boosting your savings, these measures will also improve your credit profile and your chances of being approved for a home loan.”
Kotzé says savers should also cut down on banking costs by using online or mobile banking services, and regularly check their bank statements to eliminate any micro purchases and unwanted subscriptions or premiums. “Many banking apps also have budgeting tools to help you keep track of what you are spending and saving each month.”
“And in this regard, you’ll find that giving up the ‘little luxuries’ for a while can make a really big difference to the time it will take to accumulate a deposit. Take a break from your streaming subscriptions for a few months, for example, or stick to home-cooked meals instead of eating out or buying takeaways, and you’ll be amazed how much extra you’ll be able to put in your savings account,” he says.
“You could also try taking your own coffee to work, running with your friends instead of on the treadmill at the gym, and carpooling to save on transport costs. Every little bit helps.”
Selling your unneeded assets is another great way to generate extra savings - and start preparing for your fresh start, he says. “If you have two cars, see if you could manage with one and sell the other. If you have clothes, household goods or furniture you no longer need or use, have a garage sale and put the proceeds in your deposit savings account.
“You might also be able to supplement your savings by doing part-time work at night or on weekends. Alternatively, if you enjoy cooking or baking, art or any kind of craft, why not take a stall at your local weekend market and turn your hobby into cash for your new home? It could make all the difference between living lean for the long term or saving the deposit you need within a year or two.”
Original article: Property24