Buying a first home is a big financial goal, and saving for a deposit can seem daunting. However, with a little planning and effort, you can reach your goal sooner than you think. Saving for a deposit is the biggest hurdle for first home buyers. According to a 2022 ANZ CoreLogic report, it takes a little over 11 years to save a 20 per cent deposit in Australia.
Here are our tips to help you reach your goal sooner.
Set a Savings Goal
How much do you need to save for a deposit? A common goal is 20 per cent of the purchase price, which avoids lender’s mortgage insurance. You can use a borrowing calculator to estimate how much you can borrow.
Work Out How Much You Can Save Each Month
Once you know your savings goal, you need to work out how much you can afford to save each month. Create a detailed budget that outlines your sources of income and all your regular expenses. Identify areas where you can cut back, like dining out less or cancelling unused subscriptions. If possible, consider taking up a part-time job or freelancing opportunities to increase your income. Use budgeting apps to track your daily spending and ensure you stick to your budgeted amounts.
Pay Off Your Debt
Prioritise paying off existing debts, especially high-interest ones like credit card debt or personal loans. Debt repayment should be a top financial priority because it frees up more money for your savings each month. Consider using the snowball or avalanche method to pay off debts strategically. The snowball method involves paying off the smallest debt first, while the avalanche method tackles the debt with the highest interest rate initially.
Open a High-Interest Savings Account
Research financial institutions to find a savings account with a high-interest rate and no monthly fees. Online banks often offer competitive rates. Set up automatic transfers to this account immediately after receiving your paycheck. Automating your savings ensures consistency and helps you avoid the temptation of spending the money earmarked for your home deposit.
Reduce Your Accommodation Expenses
If you’re currently renting, explore options to reduce your living costs. Moving back in with your parents, if feasible, can significantly cut your expenses. Another option is to consider moving into a share house or finding a roommate to split the rent and utilities. If you have a spare room, consider renting it out to generate additional income. Alternatively, if your lease is up for renewal, shop around for more affordable rental properties in your desired location.
What’s Next?
Saving for a deposit on a home can be a challenge, but it’s definitely possible with careful planning and dedication. By following the tips in this article, you can reach your goal sooner and start building your dream home. Simplify Finance can help you by assessing your financial situation and creating a savings plan to get you into the property market.
Book a call or fill out our contact form to find out how we can help. We’d love to hear from you.
