The path to home ownership starts with saving for your first home deposit. For many, it requires a new attitude to financial responsibility and learning some new financial techniques to make your savings grow.
Here are a few tips from Eadon Home Loan
’s Paul Eadon on saving for your first deposit.
Work out a budget
Managing your money is a lot easier if you create a comprehensive budget. To create one, work out your living expenses every month. Include everything – rent, food, morning coffee, utilities, petrol or public transport costs – everything you are spending your money on. The trick is to think carefully and include all of your actual expenses. Once these have all been deducted from your monthly income, what's left over is your potential monthly savings amount. It's that simple!
The next step is to look at areas where you can spend less. Decide how much money you want to save every month and find ways to cut your spending to achieve that goal. For most people, just being aware of your casual spending habits can be a big help. Do you really need to buy a coffee on your way to and from work every day? Could you save an extra $50 a week by bringing your lunch instead of buying it?
The next step is to look at your bank account at the end of every month and put away what's left over. If you've ever said something like "Oh look – I've got $200 left over this month, I'm going shopping!" then saving for your deposit is also going to require a bit of a mental shift. Remember that ‘extra’ money is destined for your savings account – don't be tempted to spend it on anything you don't really need.
There are some additional benefits to planning a regular budget and training yourself to stick to it! If you have an established savings routine and a strong history of growing your savings balance, it may place you in a better position when it comes time to apply for your home loan. It could even mean you have more choices and can obtain a better interest rate.
Make your money work for you
Once you've worked out a budget and have established a monthly savings routine, you'll want to consider other areas where you can save money. You can start by cutting back the costs on your everyday transaction account. To do this, you can consider paying your bills with automatic debiting as this is usually a fee free service. You can also save money by being careful where and when you make withdrawals – use EFTPOS when shopping if you must withdraw cash as there is no extra charge and avoid using other bank's ATMs as these can attract higher fees.
Keeping your savings in your transaction account also makes it very accessible – consider putting your money away in a savings account to help remove the temptation to splurge.
Stash your money away from temptation
A savings account is a great way to get started on saving your deposit. But once you have a few thousand dollars saved, you may find it beneficial to put it away in a term deposit account. With a term deposit account, you put your money away for a fixed period of time. It's a great way to remove the temptation of spending it on luxuries or things you don't really need.
Try a budget app
Budget Tracker from the Apple store is a handy app that gives you a simple and smart way to save money in three easy steps. You just create a budget, track your spending against it and get some clarity on exactly where your money is going so you can find ways to save more. It lets you customise your budget for each category of spending and track it in real time. Compare your spending weekly or monthly so you can see how you're doing – it shows whether you are on track, off track or overspent! It's a great way to set a budget, motivate yourself to stick to it and build your savings faster!
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