In retirement, saving lets you stash away money, but you access it for many years. But a house deposit is a large sum of money that you’ll need to access soon. It means setting aside small amounts, but investing in stock markets may not necessarily work for you either due to fluctuations.
In these nine points, we’ll cover how to start saving for your house deposit and how to do it the smartest way.
How to save for a house deposit the smart way
1. Set a realistic goal
Before you start saving money for your house deposit, you first have to have a goal in mind. Plan to sit down with a mortgage lender to help you understand how much of a mortgage you can qualify.
Generally, in Australia, housing expenses and mortgage repayments should not exceed 30% of your stable monthly income.
So if your income is $4000, you can potentially allocate $1200 of that ($4000 x 30%) to your future house payment.
The $1200 includes the principal and interest, insurance, and other associated taxes.
Shop around and see the kinds of houses you can afford based on your current income. It will help you understand how much you need for a house deposit.
2. Set up a separate savings account
The next step toward saving for your house deposit is setting up a separate savings account. Your special-purpose savings account is where you place all the pennies you pinch away.
As a rule, since this savings account is a special purpose account, you need to save money within a specific timeframe. It means you avoid saving money in risk-type investment vehicles such as real estate, stocks, investment trusts, etc.).
Instead, save your money in super-safe vehicles such as boring old savings accounts and certificates of deposit.
Sure, high-risk investment vehicles have an equally higher return, but they also carry a risk of losing your money in the process which will set you back from your deposit.
Remember, if your goal is to save money for your house deposit, your worst-case scenario would not be missing out on good returns. It would be losing some or all the money you needed to buy your house.
3. Make more room in your budget.
Since we are talking about saving a few dollars per week, you have to clear some room in your budget to achieve your weekly saving goals.
It means cutting back on your expenses, adding additional income, or both.
Making room in your budget will help you achieve your goal and help you manage your expenses. Embrace it for all it is worth.
4. Start saving smarter – not harder.
The digital age makes it so much easier for anyone to save. You can easily find many platforms and programs geared towards helping you learn how to manage your money.
Find applications you can customize to your financial needs and give you updates to help you reach your goals.
But which ones work best when it comes to saving money for your house deposit?
Have a read through our list of the best Aussie budgeting apps to help you make up your mind.
5. Automate your savings
Most people are not savers by nature, so automating your saving process will work best if you want to achieve your saving goal.
It means having some payroll savings plan where you allocate a certain percentage or dollar amount from your regular pay. The money goes directly into your savings account or money market account dedicated to your house deposit.
The method not only automates your savings but also makes them invisible. It removes the temptations and ability to spend the money on other needs.
It helps you save first then find ways of stretching the balance as far as you can.
6. Shorten the process with windfalls
Windfalls can make the process of saving money towards your house deposit much easier or shorter.
Windfalls include gifts, income tax refunds, bonuses, large commission checks, or the sale of personal assets.
Deposing a windfall into your savings accounts fast-forwards the process. Regularly depositing a few thousand every week can chop off years of your savings timeframe.
How to save money for a house on a low income
Let’s be honest. Saving money for a house on a low income will take a bit more finesse than it does for those with more disposable income.
But it is still possible if you consider some additional methods.
7. Rent out a garage or a room
It makes no sense to have a garage or a spare room you don’t need. Why not rent it out for extra cash?
On average, you can make a rental income of around $85 to $440 per week in Australia, depending on location and other factors.
Imagine having $400 extra every week that you are putting towards your house deposit. However, before you rent out any spare space, check your rental agreement (if you are renting). Some property owners do not allow you to sublet your spare space legally.
The Airbnb option allows you to rent your room to holiday travelers for a good income.
8. Sell stuff you already own
How much of your stuff do you need? It could be an old laptop you have already replaced, an old TV you no longer use because the screen is either too small or too bulky.
Your junk could be someone else’s treasure.
Wouldn’t it be nice to live in your own house with less stuff that you need than paying rent the rest of your life with a whole bunch of stuff you don’t need?
Ebay is one of the greatest places to sell used items. To increase your chances of selling them fast, use terms, headings, and subtitles that people type in to search for items.
Sunday nights and weekdays around 1.30 pm could be the best time for you to sell.
9. Start a side hustle to boost your income.
If you still want a different way to turbocharge your income, pick a side hustle or a second job. A side hustle doesn’t have to take you out of your way but help you save for a house deposit in a year.
Start with hobbies or stuff you already love to do. Here are some examples to consider;
- Online Writing – You can help people sell stuff online. You can become a copywriter, social media marketer, content marketer, virtual assistant, or transcriber.
- Driver – You can drive people around the city, make deliveries or work with companies such as Uber or Lyft and make some sweet cash on a flexible schedule.
- Teach English or Another Language – Search online for teaching jobs or ways to teach English to non-English speakers or vice-versa. You can even earn more if you have an advanced degree.
- Pet care – You can take care of other people’s pets while they are away. Make some extra money while having fun with pets you love.
Is it worth it? Imagine adding 16 hours a week, making $10 an hour. That is an extra $120 per week. Keep that up, and you’ll have more than a $12,400 in-house deposit in 24 months.
This method could be the fastest way to save for a house deposit.
Buying a house is a long process that requires a good sum of your savings. But think of it as preparation for your big dream – homeownership.
You will still have the expenses you have now even after you buy your house. But you’ll also have additional large expenses related to your new house. So look at it as a dry run to prepare both your finances and psychologically for extra expenses that come with homeownership.