Saving for a home deposit while managing to pay rent and other bills is often a challenge. But sticking to a serious saving plan can help you better manage your finance and allow you to save the most money. Here is how:
Strategy #1: Save to a budget
Most people make the big mistake of trying to save ‘what’s left over’ each month. That makes it really hard to set goals for savings because you never know exactly how much money you’ll be able to put away. Instead, work out a real budget for how much you have to save each month instead of guessing.
If you’re self-employed and your income varies, you can have two strategies. One, a monthly budget set to the lower amount you earn, as a regular savings amount each month. The other, a specific percentage of extra money you’ll add to savings after the usual bills are paid when you have a good month. More budgeting tips for self-employed can be found here.
Strategy #2: Pay your savings amount first
Don’t try and save in your regular account. When you have money in your account, you’re more likely to spend it on non-essentials. Try this instead: Pay money into a designated savings account at the beginning of the month, or whenever it is you get paid. Think of it as your savings bill. Of course, only put money into your savings account if you have funds available to cover your regular monthly bills.
How to set yourself up to succeed at this? Simply create an automatic transfer from your main account to your savings account, on the same day you get paid each month. When you ‘set it and forget it’, you’ll be happy to see just how quickly your nest egg can grow.
Strategy #3: Set up your savings account with a different bank
It’s not a great idea to have your savings account linked to your main account. While it is convenient, you risk dipping into your savings to make ends meet, or even to fund an impulse purchase, because that money is too easy to get to.
Try this instead: While it’s a good idea to keep some savings in an easily accessible account in the event of emergencies, keep the rest at a distance, in a separate ‘untouchable’ account with another bank. It’s a smart strategy, especially for impulse buyers.
Strategy #4: Have more than one savings pot
If you’re planning on saving for something specific like a home loan, it’s a good idea to have more than one savings pot. If your emergency fund is in the same account as your deposit savings, you could easily drain your emergency fund when you’re ready to buy a property. By the time you take on your first mortgage, you don’t need the stress of dealing with an emergency and not having any funds.
Try this instead: Create separate sub-accounts for different goals, like emergency savings, deposit savings and holiday savings. Most online banks make this super easy, and you can even nickname your accounts so you know exactly what each one is for. Have accounts for your top three to four objectives, and revisit them on a regular basis as your finances and goals change.
Strategy #5: Pay off your debts first
Make sure you’re not saving at the expense of other goals, like paying off your student loans or paying down credit card debt. Getting rid of those high interest debts is the best place to start getting ahead with your money. Pick a monthly goal that is sustainable to pay them off and stick to it. After a month or so, revisit the amount, and if you think you can consistently pay more, increase it. Then, when the debt is paid – simply set up an automatic transfer for the same payment amount to your savings account each month and keep going. Learn how to cut down on your credit card debts by following these smart tips!
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