We all know that saving money is a good habit to get into, and to save money we must stick to a budget. An excellent theory, but how many people actually forge ahead with this money saving plan? Saving money requires discipline. Any lapse in discipline means you will be putting your ultimate goal further out of reach. Before you start looking at display homes or browsing the internet, saving for a home loan deposit is your first step to making your dream a certainty.
Start making purchases in cash
It is easy to become oblivious to how much every purchase actually costs. Swiping your credit or debit card becomes so routine, that you don’t realise how much that coffee or magazine actually cost. If you start paying for items in cash, it will make you more aware of how much you are spending. If you run out of cash, go without. Don’t be lured into using your EFTPOS card.
Make a savings plan
Commit to a savings plan such as banking 10% of your income into a high interest savings account. Choose an account that has no access to your key card so you won’t be tempted to dip into it when making purchases. If you are determined to build up your savings account, add to it any pay rise you may get or if you are finding your ‘vices’, such as smoking or impulse purchases, too expensive, put the money you would have spent into this account as well. It is surprising how quickly small amounts build up.
Source extra income
You could sell unwanted items online or take your treasures to a car boot or rummage sale. Tutoring, child minding or teaching English are other ways to earn extra income, which can go straight into your savings account.
Pay off debts
Paying the minimum amount off debts such as credit or store cards and personal loans can take a seemingly endless amount of time. These debts not only cause a financial burden, but may have a negative impact on your home loan application. Paying off your debts means that money can now be deposited into your savings account.
Cut out unnecessary spending
If you are saving for a home loan deposit, it’s okay to be a little frugal. Eliminate what you think are frivolous luxuries, such as a daily takeaway coffee, cable TV or buying new clothes every week. You do not have to ditch everything; just buy a coffee twice a week at first and cut back on your cable tv plan. The savings will soon accumulate.
Applying for a home loan can be a tough process. Lenders will need to know your full financial situation and will want to see what savings plan you have in place. Informing your lender of your position and being able to show how you have decreased your personal debt and instigated a savings plan will be greatly beneficial to you. It can take many years to pay off a mortgage but with a strategic plan in place, your own home will easily be within reach. There are also many different types of loans and your lender will suggest the best one for you. A Clear Path Home Loan from BOQ has a low interest rate which means, with self-control and a savings plan, you will be able to pay off your home sooner.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.