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How to Save For a House: The Do’s and Don’ts For Saving For a Deposit
October 1, 2019●
4 minute read●
If you want to buy a house, you’re probably thinking “Oh no, I need to save thousands and thousands of dollars.” It’s daunting, but don’t worry; it’s possible! I say this as a current homeowner, and you can do these things too.
I’m going to break down how by going over some helpful do’s and don’ts to help you save for a deposit on your house.
How To Save for a House?
Buying a house is exciting. For many of us, it offers a sense of financial stability. Of course, it’s not for everyone! You don’t need to buy a house to be a financially stable human being.
If you do want to buy a house though, it can be an excellent investment as well as an exciting big step. Like most big steps, of course, it can cost a lot of money. So, let’s dive into the different tactics that help make a difference when saving for a house.
How To Save For A House Deposit
Do: Understand Your Current Spending & Saving
Step one is to understand how much you are currently spending and saving. If you’re starting from square one right now and you have zero dollars saved for a house – that’s fine! You’ve got to start somewhere.
If you’re starting, look at your current budget and track your spending for a few months if you’re not sure where your money is going. Look at how much you’re saving, what you’re saving for, and how much you’re spending.
Look at what you’re spending on, and decide whether it is as important to you as your goal to buy a house. You can reallocate the money saved from unnecessary spends over to your house savings.
Don’t: Give Up All Your Other Goals to Buy a House
Here’s a key ‘don’t’ to remember though – don’t give up essential savings goals to buy a house. There are two key things to consider here:
Do not stop saving for retirement. It’s a critical mistake not to make because your house is not a retirement plan. Your home is a place where you live and maybe work, and you’re still going to need food and other things in retirement.
Do not give up your emergency fund. It’s so important to keep contributing to an emergency fund because things can go wrong at any time with houses. Your house may need an emergency repair, and if there’s no landlord to call, you’re on the hook for those failures. If shingles fly off your roof, it’s on you to fix it!
Ultimately, if you give up these savings goals, chances are you’ll probably end up dipping into your deposit fund anyway to cover these costs.
Tips For Saving For a House
Do: Prioritise Your Savings Goals
That said, a key ‘do’ when you’re saving for a deposit is to prioritise your savings goals. While you shouldn’t stop saving for your retirement or emergency fund completely, it is okay scale it down a little bit.
The same thing goes for saving for a vacation or saving for a beautiful new couch. Maybe it’s more important to you to put that money towards your house deposit now, and save for those things once you’re happily in your house.
Don’t: Think Your Income is Fixed
One more ‘don’t’ that you should avoid is thinking that you can’t make more money. I know that there’s a lot of reasons why some people don’t want to have a side hustle. But, if you can make even an extra $100 a month, that $100 could be very well used to help top up your deposit savings.
A side hustle can also be anything that works for you. You could try babysitting, write online, or take on freelance gigs in your skillset.
By the same note, don’t take your income for granted. Lack of job security is one very good reason to have an emergency fund. Of course, we hope you’ll never be in this position but just be aware that things can sometimes not go the way you expected.
Do: Plan for Any Extra Income Ahead of Time
Even if side hustling isn’t your jam, it’s crucial to have a plan for what you’re going to do when extra money comes your way. Extra money can be anything from a tax refund, to a bonus at work, to even birthday money! There are all of these different times when money comes into our lives as a surprise.
So, if you have a plan for what you’re going to do with it when it does, you’ll be so much better prepared to handle it the way you want to handle it. Try not to think, “Oh well, I’m just going to treat myself with my tax refund.” You could put that money into your deposit savings and be done with it. It’s an easy decision then because you’ve planned for it already. Plus, those little bits of extra money will add up over time.
Why It’s Worth All the Effort
The best part of all this is once you’ve hit your goal, you have the learning experience of saving for something big and reaching your end target!
Knowing how to balance priorities, save up a lot of money and make a plan is something that’s going to be helpful at any point in your life, even after you’ve saved for a house – buying the house itself may just be step one on the route to creating your dream house!
Jacaranda Finance is an online lender that gives everyday Aussies a fair go at personal loans. For more finance tips on saving and setting goals, check out our blog!
Written by Jacaranda Team