Savings strategies for first home buyers
Getting into your first property is hard work. For a start you are always playing catch up with capital growth and that can be very disheartening. There are a lot of common mistakes that first home buyers are making, find out below how some simple strategies can help to make a difference:
What method do you use to save money?
Savings accumulate best when you have a dedicated plan tied to a specific purpose. Most people only save what’s left after they’ve paid their bills and while this can work sometimes, it’s hit and miss at best.
Obviously, if you are not saving enough money now then you may have a cash flow problem and this should be addressed immediately. When you are going to buy a property it’s very important to keep control of your cash flow. After all, having money in your bank account makes more sense than not.
Understandably, your ability to save will be limited by income so why not look at improving that situation first. Perhaps consider asking your boss for a pay rise? Or if there’s no room for salary increase is there a potential option to change roles or positions? Changing jobs may seem extreme but ask yourself just how committed you are to buying a home in the first place.
Consider how to minimise expenses.
An accurate picture of your spending habits is critical if you are serious about saving so let’s look at how to do this. For instance, when you spend any money, write down the details and record it on a spreadsheet. What you are doing is tracking how and where you spend your money. Keep tracking it for at least three months, then once it’s all laid out in front of you, choose the areas where you could make changes. Unfortunately, there are no set guidelines for this part, only you can decide the areas you can afford to change.
Create a workable budget.
A budget is also a way of getting rid of unwanted debt by allocating extra money to pay it off faster and repaying debt is just savings in reverse.
Bear in mind that it will take time to build up a substantial savings balance so do some research on high interest at call accounts. Some of them provide bonus interest if you deposit money regularly, such as your pay. At call accounts should give you full electronic access to your money when you want it. The general idea is to accumulate money in this account before moving it into higher yielding investments. Think of this account as your base camp while you get ready to climb Mount Everest.
The next stage is to begin investing larger sums for better interest rates. Generally, these are longer term investments with restrictions on getting your money back. Bank Term Deposits are one example. They lock your money up for a set time frame in exchange for a better interest rate.
At each stage of the savings process you want to earn interest. You’ll find that the early stages earn very little while the later stages earn the most. Therefore, the more money you can save, the more money will be funneled through the process.
An interesting alternative is shares. Usually shares are long term investments and there is more risk attached to them compared to a simple bank Term Deposit.
Naturally, the trade-off between risk and return is a personal choice with safety the prime consideration. Remember, it’s easier to recover from a small loss than a large one.
Having a strategy to lift your savings capacity is a simple way to make your money work harder. Sometimes it’s just a matter of looking outside the square to see a better way.