With the rise in housing prices during the pandemic, house deposit can seem a lot more daunting to save money for. However, there are still ways to build a bigger money pot for your first home.
Whether it is a quick money hack such as cutting down your spending to longer tricks such as the ‘30-day rule,’ here are some ideas for boosting your savings toward the home of your dreams.
Take note of your spending
Only when you start tracking your spending and get it organised on a piece of paper, or on an Excel spreadsheet, you will have a clear understanding of where your money goes each month.
Keep track of every expense – a coffee, dinners out with friends, or shopping. That way you have a view over where your money goes, and you can take control of your spending habits.
Set up a time every day or once a week to look at your finances and make it a habit. The key here is once you’ve got it all listed, you’ll be able to see where money is being overspent and cut back as needed.
If you’re rushed for time and don’t want to document your spending line by line, digital banking apps often have good analytics that will give you an overall break down of what you’re spending money on.
Cut down on unnecessary costs
Do you have a subscription that you pay every month, but never use and always forget to cancel? Now’s the time to take control of your finances by:
1. Cancelling unnecessary subscriptions that you or your family don’t use anymore – especially if they renew automatically
2. Switch to another provider/competitor or negotiate prices (whether that is for energy bills or entertainment TV)
3. Spend less on nights out or dinners, and look for more low-cost alternatives
4. Control your spending by using the 30-day rule. Instead of purchasing an item you may regret spending on later, wait for at least 30 days to see if you really need it. If you don’t, then you have saved yourself some money.
Set up a savings plan
Decide on the reasons you want to save money – is it to buy a house, go on a holiday, or save for your future and retirement? Then figure out how much money it will take to make those things happen and create short- and long-term goals.
For example, for your short-term goals you can focus on creating an emergency fund, save up for a holiday, or buy the latest iPhone. The idea behind a short-term goal is to offer a quick sense of achievement – so you can enjoy life’s pleasures.
For your long-term goals, you need more patience and time. If you want to save money for your house, look at different ways to invest or savings accounts. Or if you want to invest in your child’s future, look into Junior ISAs.
Pay off your credit card and other debt
There are a lot of support available that you can reach out to when dealing with debt. When it comes to financial goals, paying off debts should always be the priority. Unless it is an arranged debt such as a student loan, these can be managed with instalments.
Credit card balances (if you are not clearing them every month) should be the priority to pay off if you have spare money. Target one debt at a time, focus on the highest interest rates or pay your smallest balance first.
Pay more than the monthly minimum to cut down on the interest rates. That way you can pay off your debts faster too. You can also take advantage of low balance transfer rate to move debt off high interest cards but be aware of the transfer fees.
It’s very important to understand the terms of your debt so you’re not caught out by any unexpected fees. For example, Lendwise loans don’t come with any early repayment/overpayment penalties. So you can reduce your overall interest cost by making overpayments on a regular or adhoc basis.
Use the power of DIY
DIY can feel overwhelming at times, but it can be a good way to save money for your future. From home improvements to outfit transformations, depending on your skill set, you can create anything you put your mind into.
For example, if you’re handy with a tool set, you can do a project like converting your open kitchen space into a bar stool for basically a tenth of the cost.
Not only this is a practical and affordable solution, but it can also be a creative outlet for you to express your own personality.
Bonus tip: get a Lifetime ISA
If you’re in the process of saving for a house deposit, or would like to start, where that money is stored while you save is really important.
The best place to put it is in a Lifetime ISA. This is because for every £1 you put in, the government gives a 25% bonus – up to £4,000 a year. That means if you put in the full £4,000 per year, the government will give you £1,000 extra on top.
You have to be between ages 18-39 to open a LISA and can choose between a cash or stocks and shares version. If you’re planning on having enough money for a deposit in less than five years, the cash account is probably the best place. Although it won’t have the same potential for growth as a stocks and shares LISA.
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