Saving for a Deposit
Whether you are saving for a deposit to rent a home or to put down a deposit on a mortgage the fact remains that you will need to be vigilant that you spend less than you earn – and bank the difference. By maximising your in-comings and minimising your out-goings you will hopefully begin to see a regular amount of money “left over” each month that will grow into your deposit. For some people being able to save is a tremendous challenge, so enlisting professional advice may be a good idea.
Know How Much You’ll NeedKnowing how much you’d like to save is the first step to success. In terms of cold, hard cash you’ll need to figure out the price of the deposit you want (one month’s rent? 10% of a purchase price?) as well as if you will be saving this amount of money alone or with a potential joint tenant or owner. You’ll also want to figure out if you are just saving for the deposit, which is usually the case if you are hoping to rent a home, or if you’ll need a reserve of further cash for example to pay conveyancing fees when buying a home.
Create a Household BudgetOnce you know how much you need to save you’ll want to create a household budget to help you meet this goal. This can be slightly tricky if you are attempting to save in conjunction with a partner, so it might be easier to simply agree on how much you are each responsible for saving and then committing to saving this amount on your own. Though it may sound like overkill, spend a month writing down each and every time you spend money. At the end of the month you’ll be able to total up how much money you spent – and where you spent it – and it should become clear where you can cut back in order to add more to your savings.
Consider Investing Your SavingsOnce you have a little lump sum growing you may decide that you want to invest it in order to try to make even more money. This is obviously a risky plan, since by nature investments may go very right or very wrong. If you truly could not absorb a loss then you might be better off looking for a savings account with a good interest rate. Otherwise, you might want to consider a short term investment option such as a Certificate of Deposit (CD) or short term bond.
Discuss Your Plans with a ProfessionalNo one expects you to be a financial wizard, so if the thought of figuring out a budget or investigating investment options makes you break out in a cold sweat then you should seriously consider discussing your plans with a professional. Most banks have financial advisors that you can access on demand, or there is always the option of hiring your own personal advisor. However, spending money to make money may not help you in the short term, so be sure about when you need your deposit before you begin to explore costly options.
Saving for a deposit may not be easy, but with a lot of hard work and maybe even a little luck you’ll get through it just fine. Good luck!