Saving money for your first home may seem like a daunting prospect. After all, we’re talking about needing a down payment that can range from several thousand dollars to tens of thousands of dollars.
But how to raise all that cash? The truth is, by making a few simple changes to your lifestyle and spending habits, you can see your new home savings grow quickly. It’s easier to save when you look at all the small things you can do that add up over time, and the more money you put into a down payment, the smaller your monthly mortgage payments will be.
How can you save money for a home when you’re renting?
These tips will help you save.
1. Pay down credit card debt
Start by getting rid of as much debt as you can. Paying down or paying off high-interest credit cards is key because all that money you’re paying in interest could be going to your down payment. If you need help, consider enlisting your bank or a credit counselling service to help streamline debt.
2.Cut unnecessary extras
That pricey coffee you buy every day can really add up. A grande latte at Starbucks costs about $4.25. Add that up over a week and that’s $21. In a month, you’ve saved $85. Over the course of a year, that’s just over $1,000. Not small change!
This phenomenon is known as the Latte Factor. When you factor in that pricier glass of wine at dinner out, or the consider skipping that weekly meal at a restaurant, you can see how quickly your savings can add up.
3. Pay yourself first
There’s an old adage in finance that you need to stash savings away before you realize it’s gone.
Paying yourself first involves setting up automatic transfers from your bank account so that you can set some money aside in a savings account the moment it hits your bank. If you can save $50 or $100 from every pay cheque, that adds up over time.
Saving $50 from each biweekly paycheque will leave you with $1200 at the end of the year. Between this and cutting your coffee habit, you’ve now got $2,200 in the bank!
4. Ask for overtime and extra shifts
If your workplace lets you take on extra work or pays overtime, volunteer for those shifts. Even doing a few extra hours of work once per week can pad your paycheque nicely.
5. Streamline your spending
We’re all guilty of spending a few dollars here, and a few dollars there without thinking. Not to sound like a broken record, but all those small expenses add up!
If your vice is books, get a library card and borrow books instead. Like picking up magazines? Invest in the Texture app; for the cost of one or two magazines per month, you get access to hundreds of Canadian and US glossies, all on your smartphone or tablet.
6. Do you buy lots of music? Subscribe to a streaming music service instead, like Spotify.
Whatever you like to buy, scrutinize the expense, and see if there’s a cheaper option. Another way to keep tabs on where all those dollars are going and how you can corral them back up is to write down everything you buy each day for a week. Ask yourself if those expenses are truly necessary, or if there’s a way to cut those costs. Similarly, look at your phone, cable and internet bills and see if there’s ways to trim service and save money.
The rental market is constantly changing. Sometimes you can find a better apartment for a lot less than you’re currently paying or you can find a bigger place and get a roommate to help keep your costs down. Also, look for deals like free internet and cable to further reduce your expenses. Right now, The Arch has a great promotion where you get free cable and internet if you sign an 18-month lease on select two bedrooms.
With just a few small life changes, you’ll have that down payment in no time.