Hello
Today I'm going to talk about how to save for a deposit. I'm sure this will be helpful to a lot of people as getting the deposit together is the hardest part of buying a property. Particularly at the moment with youth employment low, low wages, a high cost of living and an over inflated property market. It has never been harder to get on the property ladder than it is now. If you're reading this post hoping that I'm going to give you quick easy ways to save or make money, then you are going to be disappointed. It is NOT easy, unless you are in the fortunate position to have some inheritance or other big source of funds.
Before I get into the tips for saving I want to give you a bit of my back story, just to highlight that it is possible. It has always been my goal to own my own house. My parents own their own home and they have always encouraged me to be sensible with my money. To me I would rather be paying off a mortgage where at the end of it I will have a large sum of money contained within my house, than pay rent, making someone else richer, with nothing to show at the end of it. Renting now costs more per month than a mortgage (comparing like for like, depending on where you live) so if you can get on the property ladder you will benefit. Of course I am aware that this is not an achievable goal for everyone and I know I am incredibly lucky that I can get a mortgage. I also would not have been able to do it on my own, its only because I have a partner to halve everything with that it is possible. Achieving this goal is a lot about personal circumstances, but also about committing to that goal. You will have to go without a lot of luxuries for several years, but it is possible.
I have been saving up my deposit since I was about 16. I had my first job at 18 and since then I have never worked full time (not through choice) or earned much money. But what I have earned has been carefully saved. Again going back to circumstances, I have been lucky that my parents have never charged me rent, so that money I saved was put into a savings account. My parents appreciate how hard it is financially for young adults so helped me out in this sense. If I had been careless with my money then they might have started charging me rent. This has helped me greatly but I've also been smart with my money. I haven't had expensive holiday or a new car. I don't own loads of clothes or possessions and I try to save money wherever possible.
Ok, so on to the tips;
1. Make a packed lunch rather than eating out at lunchtime.
This might seem like an odd one but it is surprising how much you spend on lunches, drinks and snacks at work. My philosophy is that I have come to work to make money not spend it. Bringing a packed lunch will save you a lot of money as you can make the most of buying in bulk. E.g. A can of fizzy drink will cost you at least 80p in a shop singularly. If you buy a multipack of 8 they will cost you 44p each.
What led me to this was my own spending at work. In a typical week I would have a drink and cake at a coffee shop (£3.50) on a Monday, then on a Thursday I would have a McDonalds Meal (£3.99). So over the course of a month that amounts to £29.96. That may not sound like much, but over a year that is £359.52!!! On stuff that I didn't need to buy, and thats just two days of the week. If you get lunch and a coffee everyday then that figure will be a lot higher.
CHALLENGE- Work out how much you spend at work in a year on food and drink.
2. Choose your savings accounts carefully.
Shop around to find the accounts offering the best interest rates. At the moment the best you are going to get is about 3% as interests rates are at an all time low (0.5%). ISA's are a good option as they are tax free, but don't discount other types of account. Bonds are an excellent savings option as you lock away the money for a set amount of time (the longer the better) which means you get higher interest rates. They also have the added advantage that you can't access the money, which is good if you like to spend! I would estimate that over 5 years I earned £1000 just in interest and putting my money in the right accounts.
Once you have a decent amount saved I would suggest moving the bulk of it into a bond and tying it up in there for as long as you can. But keep £1000-2000 in an instant access savings account so that you've got some money for emergencies. This is also the account that you keep adding to. You can't add more funds to a Bond once it is set up.
CHALLENGE- Set up a savings account or bond
3. Keep your goal in sight.
Again this might seem like an odd tip, but as I've already mentioned you are in for a tough few years. There are times when it will make you miserable and you will want to splurge on something with your savings. When you feel like this you need to think about your ultimate goal. Look at houses online, look at interior design magazines or homeware shops and start planning in your mind your dream home. This will get you excited again and refocus your mind on whats really important.
4. The 52 Week Challenge.
Someone at work told me about this and I am currently doing it to save up for house things. The challenge is to save money every week for a year starting in week one with £1, week 2 save £2, week 3 save £3, etc until you get to week 52 where you save £52. I have changed this slightly as saving over £200 in the last month can be quite difficult. Instead I have written all the amounts out and I pick one each week and tick it off. So if I'm feeling flush I'll pick a high amount but if I'm feeling poor I can save a low amount. Over the course of a year, without interest, you will save £1,378.
CHALLENGE- Start the challenge with £1
5. Set up a monthly or weekly standing order into your savings account.
This is essential, particularly if you find saving difficult. If you set it to go out at the beginning of the month you won't get caught short at the end and can manage whats left over better. Its best to first of all do a budget of all your spending and find out whats left over. Then divide whats left after bills into two. One half is for spending on treats and the other half you set up as a standing order.
6. Make sure to change your accounts each year (or at the end of the ISA Term).
You may not be aware, but unless stated otherwise, the advertised interest rates on any account only last for the first year. After this year they go down to a much lower rate, unless you change your accounts. So each year I go into my bank and update my accounts to ensure I am getting the maximum interest.
CHALLENGE- Check your account interest rates and change them if you are on the low rate.
7. Downgrade your car.
This can be very painful to do, depending on how important your car is to you. I have downgraded from a 1.6L car to a 1.2L and it depresses me every single day that my car has no power. But I comfort myself with the knowledge that I am saving £150 a year on tax, at least £40 a month on fuel and a few hundred pounds on insurance. Depending on your current car the savings could be huge. At the end of the day a car is a mode of transport, I don't want to pay anymore for that than I have to. Cars are hugely expensive as it it.
8. Question Every Purchase.
Before you buy anything just take a moment to think do I really NEED this or do I simply WANT it. If the answer is you want it (maybe really really badly) consider walking away and putting that money you would have spent into your savings. This links with tip 3.
9. Treat yourself occasionally.
Despite what I have said above I do think it is important to occasionally treat yourself to a little something. We all work very hard for our money and we need to feel that it is for more than just bills. Having said that be sensible. Don't blow £500 on a pair of designer shoes or a handbag, maybe just £50 instead. A good treat is to buy something for your house e.g a case or a picture so that your end goal is still in sight.
10. Get into the mind set that "Every penny counts".
Some of my tips may seem incredibly particular, but as the saying goes "If you look after the pennies, the pounds look after themselves". Spending just £1 on unnecessary items each day amounts to £365 a year. Saving these small amount into a jar is a good way to demonstrate this.
CHALLENGE- Set up a change jar.
11. Be disciplined with your savings.
This is aimed particularly at spenders. If you are one of those people where money burns a hole in your pocket, then saving is incredibly difficult. If this is you then make sure that you have a savings account that you can't access. This will stop the temptation to spend it when you reach a few hundred pounds, as you simply won't be able to get to it. The tip of setting up a standing order will also help you.
12. Get savvy with coupons.
You can make some good saving by using coupons, but you need to make sure the coupons are for things you actually buy. After all companies offer these incentives to encourage you to buy things you wouldn't normally. In which case you are wasting money, not saving it.
I really hope these tips are useful to you. It's not going to be easy but I wish you all the best with reaching your goal. It will be worth it in the end. Remember, the more you save the lower your mortgage payments will be and the more disposable income you will have when you finally get in your home.
TTFN!
