Here are some smart tips to help grow your savings and financially prepare for buying your first home.
Save 10% of your pay each pay cheque
This tip is an oldie but a goodie that works if you’re prepared to stick with it.
Designate one savings account – ideally at a different bank to your everyday accounts to make it harder to access the money – and then transfer 10% of your net pay each pay period. It might mean you have to miss out on a few restaurant meals or coffees throughout the month, but it will be well worth it in the long run.
You could even look to make voluntary KiwiSaver contributions and benefit from the compounding investment returns. Only use this option if you qualify to withdraw your KiwiSaver balance to purchase your first home i.e. been a KiwiSaver member for more than 3 years.
Pay off your debt
Eliminating debt is not a direct savings tip, but it is by default as you’ll be saving money on interest payments. Paying off your debts makes sense for two main reasons: it will increase the amount of money you can borrow, and it will free up cash to put towards your home loan repayments.
Sell stuff on Trade Me
Trade Me is a great place to offload unwanted items in return for cold hard cash. From old clothes to unwanted perfumes, cosmetics, electronics and sports equipment, Trade Me can generate hundreds – if not thousands – of dollars for you in a matter of weeks. Just make sure all money from sales is deposited directly into your savings account.
It’s never fun tightening up your budget, but it’s an effective method for saving money. You can start by removing or downgrading personal luxuries and directing the money into a savings account. You don’t have to skip everything at once, instead, remove one luxury per month, pocket the savings, and then move on to the next one. Over a period of twelve months, you could easily save a few thousand dollars by alternating between life’s little luxuries. For instance:
- Cancel your Sky television or favourite magazine subscription
- Take your lunch to work instead of buying it
- Avoid online shopping
- Skip alcohol – your health and your bank balance will benefit
- Host dinner parties instead of going out to restaurants
- Buy some nice plunger coffee and make your own coffee at home and work
- Avoid those smashed avocado on toast breakfasts
Get a part time job
If you’re serious about saving for a home deposit and your finances are already stretched to capacity, then consider looking for extra work. By working a few evenings a week, you could easily add $1,000 a month to your bank account, or $12,000 over 12 months. Think babysitting, dog walking, freelance writing or graphic or web design, tutoring high school students or teaching English to foreigners.