Tips for Saving for Your First Home

tips for saving for your first home

Buying a first home is still seen by millions of Britons as a rite of passage, allowing people to set up a family of their own and start paying into an asset that they actually own. But for many people, it feels like a next step that is increasingly out of reach, particularly for young adults whose age group would ordinarily be the ones to make that leap. While stagnating wages and rising living costs have certainly impacted the affordability of homes, there are still ways in which you can organise your finances to raise the cash you need. So how can you go from renting to owning under your own steam? Let’s take a look.

Go technical

Keeping track of your monthly incomings and outgoings is essential when you’re trying to save. After all, how can you know how much you have if you don’t know where it’s going and when? This can be tricky if you’re a busy person and you regularly make lots of small purchases, so it’s a good idea to get as much help with this as you possibly can. Luckily, there are all sorts of options that can use the power of technology to make it easier, and you can even rely on your bank to help you with it too, these days. There are several apps and some bank accounts, which allow you to track your purchases in minute detail. Aside from letting you see each purchase, you can also see the types of expenses broken down by category, such as bills and entertainment. This shows you how much money you might be spending on non-essential areas and highlights potential candidates for cutting back.

Another way that technology can help is by helping you to keep track of smaller amounts of money, which can add up to a larger amount over time. For example, there are finance apps that allow you to round up all of your ‘change’ (all amounts less than one pound) on purchases that you make to the nearest pound, depositing the difference into a separate account. While it may not net you a deposit on its own, it’s a nifty way of saving without using any effort and can add up to a decent sum over time.

Optimise your finances

Another advantage that modern technology affords you in the race to save up a deposit is the ability to find the cheapest options available to you at the touch of a button. The list of things you can optimise using a price comparison website is virtually endless, from your electricity and water bills all the way to your car insurance and your bank accounts. If possible, get yourself onto the best possible deal in each area and then pocket the money that you’ve managed to save into your home kitty every month. You lived without that money before so that you can do it again, but instead of going into the pocket of some company, it’ll be setting you up in a place of your own. As well as this, it’s important to make sure that you do this checking semi-regularly, at least once or twice a year. Many deals expire or are superseded by better deals to be found elsewhere, so you should always be on the cheapest rates available. You can even use services that move your contracts around for you, bouncing you between the best deals so that you don’t have to.

Prioritise your spending

While there’s plenty of money to be shaved off your expenses here and there, you should also live like a saver too. This means putting saving at the top of your priority list, not as a ‘nice to have’ at the end of the month. Ideally, you should decide how much you can reasonably live on in a month and then put the extra into the bank at the beginning of the month so that you’re living to a budget. This way, you can’t accidentally spend the extra money, and if you do end up needing to dip into it, you can still access it anyway. To have this method work properly, you’ll need to make sure you’ve set up a well-defined budget so that you know what you’re working with.

A budget is simply a rough idea of how much money you’ll need to allocate to each area of your life in order to live as you’d like to, and can be easily divided up into essentials and non-essentials. Things you need to live day to day, like your rent payments or your gas bill, go firmly in the ‘essential’ category, while things you merely like doing can go in the ‘non-essential’ category. However, that’s not to say that essentials are sacrosanct while non-essentials need to be cut out altogether. It’s not reasonable to expect anyone to live for an extended period without any spending on luxuries at all, and there are probably ways you can cut down on your essentials to make them less burdensome. All that matters is that you meet your obligations to others and yourself while still leaving aside enough to make a meaningful dent in your deposit every month.

Luckily, technology can come to the rescue here as well. Many banks now make it easy for you to separate your spending into separate ‘pots’ for each requirement so that you can’t easily eat into the money that you’ve set aside for other things on day to day expenses. You can also set hard limits on how much you’re able to spend from a certain account so that you don’t accidentally spend more than you were supposed to. Once you have got a good system worked out for how much you spend and save, you can set up automatic transfers so that you don’t even have to worry about moving your money around manually unless you absolutely have to, which means it’s never been easier to manage your money. You can even do most or all of this on a tablet or smartphone!

Get a side hustle

While this is all great advice for people with a bit more disposable income, the sad reality is that many people (especially young adults) find that their essentials are barely covered by their income. This makes the choice between non-essentials and saving a moot one, as there’s not really much money for either, and it could take decades of saving all the spare money there is to make a dent. In this case, one of the better options available is to see if you can make a bit more money in order to add to your kitty. Luckily, it’s never been easier to find casual work on your terms, which you can even do from home in some cases.

Gig economy apps such as JustEat, Uber, Uber Eats and Task Rabbit are all ways in which you can convert your free time into cash, making deliveries, giving lifts or performing other miscellaneous tasks. All of their platforms are easy to use and take a minimal commission, meaning you get a decent chunk of the money that they charge. On the more sophisticated end of the spectrum, it’s also easier than ever to turn your hobby or skill into a money-making venture through sites like Etsy, Patreon or copywriting sites, which pay competitive prices for smaller projects that you can do in your spare time. You can even monetise your demographic by carrying out paid surveys or focus groups, which will give you a small fee in exchange for your time and opinions. While it’s not a good idea to work yourself to death for your deposit, and you should only use this method in conjunction with cutting back and budgeting properly, it can certainly help pay for other things in your life and help free up spare cash for saving.

Get creative

Saving for a deposit on a home is more difficult now than it’s been for a long time, especially since lenders have tightened their criteria, requiring higher deposits for homes that keep increasing in value, but it’s not impossible. The key to making it work is to be creative, think about how you could potentially shave off pennies and pounds from your living expenses whilst adding to your income in new and different ways. It’s tricky, it can be difficult, and it can be a slow process, but eventually, those pounds and pence add up to a brighter future for you and your family. It’s also important not to worry. There are always options to help you out, and if you suddenly find that you’ve got a shortfall in your cash requirements and no amount of saving can help you out, we offer same day cash loans that can get you out of a tricky spot when you need it most. While you should only apply for a loan if you really need it, and you should think about how it will impact your future finances, we’re always here if you should need us.