Saving for a house deposit? Five tips to stay on track this festive season
As end-of-year parties, festive get-togethers and gift buying are in full swing, savings goals can quickly be placed on the backburner.
Without some pre-planning, these end-of-year expenses can add up and put pressure on long-term financial targets, like buying a home. According to the 2022 Domain First Home Buyer report, aspiring homeowners are taking up to five years and eight months to save a deposit.
And, with the rising cost of living and inflation adding further pressure to household incomes, it's never been more important for homebuyer hopefuls to keep their finances in check over the festive season.
Here are five tips you can follow to keep your deposit savings on track:
1. Set a budget ... and stick to it
When saving for a house, it's very easy to only focus on the biggest item - the value of the deposit. However, it's important that you factor in saving for those extra hidden costs such as any applicable stamp duty, conveyancing and don't forget, moving costs.
To get this right and keep yourself on track, I recommend creating a realistic budget, and more importantly sticking to it!
There are several budgeting apps such as WeMoney and Frollo that can help you understand how to better manage your money.
A good tip that my mortgage broker gave me was to make sure that when budgeting to include a rainy-day fund for emergencies.
2. Track your spending
When it comes time to assessing your loan application, a financial institution will look at your discretionary spending, which includes non-essential expenses such as entertainment costs or multiple streaming services.
It's worth keeping a track of this in advance to see where you can trim some fat. Entertainment expenses on restaurants or nights out can add up and are often the easiest to scale back on ahead of your loan application
You'd be amazed at how much you can save by cutting back on non-essentials. In fact, the Australian Securities and Investments Commission (ASIC) has calculated that Australians spend more than $1 billion on coffee alone each year.
3. Avoid the temptation of pay-later services
Especially at this time of year, it can be tempting to use Buy Now Pay Later (BNPL) services to help you through the festive period. In fact, according to research from RFi Global, there are 5.9 million active BNPL accounts in Australia, accounting for more than $11.9 billion in transactions.
Using BNPL can make it difficult to track your spending, and when you are ready to apply for a loan, these services can potentially impact your borrowing power.
4. Plan for the year ahead
Now is the perfect time to get ahead and look at what's coming up in 2023 for you.
Do you have other big expenses such as a trip overseas that you need to plan for? With the right budget and saving systems in place, it is possible to save for multiple things at once.
Reflecting on your previous year's budget can be a great way to see what aspects of your budget need improving and to also see where you've gone right and what you can replicate for the next year.
5. Talk to an expert
When it comes to setting your house deposit savings goals, you don't have to do it alone. A mortgage broker can assess your financial situation, look at your income and expenses to help you determine how much you can spend on a property, and how much you need for a deposit.
A broker will also let you know of any government grants that you might be eligible for and can make you aware of your lending options, knowing that some lenders will accept smaller or gifted deposits.
With the festive season in full swing, these tips will help you stay on track in saving for a deposit and reaching your home ownership goals for 2023.
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