5 tips to build your house deposit
There’s no magic way to save a house deposit (boo).
It takes strategy, planning and some good hard focus. It’s helpful before you start saving toward that first home deposit to determine how much you want to save, and in what time frame – that will help you put some strategies in place to meet your goal. Get an amazing mortgage broker in your corner to start talking through your lending capabilities and anything in your finances you need to tighten. There’s also a lot to know about the property buying process so have a listen to the my millennial property episode below stacked full of fundamental tips and have a read of these great ways to help you save your deposit – good luck!
Have a cash flow management plan for your finances
This is crucial to understand what life day-to-day is costing you, and where you can be saving extra cash towards your deposit. If you can make your living expenses really lean – do it. No car debt, no extravagant clothing, spend as little money as possible on rent. It’s time for those painful trade-offs - cut unnecessary expenses and stick to the essentials (accommodation, food, bills & transportation). If you have a partner, make sure they’re on board. If you’re in it together you’ll get there faster. If you need a tool to help wrangle your income and expenses then check out the Glen James Spending Plan.
2. Pay yourself first
This means prioritising your savings before your expenses. Pick a specific amount you want to save each pay cycle and plug that into your budget before all other expenses are considered. You’ll see your savings start to grow so much faster when it’s at the top of your priorities list. If you’re the kind of person that just spends the minute you get paid, then automate your cashflow so you can’t get your dirty mitts on it!
3. Increase your income
Consider whether you could be paid better in a different role, or look into whether you’re able to negotiate a pay rise with your boss. This doesn’t, however, mean you can take your boss for a ride! For some tips on how to achieve this have a listen to episodes about pay rises on my millennial career. If you’re successful in getting one, don’t go and spend it all! Remember – keep your costs lean and you’ll be setting up a sweet savings environment. Also consider a side hustle if you have the capacity to top up your income but remember - focus all that side hustle money on your deposit growth - don’t factor it into covering your essential expenses week on week.
4. Consider a parental/family member guarantee
This isn’t for everyone, but it may be an option to help get that first property in the bag. Make sure you chat with a mortgage broker to fully understand what’s involved. The family member could be anyone, but whoever it is it’s important to have an agreement made between you to be clear on the nature of the relationship.
5. Organise a joint venture
If there’s someone keen to go 50/50 with you in a property, this can help fast track the process. Again, talk with a mortgage broker to understand all the details involved, and make sure you and the other person are clear on what will be required.
BONUS TIP: be ready to compromise
Property in some markets across Australia is crazy expensive and competitive. As such be prepared to make trade offs to at least get started on your property journey. This might mean you change your strategy to look at properties slightly smaller, maybe a little further out location wise, potentially a little older, in need of some DIY, and so on. Sometimes we set our sights a little too high (especially for that first home, which is a super emotional purchase - and rightfully so!) and that can lead us to focus on properties that may be a little out of our reach financially or may push us into mortgage stress territory. Stick with what you can afford and you may not have to build up as big of a deposit, but you may also be able to get into property sooner!
Other quick tips:
If you have debt – focus on smashing that first. Ideally you’d also want an emergency fund ready. Then focus on saving the deposit.
Direct lump sums like tax returns towards your debt, emergency fund or deposit.
Sell anything in your house you haven’t used in 2 years that isn’t a family heirloom.
Can you live with your parents or a family member to reduce rent?
Stay off real estate websites until you have your debt sorted, your emergency fund ready, and your deposit ready to go.
