If you’re looking to start saving for a new home, it can be a bit daunting looking at the numbers – especially with a family. But there are some easy changes and steps to help you with saving for a new home – even if you can’t get out of renting for the time being. Start simple and use our step by step guide and you’ll be there in no time.
Step 1: The House
First up it’s good to get an idea of what you want and how much you will need to get it. If you know approximate areas and styles of house you want, you will have an approximate price in mind. If you have a maximum total cost in mind, then work to this (but make sure you can get what you want!). Either way, you will need to save up somewhere between 5-20% of the total cost as a deposit for your mortgage.
The ways to get this money together include:
- borrowing money from friends and family
- buying with a family member
- Shared ownership or help to buy schemes
- Mortgage deals that cover costs
- Own savings and income
Step 2: The Budget
Next, analyse your incoming and outgoing money, and your current savings. Doing this will give you a good idea of what you can save each month – or if you have a total goal, then how long it will take to get there.
You will need:
- How much you earn
- How much your bills, rent, food, fuel and other unavoidable costs are
- How much you want to have for spending (because you still need to live!)
- How much you will be able to save each month
Write down all your incoming money and make a monthly total. Then, work out your required outgoings over a month – include all your regular payments such as food, fuel, rent and bills – and make a total. The difference between these is the amount of money you can potentially save (though remember you will need some money for unexpected costs, and for little treats!).
Once you have some figures, you can put together a budget plan, and track it closely to keep yourself motivated.
The 50/30/20 Method
There are a few methods for budgeting that might help by giving you a structure to work to – for example the 50/30/20 method. This is where you try to divide your income as 50% unavoidable costs, 30% for spending on yourself and 20% for savings.
Alternatively just work out what you will be able to do and work to a plan you create yourself. Sometimes when there is no great rush, it is nice to take your time and have some flexibility to go to the pub or take your family out, without worrying about money too much.
Try out some of these budgeting apps to see if they help with tracking and checking your funds!
Step 3: Cutting Costs
See if you can increase your savings by cutting some costs. From using price comparison websites to bring down insurance, phone bills and internet, to having one less takeaway a week, there is something that we can all cut down on when the time calls for it. The more you can save each month, the sooner you will reach your end goal.
One way to help cut costs is to write a list of every outgoing you have, and categorise them as “needs” and “likes” – this will help you to see which costs aren’t really necessary – and get on top of where your money goes each month! Any “likes” that can be cut out mean more savings in your pot (but remember to enjoy life still whilst you are saving!).
Some ideas of easy cost cutting areas include:
- make your own packed lunch for work
- don’t go to coffee shops
- share lifts or walk/cycle to work
- don’t carry loose change or cash
- weekly food shop rather than daily
- food shopping with a list (to stop you grabbing snacks!)
- cancelling unused memberships (e.g. the gym!)
- reducing TV packages and services
- one less drink at the pub
- eat in more often if you eat out alot
- reducing spend on clothes
Banking for Cutting Costs
Don’t forget to use your free ISA allowance each year for tax-free savings to help you get a little closer to the total.
Consider other types of accounts too – a regular savings account may give you extras, but look out for costs and restrictions.
Savings accounts will all have different interest rates so shop around for the best deal.
Step 4: Pay Off Any Debts
A biggie is paying off debts. The interest on any debts can impact savings potential massively, and can put off a mortgage provider in some circumstances. Try to factor in regular repayments in your budget, and see how it impacts the time to reach your goal as well.
Speak to debt specialists for advice about your situation – there might be a simple solution that helps you save twice as much for your new home!
Step 5: Have an Emergency Fund
Remember life often throws in something unexpected – a burst tyre or a new coat could set you back but having a little money aside to cover this will give you peace of mind. Once the house is ready and the mortgage sorted, this emergency fund could be ideal for buying some new furniture, or cover you whilst you look for a new job.
Step 6: Increase your Income
If you’ve got some spare time on your hands, there are a whole host of ways to make a bit of extra money! Try some of our ideas below to boost your savings:
- Online surveys
- Cashback apps and accounts
- Selling your photos as stock photos
- Selling some of your old stuff on eBay, Gumtree, car boot sales or local groups
- Offering services on Fiverr
- Making and selling something
It won’t be long until you reach your total!
Don’t forget to think about a home lift for your new place – making your dream home a home you can stay in forever (or just make getting all those boxes upstairs a bit easier!!).