We don’t know about you, but we’re tired of hearing you need to give up everything to buy a property. Yes, saving is about sacrifice, but if you go too far, you’ll fall apart and splurge. The best way to save is to plan, and make sure you have supportive friends and family who want you to succeed. Saving is a mixture of controlling input and output, as well as making your money work for you.
Check what you’ve got and where it’s going.
It’s time for a money MOT – what are you making and where is it going? Look through your statements, and if you can, print them off. Now highlight every outgoing that’s necessary (rent, bills) in one colour, and all the unnecessary/fun ones in another. This can be painful, but stick with it. Approach this as a researcher – what are the patterns? The Friday night takeaway, the daily trips to the cornershop? Clothes, holidays, cinema trips? Where does your money go every month? Now, what are you willing to give up? What could you swap out for something else?
This doesn’t mean promising yourself to stop spending anything at all. Instead, look at where these costs were unhelpful – you paid £30 for a gym membership that month when you didn’t go at all, or you went to the cinema, but spent an extra £20 on sweets and drinks?
Don’t forget to colour the amounts you saved, and congratulate yourself on that!
Now here is where you make a plan, but it has to be based on who you are and how you deal with promises. Perhaps you need to ease in with cutting out one cost, like your unused gym membership, or your weekly take away, swapping them for running in the park and making the curry yourself? Swaps can end up saving your more than you’d think, and can make sure you don’t feel deprived. Maybe, you want to start your new year of saving being very strict with yourself.
You may want to get a notebook to keep control of your spending, set up bank alerts on your phone when money leaves your account, or make use of the many money apps available to encourage you to keep an eye on your finances.
Set a goal
It’s harder to get where you want to be if you don’t know where you’re going. Work out an amount you’d be pleased with saving this year, and work towards smashing that goal
. You could perhaps want to double the amount you saved last year, or maybe you’ve got a very specific number in mind. Try to keep it possible – it depends on how much you’re willing to sacrifice and change your lifestyle. Big savings mean big changes – set yourself a goal you can be proud of, that will make you work just a little. If it’s as easy as auto-transferring £200 a month on payday, you’re not really pushing yourself.
You want that deposit, right?
Debt and overspending
Before you start saving for a home, you need to clear your debt. It can be hard to face, when you want to be getting on with getting together a good chunk of a deposit, but clearing your debt is the best thing you can do first. This is for two reasons – the first is that you’ll get a better mortgage rate without debt, but the second is even more important: if you are saving whilst you have debt, your savings are costing you money.
It may feel natural to want savings for a rainy day, but if you have £1000 in saving and a £1000 in credit card debt, the debt is going to be charging you interest. The money you make on your savings is going to be minimal in comparison to those charges. Get your debt paid off as soon as possible, and start saving with a clean slate. Whether that’s arranging monthly payments, transferring to a 0% card, or limiting your spending to get out of your overdraft, the sooner you’re out of debt, the better shape you’re in as a future first time buyer.
(Note: yes, you’ll need to have good credit, which will be helped by using a credit card or having debt of some sort. The best way to use a credit card is to use it for small amounts and pay it off promptly. There are some who say that having a credit card that’s unused can be just as bad as having bad debt. The difference there of course is that in one scenario you have money you need to pay back. Try and get your credit card clear, or only used for minor payments by the time you are saving your deposit)
This is the time to look back at your goal and ask yourself how dedicated you are. Where is the line? You’ll cut down on the takeaways and the booze, but maybe you can’t miss out on the birthday celebrations. Perhaps you’re happy to give up your gym membership and TV subscriptions, but you need a holiday, even if it’s a UK-based mini break. Work out what’s easiest to save, and work up from there.
Swapping out named products for own-brand can feel like a return to student days, but most of those items do the same job. Consider making up batches of food that you can take to work for lunch, and adapt into different meals in the evening. It also gives you a chance to get creative. Think about swapping those nights out for nights in, especially if everyone brings a dish. Your social life doesn’t have to suffer too much.
…and making more
Sometimes, you can save like a superstar and you still won’t have enough. With low wages
and the high cost of living, often some people are very good with money, but just don’t have a lot to spare each month. In which case, if you can’t save, you need to make more. This could be reconsidering your job, making a case for a raise if you think you deserve it, or starting a ‘side hustle’. The internet has opened up endless options to make extra money out of your talents. So if getting a second job in the evening or at the weekends doesn’t appeal, you could still make use of what you’re good at. Know a lot about video games? Look for ones to buy from charity shops and resell them for a profit! Crafty? Sell your creations in an online shop. Expert in a certain field? Publish an ebook on Amazon. You could Skype tutor in a subject, or take on freelance work. Don’t forget to sell all the things you don’t need – it may feel like it takes ages, but you would be surprised at how much you could make from things you no longer want.
Check your diary
It’s surprising how many ‘unavoidable’ spending scenarios turn up. Whether it’s a family member’s big birthday, friend’s engagement parties, hen and stag do’s, weddings or baby showers, all the way through to Christmas, there are endless excuses and expectations of spending. So get your calendar out and mark these in advance. Give yourself a budget for each event. See if there’s some where you could cut down – perhaps club together with family or friends to put towards for one big gift?
Hen and stag parties are getting larger and more extravagant, with three day spa breaks and flying abroad – check if any others are in your situation and see who can afford what. If you know your friend has their heart set on something big, then start squirrelling away money month by month to afford it – or only join them for part of it. If it’s not a close friend, and the idea of spending hundreds is going to stress you out, considering not going. It’s okay to say ‘no’, you know. For Christmas and birthdays, consider that homemade gifts can be appreciated, especially if you play to your strengths and personalise it to their tastes.
Making your money work for you
Your relationship with your money should be two way – it needs to pull its weight. Make sure you’re saving in a high interest savings account or ISA (you may want to use the Help to Buy ISA or Lifetime ISA
) and consider using accounts that have benefits. Many offer cashback when paying household bills, or can give you vouchers for use in high street shops. And don’t be afraid to switch accounts if the one you’ve got isn’t helping you save!
On the other end of the scale, get a terramundi – a pottery money box you have to break to get the cash out – which will stop you sneaking into it for change. Every little helps!
Take advantage of birthdays and presents by asking for money or vouchers. If you can’t put it towards your deposit, a voucher that sorts out things you normally have to pay for, like a food shop or toiletries is a way of helping you save.
Plan (and control) treats
You’re not going to go without for a whole year – just like a crash diet, if you go 100% you’ll last for a little while, get annoyed at the deprivation and fall off the wagon with a mighty thunk. So avoid blowing all your carefully saved money by planning things to look forward to – it might be a monthly takeaway, a mini-break or taking advantage of cut price tickets to an event. When you reach a savings goal, celebrate (but don’t go mad!).
It’s a slow process and it’s easy to be sidetracked, but whenever you fall off the savings wagon, just readjust and get back on again.
Do you have any tips for building up your deposit? Share them with us in the comments below.