With the current increased mortgage rates and the end of the government’s Help to Buy scheme, saving for a house deposit may seem like a daunting prospect. However, there’s plenty of ways to make your savings grow faster. The key is knowing how to cut costs and where to put your money, so here are some helpful tips on how to pinch those pennies and get one step closer to your dream home.
1. Reduce your rent as much as possible
If you’re currently renting and finding yourself not left with much money at the end of the month, you’re not alone! Renting can be extremely expensive, with the average monthly rent in the UK currently £1,172 per month, so it may be worth considering moving into a cheaper rental property whilst you save, or even better move in with family or friends. Not only will you save money on rent this way, but also on bills and possibly other perks such as food or laundry services whilst living with family members.
2. Keep track of your spending
The first way to cut costs and work on building up those savings is to keep track of your spending. If you’re not sure where all of your money is going then you won’t be able to work out which areas have room for improvement. There’s many ways you can do this, but one of the most popular ones is using an app, check out some of the best ones on the market – The 5 Best Expense Tracker Apps of 2023 (cnbc.com)
If the thought of using yet another app makes your head spin, try using an old-fashioned envelope system instead! Simply divide your cash up at the beginning of the month and split it into envelopes such as ‘Food’, ‘Clothes’ etc, then only spend from those envelopes when shopping for those specific things – no cheating allowed! This way there’ll be no question about whether or not something was necessary because everything has been accounted for ahead of time.
3. Tackle debt first
If you have any debt, start paying it off first before you embark on your saving mission so that you’re starting with a fresh slate. You can use a debt calculator to see how much you can afford to pay off each month and then set up automatic payments from your bank account so that the money is taken out automatically every month without you having to think about it.
If getting rid of all your debts isn’t an option at this stage in life (or if it’s too painful), consider consolidating them into one big loan with a lower interest rate, and then focus on paying down that loan as fast as possible so that all those extra payments go towards reducing the principal rather than accruing interest costs over time.
4. Start saving at the start of the month
If you’re serious about saving for a house deposit, start saving at the start of each month. It’s easy to get distracted by daily expenses and forget about saving for something that seems so far away. But setting up an automatic transfer into your savings account at the start of the month straight after payday will help ensure that you don’t miss out on any money. If you can’t afford to put in the full amount that you originally had a target, start with whatever you can afford, even if it’s just £10 per week or fortnight, then work on increasing this amount when you’re able to do so.
5. Cut down on costs
When you actually sit down and take a good hard look at your finances, you may be surprised at all the ways you can cut costs and get towards your saving goal that much quicker. For example, try swapping takeaways for cheaper homemade fakeaways, assess whether you really need Amazon Prime, Disney Plus AND Netflix, and even speak to your utility providers to see if you can haggle a better deal.
If you’re a shopaholic and the thought of going months without buying something new to wear fills you with dread, then why not try balancing out the costs by decluttering and selling your unwanted items. You may be surprised at how much money you can make simply from a good clear-out and selling session!
Bulk buying and keeping an eye out for discounts are other great ways to cut down on costs. Don’t turn your nose up at retailers such as Costco, Aldi and Poundland, and don’t be afraid to buy ‘own brand’ products which more often than not offer exactly the same product ingredients as a premium brand, just in less attractive packaging.
6. Use a Lifetime ISA for extra support
A Lifetime ISA (Individual Savings Account) is a tax-free savings account that allows you to earn interest on your savings with the added benefit of being tax-free and qualifying for the government 25% bonus. Don’t forget to make sure you are getting the best interest rate available on your contributions before shopping around, and keep in mind that you can move a Lifetime ISA from one provider to another in order to improve your interest rate – Cheapest Lifetime ISA providers – Money To The Masses
There are a few factors that you need to quality for in order to use a Lifetime ISA to save for your first property:
- A Lifetime ISA can be used by a first-time buyer towards purchasing a UK residential property once the account has been held for 12 months
- Any property purchased must be valued at £450,000 or less and must be the first property owned by the applicant
- The money saved in a Lifetime ISA will be paid directly to the conveyancer/solicitor, and the property purchase must complete within 90 days from the withdrawal – if it doesn;t then it can be transferred back into the account with no loss of bonus
- The Lifetime ISA is designed to help first-time buyers get on the property ladder so all purchases must be made with a mortgage or the 25% bonus will be sacrificed
For more details click here – Lifetime ISAs explained – are they the best way to save? – Money To The Masses
7. Set yourself some financial goals
Work out how much you need to save and break the target up into manageable chunks. You’ll be much more likely to be able to stick to your saving goals if they’re realistic and you can see tangible results. When you reach certain goals, have a think about some fun free ways that you can reward yourself so you can stay motivated and on track to your final savings goal.
8. Get a lodger
Although this won’t be possible in all properties, if you live in a rental property that has a spare bedroom, speak to your landlord about whether you can fill the room with a new tenant. This is a great way to subsidise costly rent and allow you to hopefully put away a sizable chunk of your rent into savings every month.
Before you jump into getting a lodger, make sure you have a think about the pros and cons to ensure it’s the right decision for you. Having someone else living with you is a big decision and commitment so make sure to do your research – Advantages & Disadvantages of a Lodger (lodgerguide.co.uk)
We’ve covered a lot of ground here, but hopefully it’s helped you to see how saving for a house deposit is possible if you put your mind to it. The key thing is to get started as soon as possible and keep going! Even if you only manage small amounts each month at first, those savings will add up over time so don’t give up hope just yet.