One of the most common money goals for people in their 20s is to get on the property ladder. But getting a deposit together is proving harder and harder. If you’re finding yourself in this position, then try these 5 easy ways to save for your first home.
Sadly, without a lottery win or a dramatic increase in your salary, you won’t suddenly have access to thousands more pounds for your deposit. However, with these simple saving tricks, you may be surprised how much extra you can save each month.
Read on to discover my 5 easy ways to save for your first home.
- Use a LISA
- Pay yourself first
- Give up avocado toast
- Round up your purchases
- Start a side hustle
1. Use a LISA
A Lifetime ISA (LISA) can be a great way to save for your first home. You essentially get free money from the government just for saving money!
LISAs were created to help people save either for their first home or for retirement. If you take out a Lifetime ISA, the government will give you a bonus worth 25% of what you pay in, up to a set limit, every tax year. The current limit is £4,000, meaning you can end up with a total of £5,000 saved each year.
You must be careful with LISAs, however. There are penalties if you draw on the money for any reason that isn’t buying your first home or retirement. Currently you’ll just lose the government bonus (25%). This would be quite a blow to your savings.
There are some other criteria to consider too. The property you buy has to cost less than £450,000. This may not seem like an issue – that’s a lot of money! But, if you’re buying in London, for example, property prices are very expensive and you may find yourself exceeding this amount without necessarily aiming to.
2. Pay yourself first
Stop treating your savings like an after thought. Don’t save whatever you have left after the month. Decide how much you want – and can afford – to save or invest each month and pay yourself first.
Transfer the money into your savings or investment account straight after pay day. This way no amount of boozy brunches or nights out will get in the way of your attempts to save for your first home!
It can also help to think of your savings and/or investments as another tax you have to pay each month. You could start with as little as 5% to get you used to saving more. If you find this too easy, you can start to increase the ‘tax’ you pay.
As your confidence grows, you can start putting 10%, 20% or even more away each pay day.
3. Give up avocado toast
Aside from pleasing Baby Boomers, this probably won’t achieve much. But, giving up a certain habit might help you save more.
For example, I’m currently trying Dry January. I’m not a particularly big drinker normally, but I will share a bottle of wine over dinner and do enjoy a G&T every now and then. Rather than focus on the depriving myself of something, I’m turning it into a positive.
I’m putting aside the money I would have spent on alcohol into an investment account. This way I’m not losing anything, instead I’m putting money aside for my future self.
You could do this with anything. It doesn’t have to be alcohol. Expensive habits obviously work better, but even giving up something cheaper can make a difference if you save or invest the money you save.
Maybe you could give up smoking, or takeaways, or even cancel the gym membership you never use.
Remember, even £20 a month is an extra £240 a year. This sum might not be enough in itself to get you on the property ladder, but it will help create the habits that could help you save for your first home eventually.
4. Round up your purchases
This tactic won’t save you millions, but it will help make saving an everyday habit.
Whenever you buy something, round up your purchase to the nearest pound. The put the extra money into a separate savings pot and watch it grow. Some digital banks – like Monzo – will do this for you. Your savings pot will start to grow and, most importantly, you’ll create a regular savings habit.
Once you get used to this, you can start increasing the multiple by which you round your purchases up. Try the nearest £5 or even £10 if you can afford it. Once you start doing this, you’ll be amazed how quickly your savings add up.
5. Start a side hustle
If, after all these tips, you’re still finding yourself short, it may be worth looking to increase your income. There are fundamental issues with the housing market when people on above average salaries still can’t afford to buy property. But for now, we have to work within the system, while we try to change it.
You don’t have to work for hours on end to make some extra cash from a side hustle. You can supplement your income from as little as 2 or 3 hours extra work a week. Here are some examples of side hustles you could try.
Be careful though. If your side hustle takes off, you may be liable for extra tax payments and may need to file a Self Assessment tax return.
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