Save more for your deposit … yes, that is what you may have been told.
But as we know saving a deposit for your first home is not easy, and in the cities where houses are more expensive you will need a bigger deposit which makes things even more difficult.
As mortgage brokers we consistently hear people say how saving a big enough deposit is one of the biggest challenges.
So we have jotted down six ways that may help.
Here are six ways to help save more for your deposit and these are in no particular order.
1: Record Your Spending
A lot of people will write budgets, but most people fail to stick to them.
Budgets seem like a good idea, but a record of your actual spending is better as it highlights areas where you may be spending too much or wasting money.
When I left home at 17-years old and moved to Auckland my mother suggested that I tracked my spending. This was before I had a smart phone (or any mobile phone) and before I had used a computer, so I carried a note book and recorded all of my spending. It was an eye opener to see where I was spending money and especially on the weeks where I saw I was spending more than I earned. I was not earning much so every dollar was precious to me if I wanted to save for anything. It was a good lesson and it made me understand how easy it was to waste money, but more importantly how easy it was to find some extra money to put towards a savings goal.
Today there are better ways to record spending and our preferred way is by using smart software.
We suggest PocketSmith as it can link with your bank account to automatically upload, code and record your spending. They have free subscriptions which you manually upload bank transactions into and this will work well, but I preferred to pay a few dollars a month to get the more automated version as I knew it would then be up to date; hence I could rely on the information.
One of the really helpful features is the ability to upload your spending history so you can see what you have been spending your money on in the past. This is a great way to set a starting point as you cannot fudge actual figures.
It’s also a real eye opener for most people!
It’s hard if not impossible to make financial decisions without having a starting point, and by recording your spending you are establishing a starting point.
Saving money may sound quite boring, but when you have a goal it can be very satisfying.
2: Change Your Spending Habits
If you start recording your spending and especially your past spending then you will no doubt find there are some things that you are paying for and don’t need, things that you may be paying too much for or things that you are wasting money on.
It’s always a good idea to review your spending, and once you have recorded your spending you may find some obvious areas that need focus.
Some of the common things that can be easily changed are spending on lunches, coffee, alcohol, dinners out, seldom used gym memberships, the numerous online subscriptions, electricity, phone and data, insurances plus grocery shopping.
I think we could all relate to some of these, and if we are serious about saving a bigger first home deposit then we should make an effort to change some spending habits today.
3: Restructure Your Debts
Many first home buyers also have debts.
People are tempted with the advertising of special deals with interest free offers, deferred payment offers, low interest or low deposit offers and the ability to take home a new car, big television, smart phone and many other items now. Advertising guru’s spend their life trying to find ways that banks and finance companies can “sell” credit to you and they are quite good at it.
Unfortunately it doesn’t matter how cheap or easy the debt is to get, it also needs to be paid back.
While you are paying back debt it is hard to save, especially when you are trying to save such a large amount.
You need to take the time to review what debts you have and either restructure or consolidate and refinance the debts so they can be more easily managed and so you can ensure that you are not paying the high interest rates for them.
Talk to an adviser today about your existing loans and see if a debt consolidation loan is the right thing to be doing.
4: Review Your KiwiSaver & Other Savings
Unfortunately too many Kiwis have their KiwiSaver with the bank and are not getting the best results.
Plus most people are relying on just their KiwiSaver with little or no other savings that they can use to help for the deposit or expenses that will be needed when you buy your first home.
When you ask most people what they KiwiSaver balance is they will reach for their phone and check on their banking App. This is one of the key features that banks use to “sell you” their KiwiSaver option but viewing your KiwiSaver on your phone should not be the most important consideration when selecting something like KiwiSaver or any investment.
You should select your KiwiSaver provider on what is best for you… what will help you reach your goals.
We have written here about the option offered by NZ Funds which gives you the ability to have your KiwiSaver which is the locked-in fund with the optimal contributions (typically 3%) and using the unlocked fund option (Wealthbuilder) to save even more.
5: Sell Off What You No Longer Use
When we have a clean out most of us will find items that we no longer use, but they still have a value.
If you are serious about saving a bigger deposit then you should make an effort to go through your things and identify and sell things that you no longer need or use. Be ruthless … don’t think “I might start using this again” as if you haven’t used it recently then you do not “need” it and the money would be better used towards your deposit on your new home.
In New Zealand the most popular market for these types of products is Trade Me.
The benefit is that you only pay a selling fee once you have sold an item, and you will typically be paid for the item either straight away or when the buyer collects it.
Once you have sold what you no loner want or use you could try asking your parents if you could help them clean out their unwanted stuff. You might be surprised how helpful they are when they know that you are focused on getting a deposit together for your first home. They may not be in a position to help you with cash, but most people have a few things that they would be happy to let you sell.
Quite a few people will use Trade Me to regularly sell products and therefore make an extra income each week or month.
6: Earn Extra Money … The Side Hustle
Most of us can find a few extra hours a week when we could be doing something to earn some extra money. It may be that your existing employer could offer you some extra hours or you may need to look at what other options there are.
A permanent second job or extra hours can be useful when applying for your home loan as the banks can use this when calculating affordability, but regardless what you end up doing any extra income is always useful to boost your savings.
There are literally hundreds of ways to make some extra money, but you need to find something that suits you and can fit in with what time and skills you have.
Consider some of these ideas to earn a little extra money;
- Selling on Trade Me – most Kiwis have already sold or purchased something on Trade Me. It’s an easy marketplace to work with and if you have products to sell then it’s a good option. If you do not have products to sell then you may need to source a product but that typically means outlaying money with the hope that you can sell the product for a profit. A popular option is sourcing products from a wholesaler that uses drop shipping, where you only purchase the wholesale product after you have already made a sale. The key problem for many people is being able to select and finance the purchase of goods to sell online, but there are options to use a method called drop shipping whereby you sell and get paid for the products before you actually buy the products. You can therefore start selling on Trade Me without needing to buy anything first. Snipesoft is a New Zealand company that has created EasyWholesale which is a platform where you can buy products at wholesale prices and then have the products shipped directly to your customers. This is known as drop-shipping and is a good way to get started without paying for product and risking it not selling. CLICK HERE to check out EasyWholesale.
- Selling beyond Trade Me – the power of the internet and drop-shipping means that you can access the larger offshore markets and sell products in a similar way to you would using Trade Me.
- Flyer Delivery – most people can stuff letterboxes with flyers and while it is not going to make you rich it is a way to earn some extra money. There are plenty of local businesses that need people to deliver flyers and it’s often just a matter of getting out there and asking.
- Cleaning, Ironing and Garden Work – again, there is plenty of this type of work available and social media gives you an easy way to get your name lout there offering these types of services.
- Marketing Eco-Friendly Products – most people would prefer to use eco-friendly products around their home if they could be shown how to easily purchase them at a cost that is no more than what they are already paying at the supermarket. There are plenty of companies that sell products online and share the profits with people whom introduce buyers, but Melaleuca is a little different to many. Firstly they have very good eco-friendly products which is the most important thing if you are going to recommend them, but they are also well priced and Melaleuca has a very good online store and ordering system which ensures that people do continue to buy every month which means you continue to earn every month too. Take a look at the online store and see what products you could switch to use. CLICK HERE to view the online shop, and you can use the link below to get access.
These are just a few ideas that you may wish to consider if you want to earn some extra money initially for your deposit but then to help pay off your mortgage faster.
If you want to earn extra money you need to dedicate some time to it. Too many people look for ways to make some fast cash and the reality is there are very few legal ways.
Most of the ways to earn extra money involve time and effort.
Over time you can make some money, and in some cases you could make some very good money if you treat it seriously. There are people that make a good full time income from the methods listed above; however we are suggesting this as a way to supplement your income and to help with your first home deposit and then to pay your mortgage off faster.
Learn More About How To Get Into Your First Home
A lot of first home buyers believe that not having a big enough deposit is the main hurdle, and it is certainly better to have a bigger deposit; however sometimes the banks focus too much on deposits and people end up not purchasing which can mean they continue to rent while house prices continue to increase.
You need to know all of your options as there may be a way that you can buy now or sooner than you thought possible.
But until now it has been hard to find the right information.
That’s why we created the Pathway to Home Ownership course which is designed to provide all the information a first home buyer needs, in language without jargon and all in one place.