The time has come and you decided it’s time to start saving for your first home. You’ve done your research and you’re certain of every last detail. Except perhaps, how are you going to save for your down payment?
Fret not! In this post we will discuss ways for you to start saving for that elusive down payment. It is easier to save for your down payment than you may think. There are so many areas that cost us money that we will not miss once we cut them out. So, without further ado, here are five tips to help you save money for your down payment!
1. Cut back on entertainment
The first area of your life that can help you save a ton of money is your entertainment habits. Between books, subscriptions, cable and cinemas, Canadians collectively spend millions of dollars on entertainment every month.
The first major recommendation is that you check out the library. Of course, if you’re a reader it makes sense to go to the library rather than buying new books that you’ll likely read once. However, the library might also offer audiobooks (digital sign-outs are even available now while we are amidst COVID shut-downs), films, video games, and CDs. If you’re in a major city, chances are your local library will also hold cheap or free events that will often be more rewarding than a ticket to the cinema. Be sure to check in with your local library ahead of time.
The second major entertainment expense is monthly subscriptions. This can include everything from cable, to online streaming services. Cable/satellite is often deceptively expensive when you consider channel bundles that often require you choose several in order to get everything you might want. Cable and satellite can be easily replaced with internet streaming services. It’s important to note that internet streaming services can get expensive if you have several. If the goal is to save money, you should choose one or two (or a number you find manageable) and watch your savings pile up.
2. Plan out your food choices
Every financial blog has said their piece about eating at home vs dining out. It goes without saying that eating at home is the cheaper of those two options. If you are, like many, exhausted by the time you arrive home, you probably don’t want to slave away over the stove during the few short hours you have left in the day. Meal prepping will allow you to cut cooking time in half and free up your evenings. If you crave spontaneity in your meals, it is possible to prep individual ingredients, allowing you the freedom to choose your meal when you arrive.
Another way to save money on food is by making a shopping list. Impulse grocery shopping leads to both money and food waste. If you plan your meals ahead and make a list you can be certain to buy only what you need in both volume and variety. Tips outside of carefully planning your list include buying veggies and fruits only in season or frozen. You can opt for dried beans instead of canned, and try and pick up meat and dairy when it’s on sale. Grocery shopping will be much less stressful and the bill less intimidating if you plan ahead. Look for sales and stick to them! For more information on how to eat healthy on a budget check out our blog post here!
3. Focus on your savings account
Do you have a savings account? If you do, do you know what the interest rates are, and how frequently do you deposit money from your paycheck into it?
If you are looking to save for a down payment, you are going to want to look at your timeline. Different saving accounts, offered by different banks, will offer different products with different benefits. Research what’s best for you and what you can realistically expect. If you can, opt for a high-interest tax-free savings account. This will ensure the highest savings if you can routinely deposit money without dipping into them. If you’re a first time home buyer, you might benefit from contributing to your RRSP as well. You can now draw up to $35,000 (or $70,000 as a couple) from your RRSP, tax free, to use for your down payment. There is some fine print, which you can read more about this on the Government of Canada website here.
No matter what type of account you wind up using, be sure to immediately deposit a consistent amount into your savings account from your paycheck to ensure you don’t spend it elsewhere, and allow for more time to accrue interest. As humans, we’re quite short-sighted creatures, and it can be hard to stash money away in an unnamed savings account for a vague someday.
4. Get creative with travel and going out
Like when we discussed using the library for entertainment, this may not be the most relevant tip at this time. However, since so many provinces are starting to re-open and public spaces permitting customers and patrons to enter, it is something worth considering.
Do you routinely go to the pub with your friends at the end of the work week? If so, it might be better to drink with your friends in the backyard. Drinks and food are marked up considerably at most pubs. Skip the crowds, the cover charges and the over priced booze for a more laid back option that is better for your financial and physical well-being.
Maybe rather than nights out, you and your family prefer to have days out at museums, or other paid activities? If you do, you can have the same bonding experience while skipping out on the hefty bill for some of these activities. Consider going on a nature walk in a nearby park, or stay in and play board games.
If you are able to vacation in an exotic location or across the country, there are more local options for you to pursue. It is very easy for people to neglect the more impressive sites close to where they live. When the time comes for you to go on a vacation, opt for a stay-cation instead. Your wallet will thank you for it!
5. Remind yourself why you’re doing this
While we’re on the topic of human psychology, remember, it’s easier to do something you don’t want to do if you know why you’re doing it. Every time you deposit a sum of money into your savings, tell yourself that it’s for your house. Follow homeownership and décor blogs, read and follow financial or real estate influencers on your socials, especially if you, like many of us, are on social media daily. Daily reinforcements will make it easier for you to follow tips one to four, even when it gets hard to do so.
If you are planning on buying a home in the future and are looking for a plan to help you get a mortgage to buy your first home, give me a call at (705) 333-4338 or get in touch with me here!