Published on January 5th, 2017 | by Martin Clancy
Saving for a House: The Cheat Sheet!
Buying a house is probably one of the biggest financial decisions that a person can make in their lifetime. The choice to save for a house brings with it a financial burden like no other that requires a whole heap of sacrifices. It can be distressing when you realise how much of your income you need to put aside every month to save for a deposit, but thankfully there a number of tweaks to your savings habits that can help you reach your target.
Setting Your Goal and Saving for a Deposit
The first thing you need to do is set your savings goal. Decide what price range of house you can realistically afford, and see what deposit you would need to put down to secure the mortgage. In Ireland, the central bank recently removed the rule requiring first time buyers to have a minimum of 20 percent of the value of their desired home as a deposit. Previously, this would have meant those saving for a house valued at €350,000 would have to have a cash deposit of €70,000 available prior to purchase.
Although the removal of this rule was welcomed by many, others believed that saving such an amount could be a helpful discipline for first time buyers to learn.
A mortgage can sometimes require more than 20 years of committed saving. This is bound to be a testing time for couples, so whether the bank or state requires you to save or not, why not aim to save for a 15% or 20% deposit to make sure you can commit to a savings lifestyle?
Of course, it’s not all about the deposit. If you are approved a mortgage you need to be comfortable living without a third or more of your income each month just to make the monthly payment. If you are currently paying rent, or are saving for a mortgage then you’re already getting in some great practice.
Packed Lunch Syndrome
When it comes to saving for a deposit and getting used to making monthly mortgage payments it can help to tighten the purse strings in a few other areas.
Take a critical look at your outgoing expenses and see if there is any waste that can be removed and look for some opportunities for belt tightening.
Potential Belt-Tightening Opportunities
- Are you a couple saving together? You only need one family account for Spotify or Netflix
- Are taxis featuring too regularly in your month? It’s time for cycling, walking and public transport
- Shop around for cheaper car insurance
- Consider a switch to a pay as you go mobile phone plan
- Make your own lunch four out of the five days and treat yourself to a paid lunch on Fridays
- Remove any unused extras from your TV or internet package
- Give up the gambling account
- Be conservative with your home heating
- Make a grocery shopping list that fits into a modest budget and stick to it
- Give up smoking
These little changes can add up to several hundred euro that you could be putting away each month.
Alternatively, if you want to make a game out of saving you can play the fiver challenge. Every time you receive a five euro note in your change, whether you are out shopping or in the pub etc. you must pledge to save it. Count all the notes at the end of the year to see how much you have saved.
No ‘Cheat Months’
It’s always tempting to take a break from your saving activity using excuses like: “Oh it is Christmas”, “Only this month” or “I will put away extra next month”. These excuses rarely help your savings get anywhere. Unforeseen emergencies are of course a good enough reason to dip into funds, but try and protect your savings egg as best as you can.
There will always be moments when you will wonder if it is all worth it. Stick to your guns and don’t give up. Remember your goal and keep your target in mind and before you know it you’ll be looking back at a great accomplishment.
Even when your mortgage is paid off and you own your own house you’ll be equipped with the skills to save for a rainy day.
To get yourself started check out Zurich Life’s full A-Z of savings tips for moving house.