6 killer tips to save up for a deposit on a house

by Chris Lang on December 10, 2010

Saving up for a deposit on a house Saving is a habit. I am going to be bold here and say that you are either a saver or a spender.

All the savers in the house – my tips probably won’t reveal anything you didn’t know before, but they may refresh your memory. All the spenders in the house – read closely, follow my lead and you will get a lot closer to owning a house.

1. Believe.

Remember the famous saying “Whatever your mind can conceive and believe, it can achieve”? Napoleon Hill, the book “Think and grow rich”. Can I be brutally honest with you? I don’t think you can just wake up one morning and suddenly believe that saving $50,000 from scratch is possible – before you begin actually doing it. But as you keep looking at the money accumulating in your savings account, the belief comes into existence and will be growing with every single amount that you save. Reader’s voice:“Is there a trick to it?” Yes. The trick is to begin.

2. Sacrifice.

If you wanted to have a killer body, what would you do? Go on a diet, or exercise, or both. How would you go about that? You’d have a plan for what you are and aren’t allowed to eat, and a chart with the exercises that you should do every day. Equipped with all that, you would just take it one day at a time. Saving is no different.

First, you need a list of the things you’re not allowed to buy. Just like a diet excludes foods you used to eat from your menu, saving excludes expensive ‘toys’ from your budget. Just like a dietitian will ask you to list what you eat on daily / weekly basis, I am asking you to list things you spend money on and see what you can go without. Keep in mind this is only temporary, that way your brain won’t panic at the thought of giving up something that you like forever.

Take a hard look at your expenses – see where you can cut. Choose cheaper brands for a couple of years. Buy in cheaper supermarkets. Change health care funds and insurance companies for ones that offer better deals. Enough said.

3. Have a goal that’s in your reach.

Don’t set your goal to be “Save up for a deposit within 12 months”. I’m not saying that you can’t. But it makes more sense to me that your goal should be creating the habit of saving – because

A. Anyone can do it and
B. It will serve you all your life.

So set your goal to be “Put money aside every month for 1 year”. By next Christmas you will be very pleased with both your personal improvement and the amount you saved.

4. Pay yourself first

This isn’t my own tip, but the one I’ve embraced long ago, after reading “Rich Dad, Poor Dad” by Robert Kiyosaki. The way I interpret it is you pay yourself first – you put some money aside first – then you live on what’s left. Many people I know do it the other way – they put aside what’s left after their spending (if something is left, at all). When you do it my way – it may be a bit harder, and it makes you more creative because you have to figure out ways to get by on what’s left after putting a chink of money aside, but it’s been working for me for the last 10 years.

5. Put the money where you can’t touch it.

Open a savings account and choose one of the types where they punish you if you take the money out. This will be an additional reason for you to keep out of that account.

6. Keep your savings safe.

The money you save should be earning the highest possible interest with ZERO risk. Don’t buy shares with that money. Some people will tell you that stock market’s returns are better, etc – but you and I know that everything comes at a price, and in this case the price is uncertainty. You should be certain the money will be there when you need it for a house.

What are your best tips to save money? What has been working for you?

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