It can seem daunting thinking of saving for a considerable purchase like a down payment, but it is not impossible. You have already taken the most important step in saving by just thinking about it. Your next step should be starting. Here are the most efficient ways to save for a down payment or any other large purchase.
Saving for something important is all about prioritizing your spending. If you eat out frequently, take expensive vacations, and buy new cars, you should scale back on these indulgences. These items are nice to have, but once you decide having your own home is more important, you will find that those indulgences are not necessary.
The best way to figure out where you can cut your spending is by making a budget. You might be surprised by how much money you spend on buying lunch or even buying coffee daily. Small but frequent purchases can add up to quite a bit over time.
Pay off credit card debt
It is difficult to save money if you are spending it on interest. One of the first things you should do is pay off all outstanding debt you owe. Start with the smallest debt with the highest interest. Once that is paid off, you can use the minimum payment you were paying for that debt to help pay off your next largest debt. This snowball effect will help you pay off your debts faster by being able to make larger and larger payments. It can be challenging to qualify for a mortgage with a lot of consumer debt.
Stop paying with credit
Studies show that people tend to spend about 15% more when they use a credit card. Many Canadians put their purchases on credit to get cash back or earn points, but that typically earns them about $400 a year. Switching to paying for things with cash could save you about $3,000 each year in comparison.
Find cheaper ways to do things
Financially savvy people save money by making it a hobby to find cheaper ways to do things without losing any of the fun. Here are some examples:
- Instead of buying new books, borrow them from the library for free
- Watch movies on a streaming service instead of going to the theatre
- Use coupons when eating out and opt for cheaper places. Try to cook at home as much as you can as well.
- Choose hobbies that cost less
- Buy clothes less frequently and choose items that complement what you have already
Get rid of a car
If you and your partner each have your own vehicles, try to adapt to sharing one. The both of you could carpool to work, or one could take public transit instead. For the average vehicle, this could result in a savings of about $9,000 per year. We know forgoing a vehicle can be tricky depending on your situation, so try to avoid using one car for a month to see if this is possible first if you are unsure if it will work.
Even just incorporating a few of these tips could earn you thousands in savings over a few years. The professionals at Mortgage Makers can help you get approved for a mortgage when you have saved up enough. Call us today to take the step and become homeowners.