The idea of saving for a deposit for your first home is just as exciting as it is terrifying. Whilst the goal of owning your own home is one of the best motivations for saving, the thought of putting all that money aside may also feel like an uphill struggle.
That’s why we decided to put together a month-by-month guide to help you start the savings habit in a realistic and achievable way; so you can continue the savings momentum throughout 2022.
Whilst some of these tips can be used at anytime during the year, others are seasonal; but in combination they will hopefully inspire you and keep you motivated until Christmas.
Tip 1 – No spend January
We know that we’re already 7 days in to the month, but January is always a tough one financially. Instead of putting pressure on yourself to have £X saved by the end of the month, concentrate instead of getting yourself back on your feet. Some of you may be wondering how this ‘no spending’ looks. In January this means you don’t purchase anything you don’t need. So, every time you go to make a purchase ask yourself if it really is essential to your life.
It’s simple – use any spare cash after bills, food shopping and other payouts – to pay back any Christmas debt, then try to avoid spending on any non-essentials. And that’s it.
There’s two smart reasons behind this tactic. Firstly, if you are going to eventually apply for a mortgage, getting into the habit of not spending money on luxuries will stand you in a good position. This is because lenders like to see evidence of good money management. Secondly, by not spending you can focus on paying back any money or debt built up over Christmas. If, when you reach the end of January, you have a bit of spare cash left over; then by all means start saving it (we have more tips on this later).
Some of you may be wondering how this ‘no spending’ looks. In January this means you don’t purchase anything you don’t need. So, every time you go to make a purchase ask yourself if it really is essential to your life.
Tip 2 – February – start the 100 Envelope Challenge
By February you should hopefully feel a little more sorted in the cash department following the receipt of your January paycheque. It’s a good time to start thinking about saving.
One of the latest TikTok saving trend is the 100 Envelope Challenge and it could provide a more fun way of putting cash aside for your deposit. The goal is to save £5,000 in 100 days – you can do this over 100 days but it can also be stretched out over the year too.
You’ll need to buy 100 envelopes, each marked one to 100. Place them all in a box and, each day, pick one out at random and place an amount of money inside based on the number written on the envelope. So, if it says 10 on the envelope – you’ll need to put £10 inside.
As a way of improving your savings technique further, we would recommend you put this cash into your savings account so it’s also earning interest.
Tip 3 – March – take out a Lifetime ISA
If you don’t have a Lifetime ISA then now is the time to get one. March is ‘ISA Season’ because the tax year ends on 5 April; and therefore savers have just a few weeks left to make the most of their ISA allowance.
An Individual Savings Account (ISA) should be your first port of call when it comes to opening a savings account; because the interest you earn is tax free.
But, if you are saving for a deposit on your first home then you have another option open to you – the Lifetime ISA (LISA). The account for the under-40s not only pays interest but also offers a 25% bonus from the government. You can save up to £4,000 a year in a LISA. So, if you saved the maximum in 2022 you would receive £1,000 from the government as a top up!
Your total annual ISA allowance is £20,000 – so after filling your LISA you can also put away an additional £16,000 in a standard ISA. Therefore, if you have any extra savings you may wish to open another ISA account to help boost your deposit.
Tip 4 – Spring clean your finances in April
If you are looking for a way to make extra savings, why not sweep out the old and bring in the new. By this we mean get rid of anything you no longer need and switch to some cheaper deals.
Start by going through your bank statements to see if you are paying for any subscriptions you no longer need. For example, do you have three or four streaming services; such as Netflix, NowTV or Disney+ on the go when you could have just two?
Then take a look at your car insurance, contents insurance, mobile phone and broadband. Can you get a better deal elsewhere?
Finally, have a physical clear out of your home and see if there’s anything you can sell on eBay or Facebook.
Any money you manage to save – or make – can be added to your savings account. Plus, you’ll have less decluttering to do when you come to move to your new home!
Tip 5 – May – cut out the caffeine (or another treat)
One really good and easy way to save extra cash is to go without something you buy regularly for a whole month. A great example of this is your daily take-away coffee or shop-bought lunch.
Instead, take your own coffee into work or make your lunch. For example, if you spend £2.50 per day on a flat white coffee; by cutting it out for a week you’ll have an extra £12.50 to put in your savings account. Over the month this will add up to over £50! You may even find you don’t miss your daily coffee and ditch it for the foreseeable (or at least until you’ve saved your deposit). If you’re strong willed and can go without a take-away coffee for a year it’s worth £600 to your savings; add it to your LISA and the government will give you £150. That’s £750 – simply for not buying a coffee!
This can work in all sorts of ways – you don’t have to cut out the coffee or lunch. Try switching down to a cheaper brand at the supermarket or ditching the takeaways, pub trips or nights out for a month.
Tip 6 – June – summer savings
Take advantage of the better weather (fingers-crossed, we get it this year) to skip expensive indoor activities in favour of some free outdoor fun.
Going for a walk, a picnic or a day trip to the seaside is a lot less expensive than trips to the cinema, restaurants or shopping centres. If you are lucky enough to have some outdoor space; invite friends for a barbecue instead of going out for lunch. Put any savings you make into your LISA or savings account and make the most of the sunshine.
Tip 7 – July – holiday swaps
This time of year many of us start thinking about taking a holiday; and quite rightly so after the last few years. But, if you are saving for a deposit you may be a little worried about forking out such a large amount of money to go away. Even UK holidays can be expensive thanks to the rising popularity of staycations.
Unfortunately, if you have children, the cost is even more of a burden thanks to the price inflation in the school holidays. However, have you considered taking advantage of inset days? Check in advance to see if your children’s school has arranged an inset day which could work to your favour. A random Friday in the middle of September, for example, could be the ideal time to book a short break to Center Parcs when prices are cheaper.
Alternatively, how about doing a ‘holiday swap’ where you switch homes with someone in another part of the country. There are websites which offer this service but if you have a friend or family member in another location, it could also work. A change, after all, is as good as a rest.
Tip 8 – August – take on a side hustle
A side hustle is a way of making money in your spare time, to complement the income you receive through your day job. It can be a productive and enjoyable way to make some extra cash to put towards your deposit.
Most people choose side hustles based on their skills and talents. For example a musician can make extra money by tutoring, artists can use their skills to sell goods on Etsy; and animal lovers may find dog walking is a great money making venture.
Whatever your skills or interests, see if you can harness it to make extra cash. Even doing some babysitting, cleaning or getting a part-time job in a local shop at the weekend can help.
Tip 9 – September – mini money makeover
Whether you have kids or not, September is ‘back to school’ season – a chance to make a new start. Much like the beginning of the New Year it’s a good opportunity to take stock and make any changes to your finances.
If you feel you have let your saving slip over the summer months, now’s the time to get back on track. If you haven’t already, consider setting up a direct debit on the day you get paid to transfer some money from your current account to your savings account to ensure you are building on your deposit regularly.
Have another look at your budget and see if you can make any financial tweaks. Are you spending a bit more than you need to at the supermarket? Can you sell any unwanted items? Perhaps a few more unnecessary subscriptions have crept in which can be culled? Be ruthless!
Tip 10 – October – harness the power of technology
There are a vast range of automatic savings apps which can help you squirrel away money without even having to think about it; so why not use them to your advantage.
Lloyds Save the Change app is one well-known example. It allows users to transfer the change – rounded up to the nearest pound – from each purchase to their savings account. For example, if you spend £2.50 on a newspaper, the app will round the purchase up to £3 and the extra 50p will go into your account.
The MoneyDashboard app, meanwhile, can help you budget better and will help you analyse where you can make savings and cut-backs.
Take a look at the options on offer and see if there’s one which suits you.
Tip 11 – November – focus on sensible spending
November is notorious for being a spendy month – thanks, to Black Friday. We have become accustomed to being bombarded with adverts for the pre-Christmas sales even on social media, on TV – everywhere we look – so there’s no escaping it.
For a budding first-time buyer it’s a real test of your Savings Willpower. Whilst there are lots of tips for surviving Black Friday and the Christmas shopping spree; ultimately you’ll find your best chance of getting through financially unscathed is to make a list of what you need and don’t veer from this.
Make sure you put your deposit savings aside at the start of the month and allow yourself a budget for Black Friday and Christmas spending. That way you will not be able to spend more than you need. Good luck!
Tip 12 – December – saving gifts
If any family members ask what you want for Christmas, consider asking them for cash for your deposit. Most people will be more than happy to gift such a useful and meaningful present; and it will provide a good opportunity for you to discuss your plans with loved ones. They may even have some deposit saving tips of their own!
Saving is not easy – especially in these difficult times. So, use December to check on your savings account and reflect on the wonderful job you have done this year to build the deposit for your future home.
Whether you have achieved your goal and are now ready to look for your new home; or you have a while to go yet. Your 12-months of saving will have made a dramatic difference; and you will have made the biggest stride in your goal of becoming a homeowner. Now that’s worth celebrating!
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