Buying a house is a big undertaking today, considering that many Canadian markets are some of the hottest in the world. Depending on where you live, you may need to save a couple hundred thousand dollars just for a down payment on a basic entry-level house.
Even if you’re in a more moderately priced market, you’ll still need to put up tens of thousands of dollars to make your dream of home ownership a reality. To save that kind of money, you’ll need a solid plan. Here are our tips for banking as much cash as possible for that new house!
1. Slash your budget
Obvious, right? But, if you’re like many Canadians, you may not know where a lot of your money is going. Take a hard look at your spending over the past three months. You’ll probably find some surprises. What can you live without? Pay extra attention to recurring expenses (e.g. monthly subscription services) that you’re used to overlooking. A price tag of $19.99 may not seem like much, but multiply it by 12 and it’s a notable expense. Do you really need cable or satellite TV? Or could you get by with Netflix alone? Eliminate the ‘low-hanging fruit’ expenses and then move on to the trickier ones. Cars, for example, represent huge expenses for most. Could you ditch your car and get by with public transportation and uber? Leave no stone unturned. It’s worth at least considering the savings!
2. Automate your savings
This is key! Set up an automatic transfer to your savings account every pay day. If the money isn’t in there, you’ll be less tempted to spend it. Moving those funds out accomplishes two things – first, it separates those funds from your everyday savings and designates a specific purpose for them, and, two, if you use a high-yield savings account, you’ll actually earn some interest income on your savings. Shop around and you’ll see online banks offering interest rates as high as 1.5-2.0+%. Every little bit helps!
3. Track and measure progress
What gets measured, gets managed! There are so many great tools out there to help monitor your progress towards your goal. Consider using an online service like Mint.com to help organize and categorize all of your expenses, and compare them to your budget.
Mint will also allow you to set specific savings goals – select the “Buy a Home” option and it will prompt you for all of the details needed to create a customized savings plan.
Mint even provides guidance around how much home you can comfortably afford, based on the inputs you provide.
4. Consider a side hustle
If you are super motivated to get into your very own house, slashing expenses may not get you there as quickly as you’d like. Take a look at the income side of the equation. You may not be able to do much in the short term to increase your salary at your day job, but you still have your evening and weekend time to work with. Consider taking on a part-time job, or starting up a mini entrepreneurial venture to generate some extra cash. Make sure you put those earnings from your side gig straight into your savings account!
Saving for a house will likely require compromise and sacrifice, but employing all or most of these four strategies should get you there as quickly as possible.