Saving money’s an art to be mastered, whether you want to save for something big, like a house, or something more short-term like a holiday in the Caribbean. Methods for saving never change, so these tips can be used for anything, although you may not have to save so rigorously if you’re after a new phone instead of a place to live.
Buying a house is a big investment, and you need to have a considerable amount to play with even before you can get a mortgage. As a general rule, you should have 20% of the purchase price of the house in order to start the process of buying it. But how do you get such an amount? Here are some tips to help you get saving, mortgage or not.
1. Write down your expenses
Writing down everything, whether it’s in a notebook or in an elaborate excel file, helps you get a clearer understanding of your spending. If you write down your daily spending as it happens, then you can immediately identify areas where you’re spending more than you need to, and it can make things sink in more than when you see your spending on your statement. This way you can immediately identify those areas where you can cut some costs and can even show you where you’ve been getting carried away but didn’t realise. Buying a few coffees a week might seem minor, but if you stop spending £10 a week on cappuccinos then you’re getting £520 more going into your savings a year. Just think of the savings you could make if you had a packed lunch instead of buying that tuna sandwich every day!
2. Find an extra source of revenue
Do you have any hobbies which you could turn into a new source of income? Maybe you’re a DIY genius with some time to spare, or perhaps you’ve got a way with kids and could babysit for your friends and neighbours every now and then? Even small amounts can really add up over time, and if they’re things you enjoy doing then it’ll fly by.
3. Reconsider your habits
There’s a fair chance you can save on your monthly bills, either by switching or by adapting how you use your energy. Doing a cold wash on the washing machine or letting your clothes air-dry rather than using the high-energy dryer can save you serious money, as well as doing some good for the environment. Such minor changes can make a noticeable difference. To get some more ideas read our blog on how to save on your household bills. The same goes for when you’re out and about – if you’re constantly running out of data and having to top up before the end of the month then maybe you should start disabling data usage for certain apps, and simply downloading what you want when you have wifi. When contracts are costing as much as £60 a month, you don’t want to be increasing that price for the sake of Netflix.
4. Pay yourself first
Even before you pay your rent or bills, start by transferring a fixed amount to your savings account each month. You can make it a standing order, so you don’t even need to think about it. This way you know how much you can spend for the rest of the month and the temptation to overspend decreases. Just try to avoid the temptation of transferring money back if you want to buy something over budget!
5. If you’re a reckless spender, cut up those credit cards
Credit cards are a bit of a double-edged sword. They can do wonders for your credit rating, but they can also be pretty dangerous if you’re prone to impulse purchases. In order to keep an overview of your saving progress, and curb your expenses, it’s wise to stay away from them and only spend the money you can really afford. Obviously this varies a lot from person to person, but if you know that you can’t be trusted with a high credit limit then stick to debit cards while you’re saving.
6. Keep an eye on your credit rating
So if you’re saving to buy a house, chances are you’re going to be needing a mortgage too. Mortgages are a pretty beefy subject, but we’ll just keep it basic today: to get a good mortgage you need a good credit rating! A good way to keep your credit rating strong is by having a credit card and not going over your limit (remember what we said earlier about how they’re a double-edged sword), so don’t take this advice to mean go crazy on the credit card – just because it’s good for your credit rating doesn’t mean it makes sense to go on spending sprees as, obviously, that would constitute reckless spending. You don’t even need to spend much on it, simply having a credit card (and always paying your bills on time) will make you look good. If you’re not sure what your credit rating’s like, then Clearscore and Noddle let you check for free. Experian have an introduction to credit if you’re unsure of anything, as well as some tips on improving your rating. If you really want to push the boat out, there’s a company called CreditLadder which lets you pay your rent through them, increasing your credit rating.
7. Explore the market
We’ve said it before and we’ll say it again – don’t be afraid to shop around! Even before you start saving, have a look at what’s on offer to explore some of the prices. This way you’ll know beforehand which neighbourhoods are cheaper, more expensive, or more suited to you. If you really want to save up for your dream home, then you’re fastest way of saving that money could be to buy a cheaper house to sell for profit within a few years – with housing you really have to play the long game. This way you can save for a bit longer – and sell your first house with some profit – before you buy that house you’ve always wanted. If you’re not after a house, then it’s still always worth seeing what deals are available and where – the first place you go to often won’t have the best price!
8. Cover yourself just in case
We all know that you can save all you like, but it’s the little accidents which can end up costing you the most. It might feel counterintuitive to put extra monthly money into insurance, but if a pipe bursts and floods your home or someone breaks in and steals all your valuables, then it will make a real difference. Plus, if you’re wanting to limit your monthly spending, a lot of insurance companies (including ours) will let you pay monthly instead of with a lump sum. If you’re unsure, we have a blog which tells you everything you need to know about contents insurance, which you can read here
Hopefully these tips will be helpful for you, and you manage to buy whatever it is that you’re saving for. Remember that it’s now cheaper to pay back your mortgage than to pay rent in every city in the UK (except London, surprise, surprise) so now could be the time to start thinking about buying! No matter where you’re hoping to buy, it’s always best to start saving early, so using all or a combination of these tips will always pay off in the long run. As we said, all the little savings add up over time. Happy saving!
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