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Saving for your first home deposit can be stressful! I've been there and made it out alive! Between your 9 to 5 job, and home commitments restricting your ability to save, saving a deposit is definitely a tough journey.
Between 23 and 27, I scrimped and saved my first home deposit. I saved, I invested, and I compromised - but in the end, I got there! AND SO CAN YOU! In this video I share some of the top tips that got me into my first home, and I wanted to share these with you. Whether you're based in New Zealand, Australia, or the United States, these tips are useful anywhere around the world. The principles of saving for a first home deposit are the exact same!
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Welcome future homeowners. Have you ever dreamt of buying your own home
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but felt overwhelmed by the sheer thought of saving up for that hefty deposit? You're not
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alone. But here's the deal, achieving that dream might be more attainable than you might think
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Today I'll be walking you through 5 easy steps to save for a house deposit. Hopefully this will
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turn the seemingly impossible financial goal into actionable bite-sized pieces. I bought my first home in 2022 in Auckland, New Zealand. I saved up a 15% deposit by myself
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completely independent from my parents. I understand the struggle, and today I want to
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share with you some easy tips so you can do it too. Let me tell you first hand, it's not impossible
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So let's get started on the journey. Step number 1 is to set your savings goal
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This is where the rubber meets the road, figuring out how much you actually need to save
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Start by researching the housing market in the area you envision your future home
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Look at the prices of homes that fit your criteria and use them as a benchmark
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In New Zealand you can use TradeMe, Homes.co.nz or OneRoof to do this
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Once you have a general idea of the prices in your target area
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determine how much deposit you want to put down. This is where it is important to be realistic
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and understand your financial capabilities. Consider factors such as your income, expenses and savings potential. Generally a deposit needs to be between 10 and 20
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of the home's purchase price, but this can vary greatly depending on the age and location of the
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house as well as your disposable income. BNZ has even started offering 5% deposits
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to some borrowers here in New Zealand, along with some Kainga Ora government schemes and
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private co-ownership schemes like you own. Don't forget, the larger your deposit is
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the smaller your mortgage payments will be. Lower deposits don't only mean you have a larger
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loan amount to pay interest on, but you may have additional low equity margins or fees to consider
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ASB for example, charge these rates on top of their normal rates if your deposit is less than
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20%. Now you'll need to crunch those numbers. If you are looking for a house that costs $600,000
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and you want to save for a 10% deposit, your goal should be $60,000
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Calculating this number is important, as it gives you a clear and tangible goal to aim for
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This may seem impossible at first, but it's a crucial step as it gives you a target. Remember
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knowledge is power, especially when it comes to making one of the most important financial
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decisions of your life. Now we're up to step number 2, which is to create a budget. It's time to get intimate with your finances. Start by grabbing
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a piece of paper. On the left hand side, write down how much money you get in the hand each week
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from your job or business. If you're paid fortnightly or monthly, just divide this amount
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by 2 or 4 respectively. Now on the right hand side of the page, write down all of the bills and costs
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you must pay each week. This doesn't have to be exact, but just make sure to give an honest
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estimation as it will help with this exercise. When you take the number on the left hand side
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of the page, and subtract all the numbers on the right hand side, you're left with your weekly
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savings amount. One of the biggest mistakes people make when budgeting is underestimating their
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expenses. Make sure to include all of the necessary costs such as rent, food, transportation
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utilities, and any other essential items or services. Here is a guideline from the IRD which
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may help with estimating some of these numbers. Don't forget to also factor in any debt payments
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you may have. Once you have your weekly savings amount, go back through your numbers and see
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if there was anything you could potentially spend less on. Perhaps you have an unused Netflix
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subscription, or you could cut back on eating out. Every little bit counts when it comes to saving
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for a home. Once you've got your budget in place, make an effort every week to go through your bank
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statements to make sure that you're on track. Many people use a great website called Pocketsmith
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to track their spending. You can create your budget right in the app and assign transactions
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to an expense bucket such as food, transport, or utilities for example. As you can see here
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you can also automate this step by integrating Pocketsmith with your bank. When you earn and
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spend, it will also show up here, assigned to the correct expense bucket and against your budget
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Super simple. If you want to learn more about Pocketsmith, make sure to use my link down below
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They have lots of great discounts on their website for my subscribers. Now that you've got your savings starting to accumulate, where should you stash that
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growing fund? Our third step is to explore your savings options. Look beyond the piggy bank and
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consider high interest savings accounts, investments, and even retirement funds that can bolster your savings through interest gained or capital gains. Here in New Zealand, KiwiSaver
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can be a great tool here as you can get government and employer contributions. If you put in 3% of
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your salary, your employer does too. And up to about $1,000, even the government comes along
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with an extra $0.50 on the dollar. So on the first $1,000 contributed, you can get up to an extra $1.50
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for every dollar that you put in. That's an extraordinary return and you can withdraw all
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of it for a first home purchase. There is a catch however that many people forget. You must have
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been in KiwiSaver for at least 3 years prior to making a request to withdraw, and you must also
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retain at least $1,000 in your KiwiSaver account after withdrawal. KiwiSaver is also a great
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investment as you can request a first home grant from Kainga Ora if you've been in the KiwiSaver
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scheme for at least 3 years. Using this article from MoneyHub, you can see how much free money
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you could have access to as a first home buyer if you've been an active member of KiwiSaver
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Aside from KiwiSaver, you may have many other options as well. A high yielding savings rate
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can be a good option if you're looking for a safer option. This could be through your bank
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a mobile wallet like DOSH which offers a return of up to 4.6%, or even a trading platform like
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Sharesies offering 4.6% as well. Low cost index funds and ETFs, or even individual shares
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are options available to savers with a higher tolerance for risk. Most investment advisors
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would only recommend this option if you're investing for a longer period of time, as in
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the short term the values can fluctuate quite a lot. If you're looking to buy a house in a few
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years time, this might be a good option to explore. When I was saving for my deposit
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I was personally invested through Sharesies, Hatch, Kernel and Binance, but this approach is
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certainly not for the faint hearted. Every single day my portfolio would wildly swing up and down
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sometimes for over $1000 in a single day. Just make sure you put those savings to work somehow
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whether that's through a savings account, investments or retirement accounts like KiwiSaver
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as long as they can be withdrawn for your first home purchase. Now we move onto step 4, which is to increase your income. Thinking outside the box can fast
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track your savings. Side hustles, freelance gigs or part time jobs, there are many options. Extra
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income means you're not just cutting expenses, but actively adding to your house deposit fund
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Think back to our budget exercise when we listed out our income on the left hand side of the page
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Any extra income that you earn through side hustles can be listed here, which then increases
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our weekly savings rate. This can make a significant difference in reaching your
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savings goals faster. Plus, having multiple streams of income can also provide financial
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security and stability. So don't be afraid to explore different opportunities and utilise
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your skills and talents to increase your income. Consider your skills and interests and explore
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opportunities that can help you earn more money. You could also invest in improving your skills
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through courses or workshops to increase your earning potential. Investing in yourself is a
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great way to increase your income and save for a house deposit. By acquiring new skills or knowledge
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you can open up new opportunities for higher paying jobs or side hustles
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And finally we've come to step number 5, monitoring your progress. Keeping an eye
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on the price. On a regular basis, monitor your savings and adjust your plan as necessary
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It's about staying on track and keeping motivated. Saving your deposit will likely take years
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unless you earn a ton, so discipline is really important here. Set up a spreadsheet
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use a budgeting app, or simply keep track of your progress in a notebook. Whatever method
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works for you. Just make sure to review how you're tracking on a regular basis
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and adjust your plan as you need. This will help you stay focused and motivated towards
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achieving your goal of home ownership. I personally used Excel and tracked day by day
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how each of my liquid investments were doing. Just by capturing my bank balance and the value
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in each of my different investment accounts and my KiwiSaver balance, I had a record of what my
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savings amount was at any point in time. I could then compare this to my savings goal and adjust
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as required. Remember it's not just about saving the money, it's also about making smart spending
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decisions. Today we've discussed 5 simple steps to getting a house deposit together
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First, create a savings goal. How much money is needed for a deposit on your first home
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Second, putting together a budget. It can be as simple as listing income on one side of the page
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and expected expenses on the other, and subtracting them off to find your savings rate
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Third, was stashing away your funds. You can put your funds in a high yield savings account
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invest it, or just file the money straight into KiwiSaver for later first home withdrawal
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Fourth, we discussed what you can do to increase your income. This in turn can increase your
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savings rate. And we concluded by stressing the need to monitor your savings progress to the goal
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you set in step 1. I hope you enjoyed this video, if you did please make sure to subscribe
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down below to see all of my future content in the personal finance and first home buyer space
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Thanks for watching and I look forward to catching you on the next one. Cheers
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