It can feel like a never-ending challenge to save for a house deposit while renting. The good news is that with some planning, follow-through and time, it can happen.
Many renters find that the hardest part is knowing where to start. After all, there are countless experts, blogs, and articles in the media describing ways of saving more, spending less, and tracking your progress. It's not that renters are short of ideas. The challenge is choosing where to start in a way that makes a real difference that you can see quickly.
With this in mind, here is our shortlist of recommendations most relevant for renters wishing to save for a home deposit.
1. Understand what's happening to your money now
The first step is to understand the ins and outs of your money habits as they are right now. How much income are you regularly bringing in? What are your realistic spending habits? Where does this leave you at the end of each week and month?
Take a look back through your income and expenses across all your bank accounts and credit cards, to get an overall feel for your regular areas of spending. Remember to look back a long way - 6 or even 12 months - to ensure you aren't forgetting more significant and less regular expenses such as fees or insurances paid out annually.
2. Identify the easy wins - where can you cut back spending quickly?
Everybody is different in their approach to food, drink, and socialising. However these are often the areas renters can find quick wins to help save significant money regularly.
Make social nights out an occasion rather than routine
Nobody likes the thought of missing a social catchup with friends. Some friends will even make it hard to say no and will twist your arm if they know the reason is simply to save money!
Social occasions can be a significant financial drain though, especially when considering that a hazy night out may contain an untapped spend on food, drinks and Uber or taxi fares.
Try to limit these nights out to an occasion rather than a routine event and you'll very soon see a difference in savings.
Plan your food purchases and make more meals at home
Take note of how you usually spend money on food. Do you regularly eat takeaway or meals out? With a bit of planning, many meals can be made at home and either eaten there or taken with you. Taking food to work is an easy change to make, rather than ducking out to buy lunch in the middle of the day.
Plan your grocery shopping in advance to cut down on bought meal expenses. As well as encouraging you to plan what you'll eat throughout the week - leading to less spending out - if you prepare more meals at home you will very likely see a health benefit as well as financial benefit.
Buy in bulk and save. When in the supermarket, the concept of "buy in bulk and save" is great to remember. This is easily applicable to items which can be separated and frozen in portions (e.g. meats) or to those items you always use and have a long shelf life (e.g. laundry powder, toilet paper, etc.). Price per unit on largely quantities is very often significantly cheaper, as is the choice to buy generic rather than name brands where possible.
Cafe culture crushes your savings!
It's an often-heard piece of advice - spend less on coffee out and you'll save money. But let's go a step further and break this down. Just how much can be saved? And what if you just love coffee and "can't" do without it (like us, let's be honest!)?
Well, let's say you buy a single coffee at a cost of $4 per day. Forget the likelihood of buying a little something with it, let's just stick to the coffee cost. That little expense adds up to $28 per week, $112 per month, $336 per quarter, or $1,344 per year.
So, if you can do without the coffee purchases, there's easy money to be saved towards your home deposit while renting.
But what if you just need that coffee hit each day?
In our own home we ran a calculation of the cost of making on average 2 coffees per day over the course of a full quarter of a year, using premium beans, including milk and an allowance for water and electricity. Yes, we were that interested in working this out!
The cost per cup over a full quarter worked out to be as little as $0.45 per coffee made at home. A similar take away or in-cafe coffee would easily cost $4.50 - 10 times the amount of making these coffees at home.
So, working it through, if you make coffee at home instead of buying out, your costs would be in the order of $3.15 per week, $12.60 per month, $37.80 per quarter, or $151.20 per year. Compared to spending $1,344 in buying this coffee out, the cost of a coffee machine for the home coffee addict is easily justifiable.
There is certainly a joy in a cafe-bought coffee, and it offers a cheaper alternative to the earlier mentioned social night out to catch up with friends. Limiting spending in this area is however an easy way to save regularly.
3. Minimise what you pay in rent to increase your savings
A commonly overlooked method of saving when renting is to revisit the amount of rent you're paying each week. At first this may seem out of your control, but there are a number of options to do this.
1. If your current rental property allows, consider finding a roommate to join you and reduce your share of the rent
2. Consider moving into an older or smaller home to save on weekly rent
3. Investigate rental opportunities further away from highly sought after locations. You may save in rent by living further away from your work, shops, beaches, etc. Remember, it's not forever!
Really, this is a big one. Consider that if you're able to save $100 a week in rent, that's more than $5,000 per year directly into your deposit savings which would otherwise have disappeared.
4. Become more energy efficient
Energy prices just keep going up, and becoming more energy efficient is a great way to save ongoing. Some of the common ways you can reduce your energy bills are as follows
1. Turn Off The Lights
2. Take shorter showers
3. Clean up the way you do laundry
5. Revisit step 1 - with a saving mindset, what else can you save?
The above examples are common culprits of excess spending which can be limited with a little planning. Delving further through your spending habits you'll doubtlessly find more. Be flexible and be prepared to make some calls and do some research. You'll likely find ways to save from additional areas such as:
Want more? If you're a tenant currently renting and would like further tips to plan towards an investment property, subscribe to our eNewsletter now.
Carnelian Property Management Newcastle NSW
We are a family-owned and run Newcastle real estate agent offering expert property management across Newcastle and Lake Macquarie.