Buying your first or fifth house is both exciting and stressful. For many of us, this is a great achievement. Being the most prepared possible is probably the most important step in buying a home, including saving for the down payment. The majority of Canadians think they need to save thousands of dollars before they can even look for a home. Although a large down payment is advantageous, saving for this payment may be easier than you think. There are several steps that must be taken to ensure that you save money effectively.
Have a goal
Your primary goal is definitely buying the house, but unfortunately this goal is not specific enough. Rather, set yourself smaller but precise goals. So, to your surprise, you’ll manage to pick up the money for the first installment faster than you thought.
What should these small goals be? Technically, these goals will be what you want them to be. But if you’re looking for inspiration, here’s a list:
- Automatically transfer a portion of your monthly income to a savings account
- Spend months on meals in restaurants and eat more often at home
- Give yourself a savings goal higher than previously established. You will be delighted once you reach it.
Whatever goals you set, make sure you can reach them but at the same time get out of your comfort zone. So, you will be able to buy the house of your dream in a reasonable amount of time.
Plan a budget
After setting your goals, set a budget. We all know that budgets are restrictive. But that’s the only way to reach the end goal of buying a house.
First, you must calculate your monthly expenses. These should be the essential things:
- Public services
- Auto / Gas / Transportation
- Paying debts
- Contribution to a TFSA or RRSP
Once you calculate how much money you need per month to live, deduct that amount from your total income and you will get the money you have left. It is suggested that you deposit the majority of this amount into your savings account.
You can also plan to rent with option to buy
Follow the budget
Once the budget is set, the most difficult part is to respect it. Let’s be honest, respecting a budget is not easy. It takes a lot of effort and dedication, but you must always keep in mind the ultimate goal of all this, the house. Focus instead on the pleasure you will have once you own a home.
In addition to respecting your budget and saving, you must save in an intelligent way. That means you have to be prepared for the unpredictable. Life goes on and your goal can be slowed down if you are not well prepared. You need an emergency fund . While saving for the down payment, try to save some money for emergencies and contingencies.
Increase your monthly income
If you absolutely want to buy a house, you can also consider increasing your monthly income, which will help you save more and more quickly. Find a second job on weekends. Sell items you no longer use. Or turn your passion into a job. Just make sure these extra efforts bring you extra income.
Buying a home is an important decision in everyone’s life and saving for it will not be easy. But if you make a plan and follow it to the letter, the down payment will be accumulated faster than expected.