Is your new year’s resolution to save for a house deposit? We’ve got some top tips on how to get started with your savings this year.
The beginning of a new year is a great time to kick start your savings pot. With a fresh mind after a relaxing festive break, there’s never been a better time to start saving your house deposit. Keep reading to find out the best way to plan, organise and make the most of your savings this year.
Understand your finances
The first port of call is understanding your current financial situation. Are you starting with nothing? Do you already have some savings? It’s a good idea to dedicate some time to go through all your accounts, and understand how much or whether or not you’re in any debt. If you’re saving with a partner, sit down together and assess both of your accounts so you know where you’re both starting from.
Be sure to check all your accounts, including current account, credit cards and savings accounts. You may have accounts you’ve forgotten about or inactive accounts, so make sure you cancel those.
Once you’ve got to grips with your finances, it’ll make it easier to plan your savings.
Clear any debts
Before you can save, you should clear any debts you have. If you don’t, your debts will cancel out your savings, plus, you may end up paying higher interest rates the longer you leave it.
If you have debts to pay, set up a payment schedule and get them paid off. This can be easier said than done, so setting up a re-payment plan can help keep you organised and on track. It’s a good idea to schedule the payments to come out on your pay-day. This way, you won’t spend the money before it goes into the separate account.
Paying off debts will put you in a better position to get a mortgage too. It helps with your credit score
and chances of being more ‘financially attractive’ to lenders when applying for a mortgage. Read more about getting mortgage fit here
Set your goal
Now you understand your financial situation and have set up a pre-payment plan for your debts (if you have any), it’s time to set your goal; how much do you want to save? It’s a good idea to give yourself some leeway, in case anything happens which means you can’t reach your saving goal one month.
Everyone prefers different saving regimes, but the most popular way is to save a set amount each month. This is a great option if you have a salaried income and you know how much you’re going to earn each month.
Setting up a standing order for money to go to your savings account is a great way to organise your savings. It means you won’t have to worry about spending that savings money.
What to consider
Remember to be realistic with your goal. Work out what your average monthly outgoings is and see how much disposable income you’re left with, then designate a certain amount of that disposable income to your savings.
If, when looking at your disposable income, you don’t have enough to reach your goal, think about cutting out unnecessary spending. Stay tuned on our blog to hear our top ways to cut back unnecessary spending!
Open a savings account
Kick start your year by opening a savings account. Although it may seem obvious, having a separate account to put your savings in can help differentiate what you can spend, and what you’re saving each month.
Hunt around for the best interest rate
We’d love to tell you the bank account that gets you the most interest, but they often change and interest rates rise and fall every month. So the best thing to do is hunt around the market at the time you’re wanting to set up your savings account.
Make sure you bear in mind how long you intend to save for. If it’s a fixed rate of interest for a certain period of time, and you don’t intend to save that long and withdraw your money, you may miss out on your interest.
Give yourself some leeway
Even if you have a specific amount you earn each month, things can happen which may affect how much you can actually put into your savings account. Make sure you take into consideration emergencies that may occur such as car repairs, so that you reach your goal at the end of your saving period.
When you’re at the planning stage, consider creating a separate account for emergencies, so you keep your savings separate. This way, if you don’t need to use the emergency money, you can transfer it over to your savings account at the end and boost your savings even more.