A common problem many soon-to-be home buyers have is that they have the will to buy, but not the means. If you’re looking to buy but don’t have enough saved up for a down payment, try these tips that are sure to help grow your bank account.
- Cut back on your spending: While it’s one thing to scale down on some of your everyday luxuries, it’s another thing to completely cut off your spending. Like many things in life, there is a fine balance when it comes to adjusting your budget. If you try to give up all your spending at the same time, it’s likely you’ll snap and go back to your old ways before you know it. Make a conscious effort to spend less, but be realistic about your needs - including a bit of enjoyment along the way.
- Eat out (or order delivery) less: Whether you’re the kind of person that goes to a restaurant - or has restaurant orders delivered to your door thanks to the increasing convenience - a couple times a week, or even just a few times a month, there's room for you to save. By cutting that number in half, you’ll automatically free up cash you can add to your savings. When you do go out, opt for less expensive restaurants, share appetizers or desserts, and maybe reduce the number of drinks you order.
Want to see how quickly you can save? If you bring a lunch from home to work with you every day, you could be saving between $50 and $75 dollars in one week; over a month this could grow to between $200 and $300, and looking at a year, between $2,400 and $3,600! Suddenly that extra effort to make a sandwich the night before seems worth it, right?
- Vacation? Try a stay-cation: The "stay-cation" trend has been popular in recent years, and for good reason. While trying to build your savings, it’s smart to stick around your city. Not only will this save you gas or flight money, but you’ll also be less likely to spend carelessly. How often have you heard “I’m on vacation” as an excuse for spending? Keep focused and think big picture: there’ll be plenty of time for vacations in the future.
- Rethink your hobbies: Is reading one of your favourite past times? Instead of buying books, check out the library and borrow some for free. Are you a sucker for film? Try subscribing to an on-demand service instead of hitting the theatre. Can’t live without your Friday “Happy Hour” drinks? Buy a case of beer from your local liquor store, invite your friends over and skip on the costly pub prices.
Remember, these changes don’t have to be forever, and your favourite places will all still be there after you’ve saved your down payment.
- Save more: Yes, “save more” can be easier said than done, but there are tricks to make this work. Make a list of your monthly expenses and set aside that amount immediately when you get paid. Then, transfer your savings - ideally 10% of your pay cheque - to a separate account where you won't be tempted to spend it. If you receive any additional income or cash such as a raise or bonus, birthday money, or lottery winnings, add that to your savings account, too. As you can see, it doesn’t have to be a lot but every dollar counts!
- Pay off your debt: It’s difficult to save money when you’re paying off debt, so focus on getting rid of your debt as soon as you can. Try the "snowball" method and begin by paying down the smallest balance you have owing. Once that's done, take the payment you were making towards that and carry it over to the next smallest balance. Repeat the same steps until you're debt-free.
- Use a Tax-Free Savings Account (TFSA): Tax-free savings accounts are a great way to save money. TFSAs will grow your money tax-free, meaning any money you put into or earn with this account is completely yours!
- Borrow from your RRSP: As a first time home buyer, you - and your partner if they are also a first time buyer - are allowed to withdraw up to $35,000 from your RRSPs to buy a home. This is an excellent option available to everyone who will be on title. You can learn more about this process and its rules and regulations online or by contacting us.
If your desire is to be a homeowner, then saving for your first home is necessary and worth the effort. While cutting back may not be easy, just think about how greatly your sacrifices now will impact your future. If you're looking for some help and advice along the way, be sure to contact our team of mortgage specialists - we're here to help!
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.
This post reflects the best available information at the time of writing/last update. In order to ensure that you have the most up-to-date information, contact us to confirm the details for your specific situation.
Originally posted October 2015
Updated March 2018, January 2020