Saving money for a home can sometimes be like a Looney Tunes show where Wile E. Coyote always fails to capture the Road Runner. This happens just when the Coyote thinks he’s gotten a hold of Road Runner, only for Road Runner to slip through his grasp.
While that story arc is funny in cartoons, it can also feel very depressing in the real world. A common scenario is this: Buyer needs x amount of deposit to purchase a house. They need three years to reach x. But after three years of saving, the property increases in value, and the minimum deposit is now x + y. To reach that, buyer needs an additional year to save. Come the next year, the value of the property increased again, and now the buyer needs to save x + y + z; and the cycle keeps repeating itself.
But does this always have to be the case?
According to the NS&I, setting a savings goal could help you reach your target faster and help save £550 more annually.
To set a goal, ask yourself these two questions: What do you want to save for and how much do you want to save up?
Finding a purpose for your savings is important to keep you motivated. You may want to save for a deposit on your first home, or maybe you just want to save up for the rainy day. Whatever purpose you choose, remember that there’s no right or wrong purpose for saving up.
Once you’ve identified your purpose, the next task is to set the amount you want to save. How much money do you need to achieve your purpose? Suppose you want to save up for a deposit, then make sure to save around 20 per cent of a house’s selling price since that’s the minimum payment most sellers and banks ask for.
Don’t forget write down your goals on a piece of paper! This may serve as a daily reminder on what you want to achieve and motivate you to achieve them faster.
Calculate How Much You Can Spare Each Month
How much should you keep on a monthly basis depends heavily on the amount you want to save up and the period you gave yourself to reach that amount. Keep in mind that the shorter the period for saving up means a higher monthly target, while a longer period would only call for a smaller amount.
For example, you’re saving up to buy a £400 laptop. To buy that laptop, you could save £100 a month for 4 months, or £50 a month for 8 months.
Set up a standing order with your bank
One of the most efficient ways to save money is to set up a standing order with your bank.
You can do so by setting up a regular payment into your savings account, and your bank will automatically transfer the amount you specify into your account each month.
If, however, you’re just barely making enough money to make ends meet, don’t be discouraged to save. Here are smart ways on how you can turn pence into pounds:
- Add up the loose change in your pocket every week and put them in a jar. The pence you collect can add up to a considerable sum of money after a while.
- Keep track of your money through a spending diary. Just don’t forget to list down everything you spend in day and a week, even very small purchases.
- Give up your vices. Like loose change, the amount you spend on buying cigarettes, for instance, adds up as time passes.
With a little discipline and perseverance, reaching your savings goal can be a reality. Good luck!