Buying your first home is an important step in building your financial future, but sometimes the gap between your savings and what homes cost feels like a Grand Canyon-like chasm. Here then are steps to make sure your money is doing everything it can to get you there faster:
1. Cut the credit, even if you’re not in debt
Banks are being really picky about who they lend to these days, so you want to do everything you can to look like the model first home buyer.
They don’t want you to have any debt, but they also don’t want you to have the potential to build up more debt behind their back.
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So even if your credit card balance is clear, they see that balance as your “credit potential”; the amount you could rack up with no notice.
If you have credit cards you don’t use, consider getting rid of them, or lowering the limit.
2. Check your KiwiSaver settings
Your KiwiSaver is one of your biggest weapons to save up a home deposit, but you do need to know how to use it properly.
Time is a factor. If you think you can save up that home deposit in under five years, you should probably put your cash into a conservative fund. It won’t be earning much, but it will be protected from the wild swings of the market.
If we get a repeat of the stomach-lurching drops that Covid-19 caused in March, a conservative fund should stop you from losing your home deposit right as you’ve found the dream house. But if you think it will take more than five years to save up, don’t be discouraged. This means you have the option of putting your KiwiSaver into growth, and supercharging your savings.
Growth assets will earn you more, so that you’re not stuck trying to save all the deposit yourself, while house prices race ahead. You need that time up your sleeve, so you can ride out any drops and reap the benefits of a recovery.
3. Consider a side-hustle
You don’t want to spend every waking moment of your life working, forever.
But a side-hustle becomes useful when you’ve got a particular goal you’re working towards, and you’re ready to go into sprint mode.
The most lucrative options often involve using skills, so consider what skills you’ve developed through work, or hobbies. Could you freelance those skills through sites like Fiverr or UpWork?
Dog-walking and house-cleaning are also options where you can earn more, depending on the job, and you can organise hours that work for you.
4. Decide what matters to you
Keep a money diary for one week. List everything you spend, how much you truly had to spend it, and also how happy it made you. There will be things that you don’t need, and that didn’t make you happy. Cut them, and put the savings towards the deposit instead.
- Frances Cook is the host of the personal finance podcast Cooking the Books. She is not a financial adviser, and all information is general in nature. For individual advice, see a financial adviser.
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