It can be tough just making all of your monthly payments on time each month, so it’s not hard to understand why so many people are deterred by the thought of trying to save up for a down payment on top of their regular bills.
The important thing to remember is that it can be done. It’ll require some serious re-organization of your finances and dedication to cutting down on extras (like that latte you get every morning before work) but we’ve got some tips to help you save up for your down payment no matter what your current financial situation.
Prioritize Your Payments
If you’re juggling multiple important bills a month, make sure you’re not letting any of them slide. Look at them in order of priority; chances are your credit card bill is near the top of that list due to the high interest rate. Do your absolute best to pay down your credit card bill so you’re sitting at a zero balance (or as close to as possible). You don’t want that hanging over your head and accumulating more and more interest just so you can put aside some extra money each month.
Open a TFSA
If you don’t already have one, talk to your bank about setting one up. A TFSA (or tax free savings account) is the best option available when you want to save up money without being hit with tax deductions upon withdrawal. You can also set short or long term goals so you can withdraw money at any time without being penalized for it (unlike an RRSP).
By having a TFSA separate from your other savings accounts, it’s easier to meet your specific down payment savings goal. Rather than one savings ‘pool’, a TFSA gives you the option to easily allocate your funds for multiple goals.
Cut Costs in Your Daily Life
This is one of the tips you’ll probably be less enthusiastic about, but it’s also one of the easiest and most effective ways to put aside more money each month. Stop buying expensive coffees and lunches at work every day and try bringing your own coffee or tea in a thermos mug from home and making your own lunch.
If you’re absolutely set on your daily routine, at least try to downsize to a smaller and/or less expensive drink OR alternate so you only spring for the latte every other day.
Teach yourself not to make impulsive purchases and use the 24 hour rule. If you want to impulsively buy something that’s a little bit pricy, force yourself to sleep on it and make a decision the next day. If you still want it just as much, go for it (if it’s still within your budget and won’t deter you from your savings goals). If the purchase you have in mind is considerably bigger (a TV or a piece of furniture, for instance), sleep on it for two nights (a solid 48 hours) before making a decision.
Doing this will not only force you to reevaluate your spending habits but will considerably cut down on buyer’s remorse and leave you with more money in your account at the end of the month.
Don’t let Temporary Inconvenience Scare you off
Some other options for cutting costs are to take public transit whenever and wherever you can (even if you have a car – it’ll save you some serious gas money) and possibly even downsizing where you currently live to a cheaper/smaller place while you save for your downpayment. The inconvenience will be temporary and will likely motivate you to save up even faster than you would have before as you’ll miss having a bigger space.
Last but not least, make sure your expectations are realistic. Don’t set yourself a savings goal that’s too big and will only wind up bankrupting you. Budget and talk to a financial advisor if you’re uncertain how much you can realistically afford to put aside each month.
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