How to Save for a Down Payment

Posted by Steve Harmer on Tuesday, July 21st, 2015 at 11:01am.

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 bits of advice 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 this. If you try to give it all up at once, it’s likely you’ll snap and go back to your old ways before you know it. Be sure to make a conscious effort to spend less, but don’t forget to enjoy yourself along the way.

Eat out less: Whether you’re the kind of person that eats out a couple times a week, or even just a few times a month, by cutting that number in half, you’ll automatically be saving. When you do go out, opt for less expensive restaurants and maybe just have one glass of wine with dinner instead of two.

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 $25 and $50 dollars in one week! Over a month this could grow to between $100 and $200, and looking at a year, between $1,200 and $2,400! Suddenly that extra effort to make a sandwich the night before seems worth it, right?

Vacation? Try a stay-cation: While trying to save 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 renting movies or subscribing to an on-demand service instead of hitting the theatre. Can’t live without your Friday “Happy Hour” drinks? Why not buy a case of beer from your local liquor store 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 paid 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 these and a small chunk of your paycheque aside for savings. It doesn’t have to be a lot, every dollar counts! Any additional income that you may not be expecting (raise, birthday money, lottery winnings) should also be set aside.

Pay off your debt: It’s difficult to save money when you’re paying off debt, but it can be done. Begin by paying down the smallest balance you have owing, and once that is done, take the payment you could be paying and carry it over to any other debts you may have.

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! Why have it any other way!

Borrow from your RRSP: As a first time home buyer, you’re allowed to withdraw up to $25,000 from your RRSP to buy your first home. Though you should pay careful consideration to this option, it is available. Be sure to research this process, its rules and regulations before rushing into this.

At the end of the day, saving for your first home should be an exciting time for you. While some things are easier to cut back on than others, just think about how greatly your sacrifices now will impact your future.

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