Saving for your first home can be a bit overwhelming – especially when you may not exactly be sure where to start. The good news is, there are several great ways you can start saving your money right now for a home. We have compiled a few of the best ways you can start out on the right foot. While we are focusing on homes, these tips can be used to save money for almost any large purchase – a car, vacation, paying off debt, or simply putting away some money for retirement. You may find that once you have achieved your first major financial goal, these strategies will also help achieve other financial goals as well. As the saying goes, a little motivation goes a long way! Here are our tips:
Pay off credit card and other debt first
Money you pay in interest is money you can’t spend or save. Which is why the first thing you should conquer is trying to reduce your debt load. An easy rule of thumb is to start off with your smallest high-interest debt, and pay that off. Once you pay off the first debt, take the minimum payment from that debt and use it to help you pay off the next smallest debt that has the highest interest rate. Continue this strategy until you’ve paid off all your debts in their entirety. You will notice a snowball effect as the minimum payments you are freeing up help you to make larger and larger payments against one debt at a time.
Prioritize and look for cheaper alternatives
It’s important to remember that saving for a large purchase, like a home, is all about making sacrifices and prioritizing where your money goes. Do you use UberEats all the time, buy the latest Apple products, or like to purchase designer clothing? It is up to you to make the decision of what is more important to you. You’ll likely have to tighten your purse strings in order to save for a home. If saving for a home is a top priority, try to identify areas where you can cut back on so that you can spend less and put more money into your savings. Perhaps you can start by looking for cheaper alternatives to curb your spending (e.g., try eating making more homecooked meals or sticking to your current wardrobe for a little longer than you normally would).
Take advantage of a tax-free savings account
Opening up a TFSA is a great way to start saving down payment money. Opening up a TFSA is an option for those interested in growing their money tax free. This means you will not have to pay income tax on the money you earn in this account. If this is a strategy you would be interested in investing in, consult with a financial advisor to learn about your options. If you have regular income, you might do better putting money an RRSP. Saving for a down payment is an important goal for many North Americans. But it has proven to be quite a difficult task for many. If you feel stuck at any point, reach out to a professional advisor or credit counsellor to review your finances with you in detail and help you make a plan to reach your goal.