Saving For A Down Payment Is Easier Than You Think
Fri, 15 Jan
What are your plans for this year? Is purchasing your first Edmonton Home or an Edmonton investment property part of your goals this year? Or, maybe it has been a goal for a long time and your struggling with how to figure out how to make it happen.
While it may not feel easy taking steps to make it possible it also doesn’t have to be difficult. In fact, as you go, you will be impressed with how small changes can make a big impact on your financial and life goals.
Step 1:
Know Where Your Money Is Going
We get it “budgeting” doesn’t sound sexy but having knowledge of where your money is going is an important first step. Often times we spend more money on things we don’t realize. Open up a spreadsheet and analysis where your money has gone these last three months. You will want to categorize them into a logical order. Are these essential? How often do they occur?
Step 2:
Figure Out Where You Can Cut Back On Your Expenses
Chances are after analyzing where your money is going, you may be surprised by how much your spending in certain categories. Start with finding smaller wins that will help you start saving right away and continue to adjust as you go.
For example, maybe you eat out (or in as it goes right now), perhaps you could shift this to 1-2 times per week. This would allow you to shift the difference in your spending habits from discretionary spending to your savings account. Even putting $100 in your savings account per month would add up to $1200 per year. While this won’t add up to a full down payment yet, it is a good start. Keep asking where you can continue to cut back in order to save.
Step 3:
Get Rid Of Debt
Warren Buffet was quoted saying “you can’t borrow money at 18 or 20 percent and come out ahead”. So true. What is even more true though, is the feeling you get once you have paid off all your debt. It is often easier to get in debt than out, but being (consumer) debt free is worth the effort.
The less debt you have means more buying power when it comes to purchasing a home. If you are in debt, determine a plan that works best for you in terms of your goals and take action.
Step 4:
Consider A Side Hustle
There are so many interesting ways you can earn extra money – more so than ever before thanks to technology. Short term, you could go through your current home and find things you don’t need. You could go the traditional route of a second job or look at options like Uber or Doordash to earn money on your time.
Best of all though is considering something your passionate about and see if you can transform it into a second gig. Who knows, maybe it goes so well it becomes your full time hustle.
Step 5:
Utilize The RRSP Home Buyer Program Or Your TFSA
Did you know that you can withdraw up to $35,000 ($70,000 per couple) from your RRSP for your first home purchase. Essentially, you are loaning yourself this money with the expectation that you will reimburse the equivalent of this money within a 15 year period. The other important item to note is it needs to be in the account for a minimum of 90 days prior to closing. The benefit of this, is that you save taxes now by investing in your RRSP. The house overtime will ideally increase in value thereby increasing your net worth overtime.
In contrast, a TFSA is more flexible, as it isn’t limited to retirement or buying a home. Your earnings on the principle amount are tax free, so if your investments perform well it gives you more money to access. Another distinctive difference from an RRSP is that your never obligated to pay it back, rather it just opens up the same amount as the principle withdrawn to reinvest the following year.
Both are great options as they can improve your buying power, increase your deposit and reduce the overall costs of purchasing a home.
These are just a few of the strategies to take to begin saving for a big, exciting purchase like your first Edmonton home.
Remember, small changes can result in long term awards.
Looking for information on buying or selling Edmonton Real Estate, connect with the TruHome Real Estate Team today.