How to save money for a house on a low income
One of the biggest spending you will make in your life is buying a house. It requires a lot of planning and a high level of discipline to be able to save money for a house especially on a low income.
As someone who has been able to save money for a mortgage deposit, I know how challenging it can be.
Here are some top tips for saving money for a house for people on a low income.
Increase your income
If you are on low income and want to save money as a deposit for a mortgage, I think the first thing to consider is opportunities to increase your income.
There are various ways to increase your income which include negotiating for a pay increase, start a side hustle, or consider freelancing work by exploiting your existing skills.
Consider investing your money
You can invest the little money you have. One of the safest ways to invest your money is to leverage the stock market. It is important to note that there is no guarantee that you will make money by simply investing in stock and shares.
Because you aim to save money for a house deposit, it is worth mentioning that how soon you want to buy a house should influence the type of asset you buy in the stock market.
The simple rule is this, if you want to buy a house in the next 5 years it good to invest your money in a low-risk Index Fund or ETF. If you are considering buying a house in the next 2 years instead, it is better to just look for a high yield savings account and put your money there.
Automate Your Savings and Investing
Whether you are considering investing in stock and shares or a high yield savings account, you must be consistent and discipline in putting money away regularly.
Most of the time we tell ourselves that we will do something and we end up not doing it. Relying only on willpower is a recipe for failure in achieving your goal of saving for a house deposit.
Something that will help you in meeting your savings goal is to leverage the power of automation.
This is how automation works when it comes to saving money;
You set an amount you want to put in your stock and share brokerage account or a savings account every month. The next step is to set up a standing order on your savings bank account which will send the money to the brokerage account or savings account every month you get paid.
Obviously, you should know the date of the month you get paid, so set a date after your payday. By doing this, you will not have to go through the process of manually sending money to your savings account every month.
Reduce your spending
Reducing spending doesn’t mean you compromise on your quality of life. To reduce spending means to cut down on unnecessary spending and purchases.
A typical example is a subscription you are paying for which you are not making use of. It might be a software subscription, it might be a gym, it could be a magazine or an app on your phone.
You just need to take some time to go through your bank account and credit card statements and look for things you subscribed for a long time ago that you no longer use but still pay for.
Use Government Incentives
The government comes up with various incentives from time to time. You can make use of government incentives to help you either save money on house purchases or meet mortgage affordability criteria.
One of the most common government incentives is the one where Government contributes a percentage of your mortgage deposit and in most cases, it is interest-free for a certain number of years.
For UK residents, as at the time of writing this article, one of the UK government’s incentives is an account called Lifetime ISA.
For every amount you deposit in that account, the UK government adds 20 percent for you. But the account is only available for people under 40 years. It is a way to boost your house purchase initial deposit.
Sell items you no longer need
It’s unbelievable the number of items we buy that we end up not using. There are two major benefits to selling items in your house you no longer need. The first benefit is that you can add the profit you make to your savings for a house deposit.
The second benefit is also important. This helps you to declutter your house and when the time comes for you to move house after buying a house you have fewer stuffs to carry with you.
There are now lots of platforms available where you can sell items you no longer need.
The most popular for used items is eBay. You can also try Amazon.
You can sell used clothes on the Vinted app.
Consider moving house
Your main aim of saving money is so you can buy a house and move house. Why not consider moving house now to reduce the cost of your current housing.
You can move to a cheaper house or apartment which by doing this you will save some money.
I know you are probably wondering, why should I move to a new house when I’m trying to buy one?
Think about it, it makes sense. To quickly meet up with your mortgage requirements, you can downgrade from your existing house.
By moving to a new house where your rent is less expensive, you easily get to save more for your dream house. This way you even get to acquire it faster.
It is only a temporary inconvenience not permanent.
If that is too extreme a solution for you, you can also rent out one of the rooms in your house.
Make use of discounts and cashback
Cashback has been around for a long time but there are still a lot of people who don’t know about cashback. There are various types of cashback you can make use of.
The best and most popular cashback is the cashback website. Cashback websites are available in many countries around the world.
I live in the UK and the two of the most popular cashback websites are TopCashback and Quidco. Some of the ones available in the US are ShopAtHome, Coupon Cactus, Ebates, BeFrugal, Extrabux, Swagbucks, and TopCashback.
Cashback websites are just middlemen between you and merchants. For example, if you want to buy a train ticket. Instead of buying the train ticket directly from Trainline or other train providers, you can buy via the cashback website.
By buying through the cashback website, you will get a percentage of the money you spend back. The percentage you get back might not be a lot but it all adds up when you consider the way people spend online these days.
You can get cashback on a lot of things you won’t think about.
I remember getting cashback on our Haven Perran Sand Holiday because I booked the holiday via a cashback website.
From insurance to everyday commodity and consumable items you buy online, you can get cashback.
Saving money for your dream house on a low income isn’t going to be easy but it is achievable. The easiest way to do this would be to find ways to increase your income. But if you are unable to do that, there are still several ways to cut back your spending and even patch your income.
We all want to be homeowners. The craze for home buying is even more in the UK and if this is the route you want to go, it is very achievable. Do not be discouraged by low income.