5 Tips to Save for a Down Payment
Thursday Jun 14th, 2018
When speaking with potential first time home buyers, the biggest hurdle they tend to face is coming up with the down payment. That's why we reached out to Frank Gasper of CSR Wealth Management for some easy, actionable ways to save up. Here are Frank's top 5 tips:
These are five simple things to think about. A little planning goes a long way when it comes to saving money. I have rarely seen someone fail when they plan. Failure to plan is a surefire way to a lack of success. Attaining clearly defined goals is a process. Getting some help creating that process is extremely important, I can help you with that. At CSR Wealth Management, Good Advice is Always in Season. Reach us at LetUsHelp@csrwealth.ca
- Break down your annual savings goal
Divide the amount you want to save by 12, so if $10,000/12 = $867 per month. This gives you a target and an amount to see where and if you can cut expenses. Also we tend to look at monthly budgets and expenses, but, if weekly or bi-weekly works for you, just divide accordingly.
- Pay yourself first
This is a common mistake people make. By not doing this, we tend to save what is left, usually finding out that we are lacking. Saving often means at least a bit of sacrifice so by swiping $867/month out of the budget, you quickly find out where you are spending those extra $$$.
- Reduce frivolous spending
Areas of spending that are easy to target and you don’t get much BANG for your buck. Coffee shops can easily eat up thousands of dollars per year. For example, say 1 cup of coffee at $1.70/day for 20 working days out of a month. This is $34. The goal of every coffee shop is to get you to buy more than a coffee. Slowly we tend to cave into the expert marketing and buy more and more including breakfasts and even using our favourite coffee shop multiple times per day and including weekends. So let’s say we save at least $100 in this area.
- Cut back on restaurants
If all we do is reduce this expense, we win! This is becoming a biggie as people are going out more and the foodie industry is certainly growing. My take on this – quality is the way to go. So no more McD’s of Burger joints with fries and pop etc. Preparation is key here. Enlist the assistance of family to ensure a full week of meal planning. There are likely apps for this as well as grocery lists. Online cooking and recipes are available. I can comfortably say that most families could save $500 - $800/month on this. Each dinner out can easily cost $100, even smaller visits to fast food can easily add up at $25 a shot.
- Take advantage of CRA programs
An RRSP will provide some tax relief, mostly in the neighbourhood of 30%. So if you earn $50,000, by putting $10,000 into an RRSP, CRA looks the other way and leaves $3000 in your pocket (these are rounded numbers – talk to your accountant for exact calculations as every taxpayer is different). If you plan ahead for this – your employer will have you fill out a form to reduce your source deductions so you can place the $$ directly into your RRSP – again, pay yourself first. If you are saving for something in particular like a house or a car or a retirement, this method will help to avoid the temptation of looking at the travel brochures when you would normally be getting a big tax return. By systematically putting the extra tax money away monthly, you will not have a big tax return, but a big RRSP which may have actually grown if wisely invested.