You’ve been renting for a while now, but as the years go by, you notice that your payments are creeping up and this whole rental idea might not be working for you anymore. But you aren’t alone – in fact the Royal Institution of Chartered Surveyors predicted that rents in the UK will increase to just over 25% in the next four years. So, you decide to embark on that lifelong dream of owning your own place, only that now you’re wondering ‘how can I save up for a house while still renting a room?’ Here are a couple of tips that will help you move into that future cosy home.
1) Set a goal/budget
The first step in saving for a house is to set a goal by finding out how much money you need to spend on your home. These can include: knowing how much to pay for the deposit, stamp duty, building inspections and any other expenses that might come up. Once you have that figured out, begin to budget yourself by calculating how much you spend every month on essentials such as bills and rent. See how much money you can set aside each month and set a time frame for that goal to make it easier to stick to.
2) Open a savings account
It’s always a good idea to open a savings account specifically for your home so you can keep track of how much money you’ve saved and whether or not you are sticking to your monthly plans. Opening a savings account will also make it less tempting to take money from your house funds, and you’ll feel a lot more motivated to keep going. You can also look into opening a Help to Buy ISA account, which is available to first time buyers. Another good tip is to have an emergency fund, so in case of an accident, you won’t remove money from your home savings.
3) Cut back on the unnecessary
You see a nice jacket at a store and decide to buy it even though you have other jackets in your wardrobe at home. It’s not something you don’t need but want, so one way to really save is by cutting back on these items. Budget your daily expenses and see what you can cut back on or trade for a lower price. You know that cup of coffee you get from your local coffee shop every morning? Opt for buying an instant pack of coffee and make it at home or skip out on buying lunch and instead pack lunch from home. Even those cheap meal deals add up over time.
4) Lower your bills
Just like cutting back on unnecessary purchases, you can also cut back on your basic bills. See if your utility, phone or internet provider has any deals or negotiate with them to lower your costs. Even just a couple of pounds saved will help over time. If you’re unable to, then look around at different companies and compare their rates to find which ones will give you a better deal. Another good way to cut back on costs is to turn off any appliances you aren’t using. Unplug your TV or turn off any lights in rooms you aren’t using. Some appliances take up energy even on standby, so don’t forget to unplug those as well.
5) Rent somewhere else
Depending on where you are currently living and how much rent you pay, it may be of benefit for you to move to a cheaper flat or area. Living in a trendier neighbourhood or closer to the city centre usually means more rates, as well as a higher means of living. By moving further out or to a smaller property, you can save or budget that extra rent money into funding your future home. Of course, it’s good idea to factor in any transport expenses or money-related costs such as food and utility bills well in advance to see how much you’ll save in the long run.
6) Get a roommate
If moving someplace else is too difficult or inconvenient for you, then pick up a roommate. A roommate is a good way to split the costs of both rent and the bills, which means more money you can put into your home savings account. While getting a friend or significant other as a roomie is one way to go, you can also post your place up on Easyroommate to find more people also looking to save. Just make sure to check with your landlord in advance and negotiate the terms. Alternately, you can also find someone on Easyroommate within your area, so you don’t have to move too far but can still save for a house while renting.
7) Use cash not credit
Cash may be slower than credit and considered ‘the old-fashioned way’, but it’s a good method to see how your money is flowing. Drazen Prelec and Duncan Simester of the Sloan School of Management at MIT did a study that compared spending habits between paying by credit card and cash and found that subjects paid more when using credit. One reason is that credit cards make it easier to spend, while when paying with cash, there is a limit on how much you can spend. In addition, you are seeing how much you are spending. So, it’s better if you stop by the bank after work and stock up on cash rather than skip out and use your credit card.
Now that you know how to save, all that is left is to set your goals!