New Year’s Resolution: Save for a Down Payment on Your First Home

New Year’s resolutions - who keeps them? Almost no one. But that doesn’t mean you shouldn’t make one. Maybe if it were about something really important, then you’d be more likely to follow through? We’re not talking about going to the gym or swearing off mocha frappuccinos (although those would be good things to do), we’re thinking more along the lines of saving for a down payment on your first home.

So, say you decide that starting January 1, 2015, you’re going to start being more responsible with your money. How will you do it? See below for a few pointers to save enough money to make a down payment on your very first home:

The first thing you need to do is focus on paying off credit card debt (if you have any). It’s kind of difficult to save thousands of dollars when you’re in debt. If you have more than one credit card, as many do, start by paying off the credit card with the highest interest rate, then the second highest, and so on (and hopefully not on and on and on and on). Another thing you can do is contact your credit card company and ask if there is a plan with a lower interest rate. You’d be surprised how often there is an option for a lower interest rate but is never presented to you.

Get rid of your car. We know, we know, people don’t like to hear this one, but let’s be real; insurance, gas, and car payments are easily more expensive than a monthly metropass. Sitting in traffic and commuting for hours is a nightmare and has actually proven to be detrimental to your health. At least on the train you can get some work done or maybe some reading you’ve been meaning to get to.

Ask to move home. This is another one people don’t like to hear, especially if you’re over 25 years old. Odds are, rent for your downtown condo is your biggest monthly expense. Imagine cutting that from your expenses, and even if your parents end up charging you rent to move back, they’ll probably give you a break and not charge as much as your current landlord. Other expenses like hydro, cable, Internet, and groceries will also be either fully eliminated or significantly trimmed. Another option for those who don’t even consider moving home an option, is to downsize. There is always somewhere cheaper than the place you’re renting.

And many people in their 20s and 30s are burdened by heavy student loan debt. There's no shame in moving back if your parents will take you!

Set a goal. This all sounds scary doesn’t it? No car, living with the parents, staying in and playing video games because you don’t have enough cash to go out on the town with your friends. It’s like you’re a teenager again! Before you go turning your life upside down, decide on a realistic goal. Browse online for new homes, see what you can get for what amount, and then pick a monetary goal to hit. A down payment on a new home is usually 20%. First-time homebuyers have options to pay only 5% down, but it comes with insurance fees. Consult with your bank and/or Canada Mortgage and Housing Corporation to see what a realistic goal for you is.

Open a Tax-Free Savings Account (TFSA). While you’re at the bank setting goals and dreaming big, open a TFSA. This bank account is perfect for the money-saver with a lack of control. The number one benefit of a TFSA is that you don’t pay any income tax on the money in the account, and the second benefit is that you usually can’t withdraw the money at an ATM or even at a teller. To gain access to this money, you need to schedule a meeting with a financial adviser/bank representative and ask for the money. This prevents impulse buyers from dipping into the savings for that pair of jeans they can’t go without.

Borrow from your RRSP. This is another thing you should bring up while at the bank. First-time homebuyers are allowed to withdraw up to $25,000 from their RRSP to go towards the down payment of a new home. Here’s the catch: You have to pay it back within 15 years or else the money is treated as income and you get taxed on it.

NOTE: Depending on your employment and self control, saving for a down payment may be your New Year’s resolution for the next few years, but don’t give up! A home is one of the most popular investments in the world, and there’s a reason for that.  

Have a safe and happy holidays everyone! See you in the New Year!