Everyone dreams of owning their own house someday. However, most people failed at saving up the hefty down payment that come with home buying.

Though there are options out there for the middle to lower income groups to get a house without paying a huge upfront amount, such as PR1MA, most of us who are not qualified or are looking for other locations, would still need to fork out an additional initial payment to fund for the house down payment and theadditional costs that comes with it.

Some of you may opt to withdraw from your Employees Provident Fund (EPF) Account 2 to fund your house down payment, but EPF is part of your retirement savings and best kept for that. Why withdraw when you can save your way to afford that down payment?

For example, a property selling at RM400,000 with 90% loan comes with a down payment of RM40,000 (10%) and an additional of about RM20,000 in fees and charges. This would approximately come up to an initial payment of RM60,000 in cash.

It may seem overwhelming to save up that much, but by drawing a strict and realistic savings plan for this purpose, you will be able to afford your first home in no time.

Before you start, find out how much you will need based on the type of the property you would require. Then, take a look into how and where you can save:

1. Save first before you spend

Typically, we convert whatever balance we have at the end of the month into savings, if any. This is a wrong misconception that most of us have in terms of saving. The right way to save is to set money aside as savings, for example, 30% of salary goes into saving every month. This will help set a consistent saving routine each month.

The balance of 70% should be managed wisely, and you will be surprised how much unnecessary expenses you can do without when you have a clear budget.

2. Create a budget and stick to it

Create a budget by listing down your monthly expenses. Start by deducting the 30% for savings, then make changes to your monthly budget to avoid overspending. This will help identify how much you spend and what you spent on previously.

With a clear budget, you can cut down on unnecessary expenditures by limiting your spending to what you need, instead of what you want. Schedule your reward time for exclusive food, cinema or clothing only once a month, with a cap in mind.

3. Look out for affordable alternatives

With lesser money to spend, you really need to know where every sen is going. If you find that you are unable to continue with your current lifestyle with just 70% of your income, here are a few things you can substitute for cheaper options:

• Replacing your gym membership and opt to work out at home or jog around the neighbourhood. You can easily save at least RM150 a month, and that’s RM1,800 a year!
• Omitting or minimising your satellite TV subscription for free online alternatives such as YouTube. Even by cancelling the cheapest package available, you are saving at least RM52 a month, amounting to RM624 a year!
• When you go to work, you can bring food from home. Not only does it save money, it is also healthier. Assuming you spend RM6 a day for lunch for 20 days a month, you are saving at least RM1,400 a year.
• If you buy organic goods, be selective and only buy organic for food that you will consume with the skin or those without skin, such as apple and leafy vegetables.
• Substitute that club party for a mamak session or a good old-fashioned house gathering. Cover charges for a popular club in town can easily cost RM50 per person, with limited drinks included. By substituting that with teh tarik at your neighbourhood mamak, you can save at least RM45 every time you say no to a club party.

For everything that seems like a necessity, there is always a cheaper alternative out there. It just takes a bit of changes and hard work to sniff out the best deal!

4. Create a separate savings account

By having a separate savings account (go without an ATM or debit card for the account if you are struggling to keep yourself disciplined), you won’t run the risk of over withdrawing from your account. This should be separate from the account used for your expenses and income.

At the beginning of every month, transfer the set preliminary portion of savings (recommended at 30%) into this separate savings account. Using this method, you can keep track on how you are spending and saving.

5. Pay on time

Pay your bills (e.g. credit cards) on time so you do not waste money paying extra interest or penalty for late payment. To avoid from forgetting your payment due date, arrange for a standing instruction on your bills or put a reminder on your calendar.

6. Take advantage of tax exemptions relief

By making an effort to understand the tax relief and rebates when you are filing for your income tax each year, you can drastically reduce your taxable income and pay less taxes.

Once you have kick started the saving habit, see where you can invest your savings to generate more money or how you add on to your current savings.

You can even time your spending on certain tax deductible items to maximise your tax reliefs!

7. Turn your hobby, skill, time and even junks into Ringgit

If you think what you are earning currently is insufficient to save for the down payment, try to earn more! You can exchange the service of your knowledge, skills or hobbies for money on a freelance basis or during the weekends.

• If you can write, offer your services to the local newspaper, magazines, travel websites, or online websites.  You can visit these websites asiaparttime.com, you.my or parttimepost.com for freelance writing and other freelance jobs such as programming and marketing.
• If you are good at art such as painting and creating craft souvenirs, you can make them and sell it to your family and friends or sell them over Facebook, eBay.my, Lelong.my, or Mudah.my.
• If you are good at a particular subject and can teach, consider tutoring school students from the comfort of your home, their home or at a tuition centre.
• You can also bake cakes and cookies and sell them to your family, friends and neighbours. This can be a particularly good business during festive seasons like Chinese New Year, Hari Raya, Deepavali and Christmas.
• You can also turn your junk into money that can be contributed towards your savings for the down payment. For example, Chai & Chai Trading, Secondhand.my, Cash Converters (situated at PJS 8 and Taman Megah) and Buy Sell Trade (situated at SS15) gives you the privilege to exchange your used items (e.g. furniture, office equipment, electronic products, etc.) for cash.

8. Allow your money to make more money

Instead of putting your savings in a savings account, put it in high-yield fixed deposits, bonds, Amanah Sahamor unit trusts. These investments will bear returns which can be reinvested to earn more returns on our investments.

Every now and then, our local banks do run fixed deposit promotions by offering significantly higher interests than conventional fixed deposit (FD) accounts. Look out for these promos to take advantage of the high interest rates offered. For example, in conjunction with Hari Merdeka 2014, Ambank is offering a promotional rate for FD up to 3.70% for nine months for Term-Deposit-i and Am50Plus Term Deposit-I while 57 winners have the chance to win promotional FD rate of 8.31% per annum. This promotions lasts until September 19, 2014.

Once you figured out how you can save and invest your savings to generate returns, you need to be motivated and disciplined to keep going until you achieve your goal.

9. Race to the finish line

Have a healthy competition with your spouse, partner or friends to see who can save more at the end of each month. Have a target and see who can reach the target first. To make it more interesting, set a reward or punishment at the end.

When there is a competition, there will be motivation to perform better.

10. Reward to motivate yourself

You can plan to have scheduled rewards such as rewarding yourself with a nice dinner when you reach the first RM5,000. Create milestones and rewards (that won’t break your bank) to keep yourself motivated.

With a proper plan and timeline set up, you can easily visualise the end, which will keep you disciplined and motivated. By saving RM2,000 per month, you can save up RM60,000 in 2½ years.

Although being able to own a home can sound exciting, it can be intimidating when the need for larger finances kick in. It should be a well-planned process and you need to develop an effective down payment plan by considering the precautions and weighing your options

This article comes courtesy of www.imoney.my which compares between the various loans, savings and insurance schemes available in Malaysia.