Buying a home is a smart investment in your own future, and it’s an aim everyone should start with as early as possible. Nevertheless, in some cases, it does make sense to put off such an investment — such as when you are unsure of the future of your job, or your marriage, or when home values appear volatile. Saving to buy a home even when you live paycheck to paycheck is possible.
Most people who put off the decision to buy a home, though, have none of these reasons in mind. They simply choose to delay the day they buy, because they cannot figure out how they might ever put together enough each month for mortgage payments, leave alone a healthy mortgage deposit.
A recent YouGov poll of 2,000 British residents has found that one in three people around the country have so little savings, they couldn’t pay their rent if they were to not receive their paycheck a week late a given month. This isn’t to be taken to mean that they struggle in poverty.
One in four of those sampled made well over the median wage of £24,000 a year. An inability to save to buy a home, then, comes down not to lack of money, but to poor budgeting skills and inability to organize one’s spending decisions.
It is certainly possible for most people to save to buy a home. All they need to do is to put their mind to it and make a few basic, if painful changes to the way they see the money that passes through their bank accounts each month. They need to see that it is an essential resource, rather than a supply of fun.
Make a Plan and Work Backwards
In most cases, it doesn’t matter how little you make. You can be sure that you can save enough to buy a home. You need to find out what you need for a deposit on a mortgage (£8,000 on average with the government’s Help to Buy scheme), and aim to attain the savings target in three years. Approximately £250 a month should get you there.
The way to do it is to take £250 out of your income each month and sock it away in a savings account. You’ll surprise yourself how creative you can get making ends meet when you tell yourself that the money is off the table. If you aren’t sure how you might do this, there are tips below. You should also contact Entwistle Green or another reputable local real estate agent that you trust for inspiring stories on how wonderfully people manage to save to buy a home on incomes just like yours.
Work Every Angle To Save Money
While it may seem as if you will need to cut back on everything that you like to save £250 a month, you should first see what you can do with areas of big-ticket waste, credit cards, and utilities, for instance. If you are paying interest on your credit cards, find out if you can transfer the balance to a card that offers a lower rate, or find a way to pay it off immediately, even if it means taking all your savings out for a while, and putting it into the credit card. Savings vehicles cannot make a fraction of what credit cards charge.
It’s important, also, to maintain a credit card in constant use. It will help you build a strong credit history, which will in turn help you find favorable terms when you apply for your mortgage.
A large part of the British population is energy-poor, a term used to describe situations where people pay more than 10% of what they make for electric and gas. It’s possible to lower your energy bills if you carefully study how to be more energy-efficient.
Ideas like lowering your thermostat, turning off heating in rooms that are rarely used, getting an energy-efficient shower head for the shower, and blocking off all draught and other sources of energy waste can help you save hundreds each year. You can save money on your electric bill with just a few simple changes.
Save on Your Taxes
Plenty of people forget to take advantage of the many tax avoidance methods that the law grants them. From claiming expenses to making all savings in the name of the spouse earning less, there are many methods that can save you hundreds off the tax bill. Plenty of self-help articles tell you how to do it.
Be Careful with Healthcare Expenses
The NHS sells Prescription Prepayment Certificates that cost £104 year for one prescription a month. Getting one of these can help you save on expensive healthcare bills.
Budget When You Go Shopping
If you’ve always just gone to the supermarket and bought whatever you thought you needed, you should make a few changes. From groceries to big-ticket items you need to think about everything you buy. Planning every single purchase helps avoid wasteful buying decisions.
Hundreds of other ways to save to buy a home exist, including giving up television in favor of library books, running in the park instead of paying £50 a month for the gym, and walking or cycling at least part of the way to work. These steps, as simple as they seem, can save you hundreds. Before you know it, you will be well on your way to a large mortgage deposit.
Hudson Le Messurier works in financial planning and likes to share his tips on how to make your money stretch as far as possible. He writes for a number of consumer and lifestyle websites.