Buying a home, coming up with a home deposit, is one of the most important things you will do in your adult life. Buying a home is a vote for security and comfort, and an essential life milestone for the building of a family. But purchasing a home has become difficult for the average person, owing to rising costs across the board. The housing market was hard enough already but now it seems almost near impossible to purchase your first home.
The cost-of-living crisis has had many negative impacts and has generally made it harder for people to save money. With deposit money for a first home being a not-insignificant amount, saving becomes imperative. So, what can a first-time buyer do to save up enough money for a house, while also navigating a once-in-a-generation cost-of-living crisis?
Home deposit: Evaluate your finances
The very first step, as with any major financial undertaking or decision-making, should be to take stock of your current financial situation. How much do you bring in each month, and how much of that is promised to outgoings like utilities and groceries? Is your income stable, and will it continue at the same rate for the foreseeable future? Do you have any debts? As a matter of priority, debts should be paid before any attempts to save are made, so as to eliminate the possibility of debt interest eating into your saving.
Set yourself budgets if you need to, especially if you find that you are overspending on a certain thing like eating out or travel. You don’t need to cut out everything that brings you joy, but consider doing it in moderation so you can save a little more each month.
Start saving money
Once you know your financial standing, you can start to make shrewd and informed decisions about saving money. You will need separate savings account to hold your money, of course; ISAs are a solid option on account of their typically-high rates of interest, but also offer tax exemption where interest received exceeds your Personal Allowance.
There are certain ISAs and accounts that are dedicated to purchasing your first home and it’s important to check these out and see which one would fit your financial needs. With a dedicated savings account, you can set up a monthly direct debit to automate your savings process. By dedicating a pre-set amount of your income each month to your savings, you remove barriers and guesswork from the equation altogether.
Start off small and slowly, build yourself up to saving more each month. Setting yourself a goal can help with motivation. To avoid temptation, keep your savings for a house deposit separate.
Change your spending habits
If you are particularly keen to get on the property ladder in the short or medium term, then you will want to create as much additional savings as possible. This means engaging with your existing outgoings and looking for ways to bring them down in order to expand your disposable income.
You might start with subscriptions, whether to media packages like Netflix or to institutions like gyms and climbing centres. The myth that Netflix is a key factor in house affordability for Millennials is well-heeled and obviously incorrect, but every little helps.
You might also seek to change where you shop for regular and essential items. Budget supermarkets like Aldi and Lidl often outperform other major supermarkets on cost, with no noticeable dip in quality. This can make a major difference over time. But you shouldn’t feel so hemmed-in as to eliminate luxuries altogether. With some shrewd saving in some places, treats can absolutely be justified – particularly where discount codes are deployed.
It’s OK if it takes time
You are not falling behind, and you are not failing because you haven’t purchased your first home yet. It’s a huge feat trying to save a large sum of money and oftentimes, things just don’t work out the way you want it to. But that doesn’t mean that eventually, it won’t work out. Don’t compare yourself to others, you are on your own journey.
Keep a close eye on the current housing market and sign up for regular updates to find out what’s happening with the interest rates. Staying informed means you can stay on top of it all and you can make a better decision when to purchase a property.
Remember that affordability matters in the long run. Starting small on your savings can have a huge impact.