April 17, 2020
Buying your first house is a major milestone no matter what age you are. But as you probably know, its no easy feat. Unless you're already well-off to begin with, or your parents have gifted you with a substantial amount of money, buying your first house will require a lot of saving on your end.
While it may seem difficult, it isn't impossible! You'll just need to know where to adjust and where to cut corners in order to save up enough money to purchase your dream home.
If you already have your eyes set on, congratulations! You're already halfway there. Here are some easy ways to ensure you reach the finish line and score the house of your dreams.
1. Determine how much you need to save
Before you figure out how to save money, you need to first set a target. That is, you need to know how much money you need to save all in all. Most first time homeowners set the down payment of their dream home as their initial target.
A down payment is the initial payment you make when you buy something, such as your house. While there is a fixed rate for down payments, it usually falls between 5 to 20 percent. Let's say the home you intend to buy is asking for a 20 percent as an initial down payment, we recommend saving for at least 30
percent of the home's total value. This way, you'll have enough money saved for the down payment (20 percent) and have 10 percent extra in case there are hidden charges such as closing fees or title-related fees.
2. Create a separate bank account for your new house fund
Once you've determined how much you have to save, it's a good idea to create a separate bank account specifically for your "house fund". This is so you won't be tempted to touch the money or you won't accidentally withdraw from or spend from this account. Another reason to do this is so you can see exactly how much money you have. This way, you'll be able to "fill up" your account until you reach your goal amount.
3. Save those windfalls
You may not have heard of the term windfall but we're sure you've experienced it at least once in your life. A windfall is a large, often unexpected, financial gain, such as a Christmas bonus, an inheritance, gift from your parents, or even a winning lotto combination.
It may be tempting to use windfalls on a much-needed getaway to Coron or on a shopping spree, but resist the temptation and deposit the money, instead, into your house fund.
4. Use cash as often as you can
If you're already using cash as often as you can, good for you! Studies show that people who use credit cards are more likely to spend more money than people who use cash. This is because credit cards are more convenient to use, especially when you don't have cash on hand, making it easy to spend on impulse purchases.
By using only cash, you get to actually and physically see and feel how much money you spend on a daily basis. You all see how much money is left inside your wallet, so you know when you have the capacity to spend or not.
Another reason to use cash is it takes more time to withdraw from the ATM than it does to pull out your credit card from your wallet. The added time it takes to withdraw money is usually enough to turn people off from spending on unnecessary items.
5. Track all of your expenses
Tracking all of your expenses is a good way to control your finances. It helps you see where your money goes every month, where you should save, and what you can cut out. By tracking your expenses, you can categorize your expenses into "needs" and "wants".
There are two main ways to track your expenses. Some people find writing down their expenses in a notebook works best for them, while others prefers monitoring it through an app on their phone. Do what works best for you and stick with it. You'll be surprised by how much you spend at the end of each month.
6. Reduce your daily luxuries
You may be thinking to yourself "what luxuries? I live as simply as I can!" Think about it, though. There are several little luxuries you can easily cut out of your life. Those daily coffee runs that cost P110 can add up to P550 every week (not counting weekends). That's already P26,400 a year! Other little luxuries you can temporarily say goodbye to include meal delivery plans, Grab rides, manicures, eating out, Netflix or Spotify (or both!), your gym membership, and weekly Friday nights out. Saving for your dream home will require a little bit of sacrifice but we promise you it's worth it!
There you have, six simple and achievable things you can do to make sure you save enough money for your first house. It may seem overwhelming at first but it's important to remember that little steps are better than no steps at all. Just keep making small changes and before you know it, you'll have enough money saved up for your first home.