Getting the Keys to Your First Home: For much of the mid-late 20th century in Britain, this was a normal and affordable rite of passage for most young people. Today? It’s a whole different story.
Now, you can’t even mention the words “saving for your first home” without sparking a heated political debate. Can young people really afford deposits without the help of their parents? Does our obsession with home ownership exacerbate inequality? Homeownership, and the widespread drive to achieve it, is the Frankenstein who spawned a monster in the form of sloppy building codes and cowboy companies who made tinder boxes for residential buildings across the country?
These are all valid questions. It was not always good to get young people to own property at any cost. In some cases it was disastrous.
The government’s equity purchase loan program has given home builders the ability to build substandard, often dangerous, buildings with the lowest possible profit margins and then sell them for a premium. The program locks young buyers into expensive loans for homes that, frankly, are not worth the candle. But of course, helping young people buy is an election winner – few will study the crappy fine print, right?
The home-saving debate has also been invaded by the phrase “avocado brunch,” and only recently have we escaped the terrible cliché grip. It is now widely accepted that talking about such luxuries is not helpful at best, worse, demeaning. Many young people struggling to pay their rent and living expenses rightly have trouble getting painted as immaculate high rollers.
Even so, I fear that we’ve gone too far in the opposite direction and that we risk discouraging many young people from saving for their first home and making a solid investment in their future. The pandemic has shown that tenants are significantly worse off than homeowners in terms of both quality of life and financial rights. I have not yet seen any evidence that a rent-centric economy would represent an improvement on the current status quo and could have different, but equally dire, unintended consequences. While that is the case, we must face the significant advantages that home ownership still has over renting – albeit with a few important caveats.
First, aspiring home buyers shouldn’t stretch their budgets too far with small deposits and large loans: they need to save as much as possible. Second, they should avoid systems with tricky fine print and liability like Help to Buy. Finally, remember the classic principles of buying a home, from finding the right location to striving for a versatile home that can grow with you.
Aspiring buyers also need solid practical advice on how to further grow their savings. Look no further! Here are 4 ways you can save more for your first home. Most of these tips will also work when you’re trying to invest more money.
1) Get on the LISA train
First, if you really make a commitment to saving for your first home, I would try to save at least £ 4,000 a year first because then the government will give you the maximum free money – £ 1,000 a year – if you’re stuck that in a cash Lifetime Isa.
You can open one when you’re under 40, and you can’t just use it on properties that are under the Help to Buy equity loan. It covers all properties on the open market as long as they cost less than £ 450,000. The bonus is also paid out monthly so your deposit is applied when you save. Of course, if you can and probably should be able to save more if you really want to build that deposit up faster, try to transfer the additional amount to a savings account that pays the highest possible interest rate.
2) Split up what you want to save
You need to do your homework and not just at average prices in the area you plan to buy. You need to find out if your income and credit rating make you eligible for a mortgage. Using an app like First Home Coach can help you figure out what aspects of your credit profile to work on and what type of mortgages you might have access to.
If you want to get the most out of LISA, split up what you want to save. Realistically, you’re looking at £ 333 a month (minimum), or around £ 83 a week. If it sounds like too much, reduce the weekly or monthly total and lengthen your schedule. You have to face the tradeoff between time and money – the more you save, the faster you will achieve your goal.
3) Do easy kills
The decision to give up important goodies right away is a recipe for failure. The key to making a sustainable lifestyle change that can save you money is to make it as easy as possible. So you could decide to stick with an important lifestyle change that you were forced to make during the lockdown that saved you a good chunk of the money – pick the one that you least missed.
I noticed that pre-lockdown beauty treatments were actually an expensive placebo. I bought them because I thought they would make me feel better mentally, but now that I realize they don’t make a huge difference to my hair and skin, I’ll happily drop them when we’re back to normal, and just spend my money on things that really make a difference (although the truth is, most beauty aids don’t cost anything: sleeping well, eating nutritious food, and exercising will do a lot of hard work!)
4) Revise your online purchase
If you have the habit of spending online when you are bored or need a pick-me-up, get out of that passive mentality and create a little “spending book” instead. During your lifetime, make a list of the things you need / want and write them down in the book. If it’s not in the book, don’t buy it.
Then plan the shopping time and try to actively look around to find the item at the best price. Keep the shopping window to only 1 hour a week, max prioritize practical basics that you can really get started with, but indulge in a few little things that will help keep morale high.
5) Remove the bad influences
Anyone who’s tried to overhaul their diet will know that keeping a cookie jar around the house is consuming valuable willpower that is inevitably going to crack. It’s better just not to buy these items and keep them around the house – then you don’t even have to think about resisting the cookie jar.
Well, it’s the same when you save up for your first home. Shopping apps are the financial equivalent of the cookie jar. Just don’t have them on your phone and they won’t seduce you. Delete shopping apps and follow brands, stores, and promotional influencers on Instagram: these make it really hard for you to resist passive purchases that soak up your savings when you’re in a bad mood.
6) Bring your life back into balance
Set up your whole life to be geared towards less spending and more towards low-maintenance hobbies and interests. That sounds boring AF. But the truth is that during lockdown, most of us realized how much joy and importance it brings us to talking to friends, engaging in an exciting hobby, reading, being creative, doing simple exercises like running or yoga and just spend time outdoors. Structure your life so that you will spend as much on it as you can.
7) Keep track of your savings goal ANYWHERE
Never lose sight of why you are doing this – in the truest sense of the word. Have a beautiful front door on your phone’s lock screen. Create a mood board on Pinterest. If you’re using a “money-saving pot” to round off your change from your purchase through an app like Monzo or Starling, name that pot “My Amazing First Home” or whatever title resonates with you.
There will be times when you may be tempted to give up or spend your savings: keep visual and written reminders everywhere of why you are saving for your first home, and what it means to you when you finally get what you want.