HOW MILLENIALS CAN SAVE TO BUY THEIR FIRST HOME
Millennials (those in their 30s and under) have been biding their time, slowly progressing in their career, paying off student debt and building up savings (hopefully) as they wait for an opportunity to enter the property market. The current financial crisis in which we find ourselves presents this age group with the perfect opportunity to find their dream home at a price they can finally afford.
Although it might be impossible for some to think about entering the market at this stage, for others it could be a matter of having the discipline to make certain sacrifices and set aside money so that they can take advantage of the current market conditions.
For the majority of Millennials, the biggest hurdle to overcome is getting together the money for the deposit. Below are a few ways they can save to purchase their first home.
Set smaller goals
The best way to accomplish big goals is by starting small and remaining consistent. While the thought of saving an amount as large as R100,000 (*for illustrative purposes, we’re assuming a 10% deposit on a R1 million home) may seem like a massive task, it can be achieved by breaking the amount down into smaller, more manageable goals. The key is to get started and remain consistent, putting money away every month.
Save the difference between current rent & future bond repayments
The best way to set a monthly savings goal is to find the difference between your current rental payment and the estimated bond repayment. The amount should include other monthly costs such as bond insurance, homeowner insurance, rates and levies. If possible, the difference should be set aside as savings. The benefits of this strategy are twofold. Firstly, it will build up your savings, and secondly, it will help you to adjust to the anticipated cost of owning a property.
Using this method of savings will also provide you with some insight into whether you are financially ready to own a property and what you can afford. If you can meet the savings goal consistently, then you know you are in a position to purchase a property within that budget. If you are struggling to meet the monthly savings goals, you might need to adjust your housing budget and bring it in line with what you can realistically afford.
Create visual reminders for motivation
A visual dream board with a picture of the type of house you want will help to keep you motivated and on track. It is important to be reminded of why you are doing without certain things and putting away savings. A dream board will be a daily reminder of the end goal.
Where to finding the savings
The first place to look for savings is the property you are renting. If the rental is more than 30% of your monthly income, then it is too much. While it might mean scaling back, consider moving to a more affordable rental property. It doesn’t make sense to spend more money on a rental home if it is holding you back from owning property.
Finding more savings will require you to assess your current spending and scrutinise every expense. Money can be saved by making a packed lunch every day instead of eating out. Other ways of saving include cancelling that gym contract and finding ways to exercise for free or travelling to and from work in a lift club. There are numerous ways to cut back on spending – it just takes some creativity.
Don’t rush – wait until you’re ready
There is the concern that while you are building up savings, rising home prices will make it more and more difficult to get onto the property ladder. While there is merit to the concern, it is best not to rush into buying property until you are completely ready. Even if it means paying a slightly higher price, it is best to have a solid financial foundation and be confident that you can make the commitment that homeownership requires. If you are ready to purchase, speak to one of our property advisors, or start searching for homes today.