Financial Resolutions: Start Saving for Your First Home in 2020
The dream of owning a home is still very much alive for first time buyers. For 51% of Brits, it’s more important than travel, getting married or having children, and although nine in ten people still aspire to step onto the property ladder in the future, 42% have saved nothing towards a deposit. Fortunately, by starting the year off with a few healthy financial resolutions, 2020 could be the year to change that!
What’s Holding Us Back?
- A Poor Outlook: 60% of Renters think Owning a Home is Unattainable
According to the HOA Homeowner Survey for 2019, concerns among aspiring first time buyers are high. Key stats revealed that 91% of would-be first time buyers in the UK say they are struggling to get on the property ladder, 85% are struggling to save for a home deposit, and 82% say house prices are an obstacle to home ownership.
- The Deposit Battle: Daunting Savings Goals are a Deterrent
First time buyers in the UK aim to save an average deposit of £24,816 to buy their first home. To do this in four years, they’ll need to save £6,200 a year, or £517 every month. For many, this goal is unachievable and quite daunting, which means many people who want to buy a home simply haven’t taken any steps to begin saving.
- Overspending: December ‘Debt Hangovers’ Can Last Until May
One poll found that 16% of Brits (approximately 7.9 million people) start the year in debt and fall behind with their finances in January by spending too much over the festive period. There has been a rise in consumers putting Christmas presents on credit and in 2018, the average worker was expected to start the year with an average of £252 in post-holiday debt! In a recent look at our average disposable income, we also saw that the average UK household spends £300 more than they bring in.
The Good News: First Time Buyers are Making it Happen
The number of first time buyers reached a 12 year high in 2018, with a record number of people stepping onto the property ladder. Many used schemes like Help to Buy and Shared Ownership to make their dreams a reality, while others used the Bank of Mum and Dad to save for a deposit. In 2019 this trend continued, with the number of first time buyer mortgages increasing across all UK regions, including London.
This shows that while buying a home can seem daunting, it’s not an unattainable goal!
How Are Others Saving Money?
Saving money is a big trend in 2020, and 31% of Brits say its one of their top three New Year’s resolutions.
With that in mind, one study of renters looking to step onto the property ladder revealed that 18% have two jobs to save for a deposit, 33% have cut back on luxuries like magazines, flowers and Netflix, 30% take a packed lunch to work every day, and 18% shop in the reduced section of the supermarket.
If you’re looking to jump on the bandwagon and start saving too, here are a few ways to get started!
11 Financial Resolutions for the New Year
1. Tackle Your Debt
Before you can start saving properly, it’s important to clear your debts. Prioritise short-term debts, such as credit cards and short-term loans.
Tip: Switching to a 0% balance transfer credit card can freeze the monthly interest rate you pay, which will help you to pay off what you owe much faster.
2. Set a Budget
Before you start looking at homes, decide how much you can comfortably afford to spend. Calculate your total home costs (i.e. mortgage, property taxes and home insurance), to figure out how much you will need for a down payment.
3. Start Small
Fuss-free money-saving tricks are all the rage right now. Don’t be afraid to start small, and you’ll be surprised by how fast, small daily savings can add up.
- Save Up to £1,400 in a year: With the 365 Day Money Saving Challenge, you need to save £1 on a Monday, £2 on a Tuesday, £3 on a Wednesday, finally ending with £7 on a Sunday, enabling you to save £28 a week.
- Save up to £671 in a year: The 1p Savings Challenge is a more bite-sized way to save each day, requiring you to put 1p away on day one, and gradually build it up across the year, saving £0.01 on day one, £0.02 on day two, and working up to £1.51 on day 151 and £1.52 on day 152.
4. Save Big with Fewer Nights Out
According to research, the average person spends £69.64 on a night out, with Brits going out an average of 1.51 nights a week. This equates to almost 79 nights out a year and around £5,500. Spend less on going out this year, and you could save up to £5,500!
5. Start “Paying” Your Mortgage
In the months before you buy, start living as if you’re paying the mortgage on your new home. That means that in addition to paying your normal rent, you take the difference between your rent and calculated future mortgage payment, and deposit it into your savings account. This habit is a good way to get used to paying a mortgage – and it helps to build up savings towards your home.
If you opened a government Help to Buy ISA before 30 November 2019, you can also make tax-free savings towards your mortgage or deposit.
6. Cut Coffee and Save Hundreds of Pounds
Did you know that the average Brit drinks 676 cups of coffee a year, buying three drinks from a coffee shop every week on average (plus 10 cups of instant coffee a week)? This adds up to a total of £303 spent on coffee in a year! By skipping the weekly takeaway coffees, you could easily put away a couple of hundred into your savings by the end of 2020.
7. Get Serious About Saving
Most people pay all their bills and then wait until the end of the month to see how much money they have left over before putting it away in savings. This is a back-to-front way of going about it – most months, chances are there won’t be any left!
It can be tempting to dip into your savings account during tight months. To prevent this, try keeping your savings account at a different bank from your checking account. You can also set up an automatic transfer into your savings account on payday, to make sure that money goes away like it ought to.
8. Bring Your Own Bags
Retail outlets are charging more and more for shopping bags, to discourage waste. Paying just 15p for a shopping bag every time you pick up groceries adds up. Say you go shopping twice a week and buy four bags’ worth of groceries or goodies – that’s already £1.20 a week, which works out to nearly £5 every month. Bring along your own reusable shopping bags instead, and that’s around £60 in unnecessary yearly expenses cut out completely.
9. Home Cooking = Big Savings
The average British household is also spending a whopping £451 a year on takeaway meals – that’s roughly three meals a month. By cutting down on takeout and making it a special once-a-month treat, you can save yourself hundreds of pounds over the course of a year.
10. Commit to Cutting Costs
Not sure where to cut back? A good rule of thumb is to start by reducing your expenses by 10% across the board. It’s a small change that will add up to significant savings once you apply it to bills like groceries, utilities and luxuries.
11. Get Some High-Tech Help
There are some great money-saving apps on the market today, which can help you to make better choices when it comes to saving and spending. For example:
- Idealo and MySupermarket allow you to compare products before you shop, helping you to find the best deals.
- Voucher apps like Vouchercloud and Wowcher will help you to score some much-needed discounts at major UK outlets like ASDA, John Lewis and H&M, to name a few.
- Squirrel is a budgeting app that helps you to separate bill money from spending money, making it easier to manage your expenses throughout the month.
- Chip uses the data in your bank account to calculate how much money you can afford to save, and then automatically moves it to your savings stash.
More people are getting on the property ladder than ever before – the home ownership dream could become a reality for you! By committing to a few healthy financial changes, you can work towards the goal of saving for a home and get on the property ladder sooner than you might expect. Start searching for your dream property now.