It can take several years of hard work to be able to afford your first home. Realistically, when the overall economic situation is challenging, it can take even longer. With that said, it is definitely still possible, especially if you use the right strategy. What’s more, the lessons you learn during this process can stand you in good stead throughout your life.
Start with a budget
Just about everything in finance starts with a budget. At a basic level, a budget is a way to ensure that you’re always clear about your outgoings and how you’re going to pay for them. A budget can, however, be used as a tool to manage your finances in a way that helps you achieve your goals.
For example, if you’re saving to buy a home, you need to decide how much you’re going to commit to that goal. The more you commit, the quicker you’ll achieve it. The price of that speed, however, is making sacrifices in the present. You need to decide, for yourself, how much of a sacrifice you’re able and willing to make.
Pay down any high-interest debt
Starting to save for a house when you’re carrying high-interest debt is like starting to run a marathon with a weight chained to your leg. The interest payments on your debt will almost certainly more than counterbalance anything you can earn on your savings or investments. This means that the sensible approach is generally to pay down your debt first and then start to save for a house.
Make sure you’re properly insured
This may seem like an odd tip but it’s an important one. If you’re working hard to save for your first home, you’ll be devastated if your savings have to go on an unexpected expense. Making sure that you’re properly insured will protect you against this.
Build a deposit
When you’re building a deposit, you need to choose between saving and investing (or a combination of both). Once you’ve made your decision you then need to find the right place or places to put your funds.
In the case of savings, the obvious choice might seem to be the Lifetime ISA (assuming that you qualify for one). Lifetime ISAs do certainly have their benefits. There are, however, rules around how you can use them.
It’s highly advisable to read up on the full details of these rules and consider their implications carefully. You also need to be clear on the fact that rules can (and do) change. This means you should make sure you’re always checking the rules that are in force when you take out a product. You should also stay alert to any changes that might affect you.
By contrast, in the case of investments, using a Stocks and Shares ISA is almost always the right way to go if you can.
Improve your financial situation
There are basically only two ways to improve your financial situation. One is to grow your income and the other is to reduce your outgoings. Ideally, you should try to do both.
With that said, in the real world, there is usually a limit on how much you can reduce your expenses. In theory, there is no limit on how far you can increase your income.
Admittedly, in reality, there is likely to be a cap on how much you can actually earn. The key point to take away, however, is that you should always be on the lookout for ways to bring in more money.
Keep an eye on government schemes
As you get closer to being able to buy your first home, look out for government schemes that could help to push you along the final step. There isn’t necessarily a lot (if anything) to gain from looking at these earlier on. Assistance schemes can and do change. That means the schemes available when you start saving may have been replaced by the time you are getting ready to buy.
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