Thursday 9 May 2019

Budgeting for Your First Family Home

When you were a kid, your parents might have owned your house. Chances are, most of your friends' parents and family members also owned their own homes, either with or without a mortgage. Renting was something for students and other young people, as a means to an end. A situation that would soon be resolved with the purchase of a family home.

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You might have imagined that your life would go the same way. You’d leave school, at whatever age and at some point down the line you’d buy a house. You’d certainly never have to rent when you were married with children.

But, for many of us, it’s turned out quite differently. The average age of first-time buyers in the UK is heading towards 40, with many people much older when they finally purchase a home. This means that many families are renting.

There are many reasons for this. Firstly, the cost of housing. Houses are more expensive now than they have ever been before, and for a time house prices were rising at higher levels than inflation, or wages, making it almost impossible to save enough to buy. Since the financial crash, banks have also been much more reluctant when it comes to lending. People with debt, the self-employed, single people and those with low income, as well as people that have been job hopping or those with dependants have had a hard time borrowing money for a mortgage without a large deposit. Then, there’s the issue of rent. In big cities and popular rural locations, renting is more expensive than it’s ever been. Rent is often inflated, so that it’s not in line with the value of the house, as landlords look for ways to make money despite the rising costs of insurance and tax.

Of course, there are benefits to renting, and many families decide that it’s right for them. It gives you flexibility and freedom and means that you never need to worry about expensive home repairs or updates. But, it also means that you have a lack of security, you can never truly settle or make a home your own, and that you are always at the mercy of someone else. It also means that you’ll always be shelling out large amounts of money on rent. A mortgage, you will eventually pay off, rent just keeps on coming and rising. While this might not be a problem now, it can cause issues when it’s time to start thinking about retirement, or you need to save.

So, it’s easy to see why most families are desperate to buy a home. They look at an affordable apartment for sale, scout areas and dream of settling down. They look forward to being able to decorate and to make a true home for their families. But, how are you meant to save for it, when you are spending all of your money on rent, and you’re children? Let’s take a look at some of the ways that you can budget for your first family home, and some tips to help you get there.

Have Realistic Aspirations

We’ve all been online and looked at million-pound homes. We’ve scrolled through pictures of houses that we’ll never be able to afford and thought longingly of the lives that we could have. There’s absolutely nothing wrong with this, as long as you keep yourself grounded, and know what you can afford.

Think about your income and outgoings, and look at some mortgage calculators to see how much you are likely to be allowed to borrow. If you can borrow £150000, you’d need to be able to save £50000 plus fees to be able to afford a £200000 house. So, make sure you are also looking at homes that you are likely to be able to afford. It can be worth setting up filters, so that you only see houses within your budget, to avoid disappointment.

Don’t underestimate those fees either. Many people assume that once you’ve got a deposit the hard work is done. But, with surveys, conveyancing, valuations, mortgage arrangement fees, stamp duty, local searches, and other legal fees, it could end up costing you thousands on top of the cost of your home. Do detailed research on the charges in your area, and make sure you add these to your savings plan.

Create A Family Budget

The best way to save is with a budget. But, it’s important that you keep things simple. Over complicating your family budget will just confuse things and make it much harder to stick to. Set up a basic spreadsheet and enter all of your income and outgoings. Making sure to look back over your payslips, bank statements and receipt from the last few months so that you can be sure that you are including everything.

Use this budget to work out how much you can afford to save today. Based on previous months income and outgoings. With some cutbacks and carefully planning, you could save more, so this is the absolute minimum.

Make Cutbacks

Have you ever checked your bank balance only to think “where has my money gone?”. You’re not alone. Most of us have at some point spent all our money without really understanding where and how.

Your household budget will help you to see where your money goes. It makes it easier to spot patterns of spending and unhealthy financial habits. It makes it easier to know where you can make cutbacks. Are there any contracts that could be cancelled or reduced? Are you spending more than you should on things that you don’t need? Could you reduce your food bill? Or spend less on eating out and takeaways?

Then, think about your utilities. Check out swapping sites to see if you could save money on any of your essential bills. Do this every year, and never assume that your deal is the best just because it was 12 months ago.

Use Technology

Technology can be a powerful tool when it comes to saving money. Your spreadsheet is a great start, but it’s not the only way to use tech to manage your money and increase your savings potential. Online banking is a fantastic way to simplify your finances if you’re not already doing it. There are apps that can help you to save by moving money when you can afford it or rounding up your purchases and saving the extras, and other apps can help you to track your cash and manage your money.

Remind Yourself of Why You are Saving

Saving can be tough. Some nights, you’ll really want that meal out or a more expensive bottle of wine. Your kids will have tantrums about not having the best games, or things that their friends have got and you’ll all miss summer holidays. But, there’s no quick way to save for a house. It’s going to take time, but the more that you can save, and the greater your commitment, the faster you will be in your family home and life can go back to normal.

When you start to feel down, remind yourself of why you are saving. Look at houses for sale and remember what you want for your family and think about the benefits of owning a home. It might help to write down your goal, and a running track of how much you’ve got left to save, to keep you going on the tough days.

Find Other Ways to Treat Yourself

We all need treats to boost our mood. But, that doesn’t mean that we need to spend money. Find a good book in your local library and spend an hour reading on your own, enjoying the peace. Start having family board game nights, or spend time cooking romantic meals for your partner. There are plenty of ways to treat yourself on a budget and remember, it’s fine to spend a little extra occasionally.

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