For as long as I can remember, it’s been a dream of mine to have my own home–a modestly-sized lot in a nice neighborhood, with a garden for my dogs to roam around in. Now that I’m in my mid-30s, I think it’s time for me to step up and work my way towards that dream more seriously, so I decided to ask around and talk to people who’ve successfully bought their own homes about how they got started on the road to becoming homeowners and what they did right.
While there are several factors to consider when buying a home, a common thread I found among their responses was centered around financial responsibility, and how your success in buying your own home depends on the financial habits that you practice daily. Let me share a couple of things I’ve learned on what not to do, so that if you, like me, are on the path to buy your own home, you can be mindful of these things and avoid them.
Seven Things That Can Prevent You From Buying A Home
- Savings aren’t “leftovers”
The basic rule in economics is that as your income grows, your expenses will follow suit. While most people follow the formula of “Income - Expenses = Savings”, this will cause your savings to end up being residual benefits and will be more prone to inconsistency month-on-month.
Instead, change the way you set aside your savings and follow the “Income - Savings = Expenses” formula, wherein the amount you save remains fixed and harder to touch. Try putting what you save in a separate savings account so that you’ll only be encouraged to let it grow.
A personal tip: On the BPI app, you can hide the visibility of your savings account so that you can only view it on your desktop browser. The account is still in mind, but much less tempting to touch.
- Small achievements makeup big goals
Having the end goal in mind of buying your own home is great, but that big of a dream can seem quite daunting and stressful for most of us, since it will take a lot of time, money, and effort to get there. One trick I’ve learned is instead of just looking at the big picture, focus on how you can break down this goal further into smaller, more tangible short-term goals.
For example, you can start by putting 20% of your money into a savings account or invest in stocks every month as your input to achieve your long-term end result to own a house. Make your smaller achievements lead up to your big goal, and you’ll feel more confident in your ability to achieve success.
- Timelines are for tracking
Make sure that as you set your timeline for buying a house, you also take note of the financial milestones that you need to hit and by when. Think about how much money you should be saving every month to be able to hit your first million, and then your second, and keep the money in your savings account tucked away. You can even start smaller and save ₱500k first. Remember: break down your big goals into smaller achievements!
- Luxuries need limits
It’s okay to splurge on things and reward yourself for your big wins, but make sure you don’t let your spending get out of control, as it might cause a large dent in your finances. Set boundaries on how much you’ll allow yourself to spend on luxuries – a maximum of 5% of your savings should be enough, meaning, if you have ₱500k in your savings account, you may only spend ₱25k for luxuries, and only intermittently.
Once this passes the first condition, don’t make the purchase just yet. Take your time, perhaps a week, to think about whether you really want or need that luxury item before making your decision.
- Knowing the process helps
As with any long term goal, there are many steps in the process that you’d need to arm yourself with knowledge about once you get started. It’s always important to maximize the available resources you have to learn more about the paperwork that needs to get done, what costs you should be aware of, the site visits you have to go to, etc.
On that note, make sure you also look into the different ways you can finance your dream home, such as home loans or bank loans. Track and manage your credit card debt and debt records because banks frequently check them and can impact the approval of your loan applications for higher amounts.
- Keep the debt away
Before you even start saving, make sure to pay off all your debts first. Whether you owe a person or a bank money, put in the effort to prioritize clearing yourself of debt and pay in full as soon as possible. If you’ve got a car loan or bank loan, try using 50% of your savings to pay off your debt yearly.
This is especially important for bank loans, which can have a hefty seven to nine percent interest on loans. So the faster you pay it all back, the better.
- Check yourself before making big moves
You might have your own personal factors to consider before taking your first steps into buying your own house. Maybe you plan to move elsewhere to work, settle down and raise a family, or pursue major health and lifestyle changes that urgently need to be addressed. Whatever they are, settle those first, because buying a home is a long term commitment that will be much harder to back out of once you get started.
Don’t feel pressured by the people around you about what life milestones you should be hitting at your age. There is no set period in our lives when we should all try to conform to. Your readiness to buy your dream home–financially, mentally, and emotionally–entirely depends on your own capabilities, priorities, and goals in life.
Buying a home means putting in the effort, so be sure that when you decide to start on that journey, you’ll be ready to make the necessary adjustments and take note of these tips to be more financially responsible. As long as you put in the work and save properly, it will all be worth it once you get there and fulfill your dream.
Ready to find your dream home? Get in touch with our property experts at Presello to invest in your future today.
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