Can You Really Save For a House Deposit in Four Years?

The post office has released a new tool that can tell you how much you’ll need to be saving per month to be able to afford a deposit for a home along with some research they’ve done about first time buyers.

Now I have questions. They claim that the average first time buyer will spend four years saving towards their deposit. This seems incredibly optimistic…could YOU save for a deposit in just four years? How much would you need to save? Is just being frugal and switching to supermarket own brands really going to help?

 

The deposit savings journey

The average deposit for first homes in the UK last year was £51,500, according to the Office for National Statistics. This varied from £21,571 in Blackpool to £173,431 in London

According to the subjects of the study, “Approximately 70% of this deposit is reached through saving, with recent FTB (First Time Buyer) households setting themselves an average savings target of £815 a month – ranging from £565 in Scotland to over £1,000 for prospective FTB households in London. To achieve their deposit goal this means putting aside 20% of the monthly joint income of first-time buyer households (£4,105 a month) – which is often split between two partners contributing. These monthly targets – often coupled with additional monetary support from loved ones averaging £15,489 (30% of the average deposit), allow the average FTB to reach their deposit goal in less than five years.”

So how have they done this?

“FTBs  commonly sacrifice luxuries such as going on holiday (31%), nights out (30%) or takeaways (26%)”

So what if you don’t have holidays, nights out or takeaways?

“One in five (22%) move out of their home to save more money, either moving back in with their parents (13%) or downgrading their rental property to something more affordable (9%). Recent FTBs also looked for ways to boost their income in order to keep up with their deposit goal (84%). This includes taking on overtime as part of their existing job (30%), looking for a higher paying role (21%) or taking on additional paid work to boost their income (17%).”

They make is sound so easy, right? Sorry Post Office, I think I need some tips…

 

The Post Office’s Top tips for people saving towards their first home

1. Cut back on the essentials – the easiest (and most common) way people manage to set more money aside when saving for their first home is finding ways to cut down on their day-to-day spending. This could be as simple as switching to supermarket basic brands, comparing energy and mobile providers to see if you could reduce your bill or even seeing if it’s possible to reduce your rent by moving to a less expensive property.

2. Map out a deposit goal and stick to it; particularly if putting aside money with a partner – very few people save without assistance from their loved ones and first-time buyers will often be planning to purchase their home with a partner. Be sure to agree how much you can both commit to save realistically on a monthly basis and hold each other accountable, so it’s more difficult to splurge. Look for tools that may help you, there are a range of apps and calculators freely available to help you plan your savings journey, such as the Post Office online tool: www.postoffice.co.uk/mortgages/this-is-my-home.

3. Can you reduce how much you need to save? – If your goal seems out of reach you could always consider how you might reduce the pot you need to save, such as buying a smaller property, looking at a different location or considering no-deposit mortgages.

4. Have an honest conversation with loved ones about financial support – it’s common for FTBs to get some degree of financial support from their families as they attempt to get on the ladder – more than half will do so as they attempt to pull the money together for their first home. Be sure that when doing so you have an open and honest conversation about the terms of the agreement. If they are providing you with a gift or a loan and if it’s a loan, being clear on what they expect in terms of regular repayments.

5. Keep an eye on how affordability shifts and incorporate that into your plan – four years is a long time in our uncertain housing market and you want to make sure you’re aware of how things shift while you save. Be sure to keep an eye on how local property prices change so you can make the most informed purchase possible.

6. When looking to buy, seek out up-and-coming areas – young buyers often need to adjust their expectations when it comes to location but you can often sniff out which areas are likely to increase in value by looking out for new developments, new businesses setting up shop in the area or improvements in local schools and crime rates.

7. Don’t be disheartened if you have a set-back – 13% of FTB savers feel like a failure for not reaching their savings goal in the time they initially intended and it’s very common for savers to end up dipping into their deposit fund to pay for other expenses. While it’s obviously best not to make a habit of this, prospective homebuyers shouldn’t let a small slip-up deter them as they continue to save towards their goal.

 

Time to run a few numbers…

I decided to dig a little further and look into exactly how much I would need to put away in order to be able to afford a deposit for a home and the numbers aren’t pretty.

After trying out the tool, I discovered that If I were to be able to save enough for a deposit in 4 years in the area I live in now, I would have to save £1104 a month! That’s £255 a week!

How much would I need to save in order to be a homeowner before I die?

To work out how much I should be saving if I want to be able to afford my own home before I dropped dead (that’s if the second and third jobs don’t get me), I worked backwards. Usually, the oldest age you can be at the end of your mortgage is 70 and the average mortgage is 25 years. So ideally I’d want to have your deposit by the time I’m 55.

Is this depressing you yet? No? Minus your age from that number because that’s the maximum number of years you have to save for your mortgage.

Then I the Post Office’s new This Is My Home tool and selected the borough (or area) I call home…

My figure came out as £220 a month (£51 a week) every month until I hit 55. While that might sound like nothing to a some people reading this, it is a lot of money to a lot of people. One in 5 of the population of the UK are in poverty.

With house prices and demand increasing, the cost of living surging and real wages decreasing, the amount I’d need to save in order to be able to afford my own home before I die is only going to increase. And there’s only so much that switching to supermarket own brands can do.

I guess the takeaway here is that, a lot of us are in the same boat and it’s sinking. Don’t let people tell you that tightening your purse (even more than you already do) is the way into home ownership.

TLDR; Probably not.

Is quitting your job and moving to a cheaper area away from everyone you know really realistic? Have you found ways of sacrificing in your life further in order to save? Let me know in the comments…

 

Things I Learned During Frugal February

I wanted to call this post…

Things that I learned doing frugal February and failing but also all things I should have known anyway

…but it was too long.

At the beginning of February I decided to challenge myself to spend as little as possible. A challenge that both succeeded and failed. I set myself rules of how much I could spend and what I couldn’t spend money on and it turns out, just because you’re on a spending freeze, you can’t just shut yourself in a room and hope life goes away.

Just because you’re on a spending freeze, you can’t just shut yourself in a room and hope life goes away

Hiding grasshopper
Actual picture of me hiding during Frugal February

During my month of frugality, I had Birthday parties I needed to attend, social events to go to and a job interview to prepare for. OK, this all sounds like an excuse but going to a party and ordering tap water made me feel so self pitying, so I cheated and bought a small wine. And then after that it felt a little easier to justify spending a couple of pounds here and there, until I needed to get a haircut to look professional for a job interview. I could have cut it myself, but every-time I do, I end up looking like I have a DIY haircut. So I wanted to trust a professional but more on that later.

Willpower doesn’t work

Maybe yours might, but MINE definitely doesn’t. Trying to will yourself to stick to a rule everyday over a long period of time seems like an easy thing to do in theory, but actually takes a lot of sustained energy over time and that’s no fun. It’s like trying to stick to a diet…it’s better to make small lifestyle changes than than torturing yourself for a set period of time.

You can’t use up the things you don’t actually use

Bath bombs, bars of soap, celery salt. I kept finding things around the flat that I have but never used. My motto became “Use it or throw it in the bin” which aside from being oh so original and something I should already know, was also very sensible advice. I put my bars of soap into action when my hand wash and face wash ran out and tried to make fabric refresher out of the bath bombs, to varying degrees of success. To this day, I have no idea why I had celery salt.

Buy cheap buy twice

Not exactly the frugaleers motto but something of a universal truth nevertheless. From vanishing toilet roll to cheap and risky hair cuts, trying to save money is an extreme sport and you need to have experience of the terrain if you’re going to avoid pitfalls. There are exceptions to the rule, but uncovering those ultra rare bargains is clearly a skill.

A lot of your meals will be supplemented by sugar

And it’s not healthy. I noticed I drank more tea and coffee to try and catch up on the energy I was loosing from not having enough to actually eat. I allowed myself to have more treats at the office, a cookie or two in the afternoon and a slice of birthday cake which I would normally avoid. Trying to stick to good habits went out the window.

You can live without some things

I had a rule that if something broke, I’d try to go as long as I could without replacing it and seeing how that went. Within the first week, my table lamp started fizzing and died. Great timing. So I spent a week using electric tea lights. These also died. Eventually I realised I didn’t even need additional light. The developers who built the building outside my window have pointed four flood lights right at us and these are on continuously when it gets dark. All I need to do is open the curtain just a little bit and “oh would you look at that! It’s practically daylight!” I’ve been trying to decide whether I should get a new lamp but I’m quite enjoying the additional space that it has left.

Spending very little money is almost impossible

While I managed to save quite a lot that I would have normally spent, if you’re trying to live on £1 a day or £10 a week, it’s almost impossible. Food shrinkage and inflation is a very real thing and not everyone has access to a market that sells fresh fruit and veg. While it was cathartic to be able to use up everything I had in my cupboards and even reach a point where I could turn my fridge off, it’s not a challenge that can be sustained over a long period of time and my heart breaks for those who have no choice.

I have mostly learned that I can live without a few things that I previously considered essential and that there are definitely areas I can cut back on to save money. I’ve also learned that sacrifices have to be made if you’re living extremely frugally and sometimes that sacrifice is your well being.

 

Frugal February: 28 Day Low/No Spend Challenge

Have you broken your new year’s resolution to spend less money already? Well February is here and it’s a fresh new month. I’m going to be telling myself this every day for the next 28 days as I take part in Frugal February.

The idea of Frugal February is to have a no spend month (well, a low spend one) where you set yourself rules on what you can buy whilst using up everything you can that you already own.

I have made a note of my bank balances somewhere secret, somewhere safe and I’ll check them again on the 1st March to find out how much I’ve managed to save.

Frugal February Rules

Don’t buy anything that isn’t necessary to live

You are allowed to buy medicine, but if you’re doing this challenge, it’s worth looking up what help for healthcare costs you’re entitled to if you’re in the UK. Maybe it’s something you haven’t had time to do, but add it to your to-do list for this month. You can also downshift brands if it’s over the counter medicine you need. Instead of buying (and then having to drink) Lemsip, have store branded paracetamol and a delicious hot lemon and honey. Paracetamol is usually the only active ingredient in Lemsip (sometimes there’s caffeine I think) and normal hot lemon and honey will taste much nicer.

You can buy food, but only if it’s to help make a meal from something you already have, or if you run out of food completely. Go through your cupboards, fridge, freezer and make a note (mental/photographic/actual) of what you already have and make meals from it. If you need to add ingredients then buy basic food items and shop at food markets. Use up everything you can, start with your fresh items that have the shortest use by date. Cook large batches to freeze, make packed lunches for work, get inventive with cooking.

Set yourself a budget

I’m going to set myself an extreme budget of £1 a day. This doesn’t include travel, rent and bills. For the first week I think I’ll find this limit fine, my cupboards have food in them so I won’t starve. Week 2 is when I’ll have to start getting a bit more creative with meals. The last two weeks, I’ll probably be making and eating vegetable soup for every meal.

Make do with things you have in your house

We’ve already discussed food, but what about all the other things like hand wash, make-up remover and fabric refresher spray? If you’re anything like me, you probably have a few bars of soap in the cupboard that you have never got around to using. When you run out of body wash, face wash or hand wash, give the soap a go. If, after 28 days, you’re not getting on with it, you can throw it away filled with the knowledge that you’ve given it a fair chance. You can try using coconut oil as makeup remover or discover diy fixes for every day household consumable items.

Do not start any new projects

Don’t start any new projects but do finish ones you have already started. I’ll be sewing buttons back on to my jacket, hemming dresses and finishing a lot of work projects. I’ll also continue to declutter and I may even get around to some light diy projects, if replacing the sealant around the bath counts as diy. I need to finish a short story that I started writing, finish my other website, edit an audiobook, edit my showreel…as you can tell, I’ve got a lot to try and do this Month. The hardest part will be saying no to new projects.

Before the fiscal fast, don’t stockpile

It’s the 1st February anyway so I’m not giving you any chance to stockpile. If you’re stocking up before a fiscal fast, it defeats the object. I do encourage you to plan ahead a few days in advance once you’ve accepted the challenge, but if you have created a safety net for yourself then you’ll be cheating yourself out of enjoying success.

Find ways to cut your travel spending

If you can, try and catch a cheaper mode of transport, walk or cycle if you do have a bike at your disposal. Sometimes it’s not possible depending on where you live but while you’re taking part in the challenge, it might be worth exploring other options to get around.

If it’s broken, don’t replace it

If something you own turns out to be broken during the challenge, try not to rush out and buy a replacement. Challenge yourself to see how long you can cope without it and if buy a replacement after the challenge if you still miss it.

Are you taking part in Frugal February? Let me know what crazy cupboard recipes you come up with in the comments below.

 

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