People are going mad for the Body Coach Joe Wicks, so I decided to get in on the act – except my plan will beef up your savings, not your guns. Why does that matter? Well, it might be your only shot at getting on the housing ladder. Read on to find out why
“Dog-eat-dog” can be a hackneyed phrase but it certainly rings true as a description for Britain’s housing market today. How else do you explain the 40 per cent of private renters who characterised the lettings market as “ruthless and unethical” in a recent survey by LetBritain? Or the fact that a friend who viewed a property in London just a few weeks ago was one of dozens trooping in and out all day long for viewings, with frantic buyers upping the selling price there and then on the doorstep?
It is easy (indeed inevitable) to get downhearted when saving for a home has never seemed more difficult. And yet 154,200 people managed to buy their first property in the first half of last year – that’s 10 per cent more than the same period in 2015. So first-time buyers are not extinct like dodos, but more like pandas – endangered and still not out of the woods yet, but coming back from the brink.
The average cost of getting on the property ladder depends on where you live, how much of a deposit you’ve saved, whether you have a sound credit rating and how easy it is to access competitive high LTV (loan-to-value) mortgages.
So it’s a lot easier to crack this egg when you’re living outside the M25, you’ve got a bigger pay packet, you’re getting help with your deposit from Mum and Dad esquire and if you happen to be buying at a time when mortgage lenders aren’t feeling squeamish about lending to first-timers.
But regardless of all this, first-time buyers who aren’t rich or gifted with a big loan tend to be hard workers and diligent savers who have their eye on their prize and keep moving forward, ignoring the grim stats on housing affordability. It isn’t easy, straightforward or quick – but I would draw an analogy between saving for your first home and embarking on a new fitness regime. You have a goal (defined abs/your own pad), you know it will take time (months/years) and you will have to make some sacrifices that will be well worth it (e.g. fewer boozy nights out…actually that cuts both ways!)
So I’ve developed my own Financial Fitness Plan © * in the vein of Joe Wicks et al but instead of toning up your abs, we’re toning up your spending and saving pal. And just like his plan, I GUARANTEE that if you follow this plan, within eight weeks (alright, more like eight months) you will be well on the way to having a sweet savings fund – if not part of the way towards nailing that first home. Ready?
First of all, run the rule over your income and your current spending. Are you spending like Justin Bieber in a Vegas strip joint?
If so, no wonder that there doesn’t appear to be much left over for the house kitty. If you haven’t done a budget before, now is the time.
Now, it might seem simple pimple to keep track of your spending and saving if you have an online account. But bear in mind that you might, on occasion, use cash (in fact, it can be quite a good idea if you’re deliberately trying to limit how much you spend…more on that later). With a budget, you simply look at your income versus your outgoings over the last month. But then you have to mentally (or physically) tot up each area of expenditure to figure out whether you could be paying less.
For instance, I like the old pen and paper myself, but then I’m an old-fashioned gal. If you’re anything like me, you’ll need to sex up your budget with some stationary porn. I’m usually not an advocate of spending needlessly but when it comes to motivating yourself to start and maintain a budget, give yourself all the incentives you need.
You don’t have to be a dinosaur like me. You can get help from a ‘spending diary’ app such as Toshl, and online platforms such as Money Dashboard, Ontrees, or Wally. All of them are free – yay! These are ‘read-only’ applications with colourful graphics that allow you to view all your current, savings and card accounts in one place, but not to move money around.
The aim is to target some flabby spending, slim it down, and get fit for saving. You’ll be amazed at how all those trips to Costa and the pub add up over time. Cutting those could go a long way.
Rank your outgoings in order of necessity: think of Massow’s hierarchy of needs and then update it a bit. You can’t really cope without shelter, so put your rent first, then utilities (you need hot water and wifi, right?) followed by council tax. Then list your food expenses. Bottom of the pile is your discretionary spending – eating out, clothes, impulse buys, online temptations.
In between there might be a direct debit or two that can be killed, or possibly even one that you do not remember signing up for. You might also want to review your energy bill, to see if switching could save you money (it almost certainly will). All you need is a note of your current usage or spend. And how about your broadband deal or your mobile contract? Time spent working out exactly what you are getting, what you actually need, and how much you should be paying for it, will nearly always pay a dividend in lower bills.
Comparethemarket.com reckons that millennials who switch energy, home and car insurance every year stand to gain more than £500. Sounds good to me.
Check out part 2 of my financial fitness plan tomorrow!