How to save for a house

Save for a house

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Save For A House

Want to save for a house? For the average house buyer, this is no easy feat and for some may feel like a very distant and unachievable goal (unless, of course, you have been blessed with pockets full of gold or have been taught about saving from a young age). Follow these simple End-Rich tips and you will get to that house in no time! Once you have achieved your goal – why not consider making money from it? 

The Truth about Wealth

What you need to understand about saving and keeping the money you save is it’s all in your mindset. Rich people often have a completely different mindset to others; it is their mindset which can make them and keep them rich.

Viewing things as assets and liabilities is a fantastic place to begin when trying to save:

  • Asset – something that brings in an income in and of itself. This is different to your wage which is paid by an employer. An asset is something which makes you money without you having to massively work for it

  • Liability – things that cost you money to own and do not generate any income in of themselves

The average person would use their wage to pay for their liabilities and more often than not, end up with nothing  / very little / in debt by the end of the month. Rich people on the other hand, use their assets to purchase their liabilities, not their wage! 

Wants vs Needs

First, we need to educate ourselves on the difference between wants and needs! 
According to the Oxford Dictionary

Want – have a desire to possess or do (something); wish for.

Need – require (something) because it is essential or very important rather than just desirable.

 

These are important distinctions; we must try and limit our wants and stick to getting things we need.

Example: You have a phone that works just fine, it takes good pictures and you are happy with it. The phone company calls you and tells you you’re eligible for an upgrade. You weren’t thinking about a new phone, but you are now. They tell you about all the new features, (which haven’t actually changed that much) – you can get two more megapixels on the camera! You start to want it. Your current phone feels inadequate, you don’t just want it, now you feel like you need it! So, you buy it, but at what cost? An additional £10 a month on top of your initial £50… Oh and a £100 upfront cost to have that brand new phone. Your fantastic ‘old’ phone now lives in the draw – dismissed, displaced and now neglected. What a waste of money and equipment! #youdon’tneed it #sellit!

An alternative approach: I’ve had the same phone for 4 years come Christmas 2020. I researched different phones and their contracts, then decided it was cheaper to buy the phone outright and pay £18 a month sim only. The Samsung Galaxy had been out for 6 months, so I went for the older S8. They are identical phones! Now I pay £13 a month and will soon pay a little bit to change the battery in the phone. This is one of the ways I save!

How much should I save?

This question very much depends on how much you earn and the rest of your circumstances. To save for a house is an enormous commitment – you will likely need 10s of thousands of pounds. If you don’t earn much from your job, this could take even longer.

If you’ve followed the other posts, you’ll know I’m a big fan of investing in yourself. One of the books I’ll always recommend is the Richest man in Babylon which is a complete mindset changer! The book suggests you should save 1/10 of what you earn. For me, this is a must and for the majority of people absolutely doable. Although 1/10 of your wage is brilliant and better than saving less, I subscribe more to the view below where possible…

If you know of Grant Cardone, you might have heard him advocating saving 40%+ of your earnings; do this and you reach your goal 4x faster! Although this is a fantastic goal and something I strive for, it is not always possible (even for a proud saver like me). If you live in London for example, your living expenses are likely quite high and wage potentially quite low in comparison.

According to an article in the Independent:

‘One in four adults has no savings’; the main reason for this is ‘Sky high monthly outgoings and attempts to clear substantial debt before putting money away regularly’. Article

To help change this, both Richest man in Babylon  (George S. Clason) and Rich Dad Poor Dad’s (Robert Kyosaki) believe in paying yourself before paying your bills. I am inclined to agree with them! You will never have any money if you wait till the end of the month to save! Save first pay later. This may sound controversial to those who’ve been taught to pay their bills first to avoid trouble, but this is beneficial to get ahead and ensure you put yourself as a priority.  

How to accomplish your saving goals

1. Team up to save

Saving is not always easy – if your outgoings are high then that house will be a mile away. One of the easiest ways to cut your expenses in half and double your savings is by teaming up with someone. This could be a sibling, a parent, a housemate, a partner, a friend – ultimately someone you trust and who has similar ambitions to yourself.

My job as a teacher doesn’t pay very much! Not like I’m changing people’s lives or anything… if I had to pay my mortgage, house insurance, utilities, car, groceries for me and my child etc all alone, my savings would no doubt be cut in half.

Tips :

  1. If you are in the same situation and both partners work, split your bills as evenly as you can (one of you might earn more)
  2. Create a joint account and both of you put a certain amount of money in monthly
  3. Make sure your joint direct debits come from that account
  4. All the money you save from doing this should be saved!
  5. If you are looking for additional sources of income, check out our blog post for how to find a range of side hustles that could work for you.

2. Track Your Finances​

save for a homeSo, you want to save for a house, but you aren’t checking where your money is going! Change this now! Download our FREE End-Rich Finance Tracker to help you on your way.

This is probably one of the most important steps to save. When you know where your money is going, you can try to stop or limit the amount that is flying out of our pockets. If you can identify things that are unimportant, then you can remove them, and you will keep more of your money. I sound like my father-in-law, “it’s time to get rid of your direct debits”.

3. Make Sensible Choices

Every day we make choices, from what to wear, what to eat and what to spend our money on or not. There are certain things that I would strongly advise against especially when trying to save for a house. Every penny counts! Along with not upgrading your phone and thus avoiding accumulating extra monthly costs at every upgrade every couple of years, there are two more choices that if made sensibly will help you save for your home.

Buying coffee while out and about –  The average Brit spends £2,210 in coffee shop every year! That’s £2,210 less in your bank account. £2,210 less to invest in your future. £2,210 less to put towards your new home. The solution is simple. Rather than spending the additional money whilst out and about, make a batch of coffee from home and use a travel mug for convenience. Of course, visiting coffee shops isn’t just about coffee – we like to meet friends and enjoy each other’s company too. There are so many free alternatives! Visit a friend’s home; visit a museum; go for a picnic in the park! The options are endless…

Another growing trend that I would suggest against is leasing your car rather than purchasing one outright. If you want to hold on to your money, you should avoid paying £200+ a month to rent a car.

In reality, 3 years of renting a car will cost you approximately £7,200 – which doesn’t seem too bad at first. Sure, after 3 years you can upgrade the car and continue the monthly payments. After another 3 years you have now spent £14,400 on a car that could have been purchased for less!

Instead, why not buy a car for £7,200 then save £7,200 over the next three years? Seems like a no brainer to me. I don’t need a brand-new depreciating car every 3 years; I need something that performs its function and is reliable. It isn’t important to look rich but be rich. Remember – a brand new car is a want not a need. Buy a new car when you have made it! Don’t pay interest to other people and start paying yourself first.

One of the most important things to retain is this – if you can’t afford something, don’t buy it.

Important note – Business owners/self-employed people get tax right-offs and a car can be one of them. For a more frugal mindset check out the 2 cents video below:

2Cents - Cars Keep you poor

4. Direct debits to remove

  1. Tv subscription – you don’t need Virgin, Sky or Cable. If you’re in the UK you get Free View, use it! Also, for £8.99 you can get a standard subscription to Netflix. You could potentially avoid paying for a tv licence if you don’t watch it.
  2. Protection – get rid of tv insurance, oven insurance, boiler insurance, etc. If you buy these products brand new, you’ll get plenty of use out of them before they break. When they do break, they will likely need to be updated anyway (not including the boiler). People often pay for these things unknowingly for years, having racked up bills higher than the cost of the actual product! Don’t sign up and cancel if you have them. Unless you’re really clumsy!
  3. CONTROVERSIAL –Charities subscriptions that people knock on your door for. They are not volunteering – in fact they get commission the more people they sign up and sometimes opt for guilt tactics to entice you in to a monthly subscription. This doesn’t mean you shouldn’t donate to charity! Just make sure you are not being bullied into it. Pick a charity that is meaningful and that you have chosen yourself.
  4. CAR! Stop paying for this monthly. That’s all I’m going to say – unless it’s a tax right-off.

5. Change your subscriptions

Change your utility providers yearly! You may think this is a long and tedious process… but it doesn’t have to be. With many online services offering free comparison quotes, your savings are just a few clicks away! We’re with British Gas for both gas and electricity and they were just outright ripping us off. We had been with them for 6 years and never changed. We hadn’t even noticed the price slowly creeping up year on year. Barely noticeable at first, but fast forward 6 years and the difference was irrefutable! Avoid this by checking what providers are offering yearly – usually the best deals are going to the new customers!

You can then apply this same theory to all your subscriptions. We applied this to our pet insurance, internet provider, phone contracts and car insurance too!

From simply changing our subscriptions we are saving over £100 extra every month, you can too! Comparison sites are fantastic and we would highly recommend ‘compare the market’. Not only do you get the quick service and up-to-date online quotations, you also get the added bonus of 2-4-1 cinema tickets on Tuesday and Wednesday as well as meerkat meals! Money saving for your insurance and a cheap treat on the side!

6. Pay for things yearly rather than monthly!

You will often find things are cheaper when you pay a lump sum, therefore saving is important. Don’t pay interest because you don’t know how to save! This is another example of money needlessly leaving your pockets.

7. Save with Credit cards 

IMPORTANT NOTE, if you are bad with money, SKIP THIS STEP! Rather than me going into too much detail, check out this fantastic video. It turns out I didn’t invent the wheel, shame really.

This can be a fantastic way to spend the same amount of money and get free things. My first credit card was the Nectar American Express. It felt like I was constantly getting money off my grocery shop, but I always paid my bills on time! Using my Nectar card I would get 1 point per pound spent, with the AMEX I’d get 3 points per pound spent! £500 worth of shopping would give me £2.50 off, that’s really bad! With the AMEX I’d pay around £166 and get £2.50 off! Really worth looking into. Try to find these deals regardless of your home country.

I mean, who doesn’t love free things? With any credit card, avoid the minimum payment, don’t put it off and end up paying more. Some debt can be absolutely crippling – credit card debt is one of these.

8. Eliminate debt

Some debt can be crippling! For a lot of people, this will be the number one thing that stops them saving for a house! If you have bad debt (not a mortgage) decrease your savings down to 10% and use 20% of your wage to pay off these debts. Many people like that little sense of achievement and will pay off the smallest debt first. In my experience, this is not the way to go! Pay off the debt with the highest interest payments first. You are paying more to the company and less for the product. If you have many that are around the same amount of interest, feel free to pay them all off little by little. DO NOT sacrifice savings for this though. You are working hard and need to be paid as well.

Although 30% of your wage is being taken by savings and eliminating debt, using all the tips in this post should allow you to live on 70% of your wage. If it doesn’t, then remember to try and make additional cash with some of our side hustles. If those don’t bring in enough money, why not consider a part time job? At least until you have decreased your debt. If you enjoy the job, perhaps you’ll continue it and add the additional money to savings. Remember saving 40% will get you there 4x quicker; if you can save more it’s even better.

9. Have a budget

This is not too dissimilar to the free End-Rich Finance Tracker. However, having looked at the finance tracker over several months you will gain an understanding of the average amount of money spent in each area over time. You can specify how much you are happy spending in different areas and track if you go over. Perhaps you want to spend no more than £30 on leisure activities every month. When you see you are at £20, you can tighten your belt. A fantastic website with a free budget is The Money Advice Service. Once you have filled in your information, they let you download the results as a spreadsheet! This is a fantastic free resource.

If you want to do this on the go, there are a number of fantastic free/paid apps you can use. The first I used was Wallet. This was a paid account which I got for free, it allowed me to track all my accounts! Now I use Emma and Yolt. These all link directly to your bank account.

If you want to be more hands on, there are manual budgeters that I use called ‘Money Manager Expense & Budget’.  Make sure you are budgeting to hold on to more of your cash.

Conclusion

We have looked at a lot of different areas throughout this post. Changing your mindset and understanding the difference between an asset and a liability is super important! You then start paying yourself a consistent amount every month before you pay your bills. This should be set up as a standing order so you don’t think about it.

Remember, the more we can decrease our outgoings, the more money we can hold onto. So, make sure you track your finances and use a budget to see where your money is going! Don’t get ripped off by some large companies with their direct debits, limit the amount you have and change subscriptions yearly to get the best deals!

These steps will allow you to save for a house – how long it takes is down to you. Whether it is your dream home/forever home or a house that you use to make extra income, you will feel satisfied knowing you managed to achieve it. Here at End-Rich, we believe in you. You can succeed! Trust me, if we can do it with these steps – you can too! Seemingly small changes will create a ripple effect that will change your life for the better! Good luck!

 

Did you find that helpful? Anything else you’d like us to post about? Comment in the box below!

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