What huge item are you currently looking to purchase – what is IT exactly?
IT could be your first home, car, holiday, laptop upgrade or something else entirely. Regardless of whatever has come to mind, you may need to save some ££s to get it.
I’m no pro, but a few people on my Instagram have asked about budgeting and saving when it comes to your first home, therefore I’ll share my personal experience and any potential tips that may be useful.
You may be able to relate with either of two:
- You find it difficult to save (for whatever reason, but let’s say for this blog – you are not sure how to)
- You successfully manage to put money aside, but find yourself dipping into those savings, making it difficult for the money to stack up
Before you think about the money aspect, you need to ask yourself: What is my end goal and how bad do I want (in some cases, need) it?
For my husband and I, we were living with his parents at the time, and though we absolutely loved being with family, we knew it was time we had our own space. This was the main driving factor behind us saving and budgeting.
I try to keep the mindset: If I don’t do for myself (save/budget/plan), then there is no way I will be able to achieve my goal.
The first step in our plan to save: Create a spreadsheet outlining our incoming and true outgoings (we both did this individually)
Here’s my template – Example expenses and savings (it’s a simple one – feel free to jazz it up)
- Note down your monthly income – money coming in – whether it’s a salary, student finance, pocket money or whatever, note it all down
- Note down your outgoings (monthly guaranteed expenses) – I saw this as money I needed to spend to live
Be as realistic as possible when it comes to the money going out (and coming in obviously) – don’t go with the ‘this would be ideal,’ but go with the ‘this is close to reality every month.’
I was made to think honestly about just how much I spent on what, and the things that I couldn’t live without and the extra things that made me happy – if I was spending around 100£ a month on hot chocolate, then I needed to put that value down and not tell myself that I’d try to ‘spend less.’ It wasn’t realistic and I knew I’d want (need) a hot chocolate (+ a croissant) every morning before work, therefore I needed to factor this into my ‘essential food’ budget for the month.
For things you know you spend regularly on: Go back to your bank, check the average spending for that particular thing and insert an estimate of what that would realistically cost you a month.
This is the case for any expenditure – I had the following noted in my outgoings:
- Direct debits (bills, subscriptions* etc)
- Travel (daily tickets/petrol)
- Food (factoring in habits like my morning hot chocolate. I didn’t factor in food outings here – only breakfast/lunch/dinner… i.e. ‘essential eating’ – ‘fun food outings’ had a section of its own haha)
- Other essentials (toiletries, skincare, make up – which wasn’t always a monthly thing as I bulk bought this stuff, but I know some people like to do monthly stock)
*Some may not consider subscriptions as ‘essential’, but something like Netflix was my TV and counted as an essential (but if it’s different for you and something you can do without – see below). I also included Amazon Prime in ‘essentials’ as it helped me save money in the long term.
- Create a ‘fun allowance’ – for those things that aren’t essential BUT contribute to your happiness and mental wellbeing
Being realistic also means factoring in ‘unknown/ad-hoc’ spending and giving yourself leeway to cover those bits that matter to you too.
I created a budget for outings, fun stuff and extra spending – naming it the ‘fun allowance’ – which encompassed:
- Date nights/outings (cinema/food outings)
- Random purchases (clothes/books)
- Birthdays (if relevant for that month)
- You can add ‘not important subscriptions’ here if you want
Again, we tried to be as realistic (and sensible) as possible with the fun allowance. As we were saving towards something, we agreed to reduce date nights to 2 days per month (either cinema or food) and inserted values true to that (+ a little leeway because life) on our spreadsheets.
I also know that I like to shop here and there, so best to give myself a little leeway in that department too ha! Though it was important I was honest with the value I predicted, I also needed to be sensible with my own spending as I had an end goal. There was no point in me giving myself A HUGE fun allowance when the ultimate goal was my own home, so I needed to prioritise that and stick to the self-given limit.
Never feel bad about spending on the things that make you feel happy or improve your quality of life, of course within reason – but if you like getting yourself a couple of new books regularly, then that’s fine, just factor that in your ‘fun allowance’ every month.
You work hard and you deserve to treat yourself, but of course, if you have a goal in mind and know there are some things you could do without, then be honest with yourself.
Review the above regularly as your spending habits will change. I did/do so every couple of months to make sure it’s all accurate.
I am continuously emphasising on the ‘be realistic’ part… because you might be from the group of people who are saving, but find themselves dipping into the pot quite often. By outlining your expenditure and creating a realistic fun allowance from the get go, you can almost guarantee that you will save a comfy amount, all whilst meeting your other needs.
After outlining incoming and outgoing, review how much you have leftover every month
After working with the simple spreadsheet formulas, I was able to figure out how much money I had leftover every month. This number was for savings.
I had ingrained in my brain that this specific amount would be transferred into my savings account every month the moment £ dropped – without fail. And once that £ left my spending account, it no longer existed.
Takes some getting used to, but keep reminding yourself of your ultimate goal. I sometimes did this by looking at the ‘overall plan’ (a separate spreadsheet, I will get to that), which would persuade me to leave that bank untouched.
Remember, save how much ever is possible for you – EVERY BIT COUNTS! IT REALLY DOES! So, don’t stress yourself too much as you still need to ‘live life’, but also be sensible when it comes to spending. Remember
If you haven’t yet opened a savings account, do it… now! Do not tell yourself ‘I won’t touch that money even if it’s in the same account.’ We are humans and sometimes when there’s easy access, we just dip in – those occasional dip ins, add up.
Having the money in a separate place means you have a little more thinking to do before dipping in.
Figure out how much you need to save
Again, you could be saving for absolutely anything and it makes sense to be clear on how much you need for that particular thing.
For those people that particularly requested insight on the deposit amount needed for a house, it’s best to talk to a mortgage broker/advisor and figure out the right plan for you.
By speaking to an advisor early on in your journey, you will be motivated and clear on mortgage details and on how much you need for a deposit – which is what you’ll most likely be wanting to save towards.
If you are in the UK, you might already know about:
- Help-to-buy scheme – might be an option worth thinking about for first-time buyers, though I think there will be some changes to this in light of COVID-19 – worth researching (more info)
With a Help to Buy: Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home – HM Government
- Help-to-buy ISA – where you save and are offered a bonus (dependant on various factors) once you’re ready to buy. HOWEVER, I think this no longer exists and from a quick google, ‘Life-time ISA’ is an alternative – possibly something to look into! Ask your mortgage advisor about it for sure
The Lifetime ISA (LISA) lets you save up to £4,000 every tax year towards a first home or your retirement, with the state adding a 25% bonus on top of what you save. That means you could get a chunky £1,000 of free cash annually – Money Saving Expert
There’s obviously more to this and it’s different for everyone so what worked for us, may not work for you. To avoid feeling confused and lost, book yourself an appointment with a mortgage advisor/broker, and find out exactly what your options are and what will work for you – also understanding how much money you need to save for a deposit.
The saving spreadsheet
Once you know your goal number, note that down and outline your saving plan for the year. If a year isn’t enough, then that’s fine, it just means you keep going until you hit your target.
We did this by listing out all the months and a final sum of the ‘realistic’ saving figure we both established on our individual spreadsheets after expenditure.
See my example template: Example expenses and savings – it’s really simple and I am sure there are some excel pros who can connect both sheets together so things update smoothly ha. BUT, this method helped me keep track of my savings.
We reviewed this every month to make sure that it was all accurate. It also kept us motivated as we could see the plan in front of us and how our (my) willpower would help in the long run…
I say ‘my’ willpower because I’m usually the one tempted to go on a spontaneous shopping spree…. But that’s what the fun allowance is for, right?
I hope this has in some way been helpful to you – I’ve tried to outline the main things in our saving journey – I am still using this method for baby’s future items too 🙂