Homeownership is a significant milestone that intersects with various stages of life, each bringing its unique challenges and opportunities. Whether you're a recent graduate, a newlywed, growing your family, or planning for retirement, understanding how to navigate these stages can make homeownership a more seamless and rewarding experience.
Graduates carrying student debt
Graduating from university often leaves individuals with substantial student debt, which can complicate the journey toward homeownership. However, it's crucial to note that all debt doesn't need to be cleared before applying for home finance. The primary goal should be to demonstrate a healthy debt-to-income ratio. Here are a few tips for graduates:
- Manage debt efficiently: Develop a plan to pay off existing debt swiftly. Even small additional payments can significantly reduce overall debt levels.
- Build an emergency fund: Regularly transfer a set amount to a savings account. This not only aids in securing bond approval but also provides a safety net for unexpected expenses.
One of the best financial fitness tips we can give you is to set up a budget as quickly as possible. If you start your journey to homeownership understanding how much you earn, how much you spend and where you can save money you are setting yourself up for success. Here are our top three tips for setting up a budget:
- Set up a spending limit: Write down all your monthly expenses - memberships, subscriptions, groceries, medical aid, education, and loans are just some of the expenditures that you will need to factor in. Subtract that from your income - the number you have left is your expendable income. Now you can set up a spending limit - for example, you could limit the number of times you get takeaways to once a month with a spending limit of N$500.
- Know where to cut back: Do you know how much you are actually spending in a week? Mindless spending on things like readymade meals, daily grocery stops, and items that you don’t actually need can eat away at your disposable income. Track your spending for a week and make the cuts where it is possible - bring lunch from home, only buy what you really need. Groceries are one of our biggest chunks and with prices climbing ever higher you will need to start shopping smartly and implement a “no food wastage” system at home. Shop around for specials, buy in bulk where possible, and don’t waste the items you do buy. It will save you money in the long run.
- Save up for the deposit: Once you know what your spending limit is and where you can cut back, set a goal for how much you want to save each month. Aim to save that amount every month and if you do have an extra little left at the end of the month, push some of that into your savings account as well. The bigger your deposit, the less you will need to borrow from the bank and the less you will have to pay back once you become a homeowner.
Newlyweds
Marriage brings about significant changes, especially in financial planning and homeownership. Those who are newly married should consult with a tax professional to determine how this may have impacted their tax status – especially if either party owns a property.
If the couple weren’t living together before the wedding, newlyweds will also combine home and contents insurance and other household expenses, such as electricity and groceries. It is advisable that any money saved by the couple in this regard goes towards a household emergency savings fund or possibly towards a savings account for when the couple is ready to upgrade to a larger home.
If you are newlyweds that are now proud homeowners keep in mind that you now have a responsibility to look after your assets so set up a maintenance schedule to keep up with maintaining your home properly. Make sure tasks like cleaning gutters, checking for leaks and replacing broken fixtures are done regularly as this will not only ensure you keep the property in top condition but also save you money in the long run.
Newlyweds trying to buy their first home will need to review their budgets they had as single people to now include joint income and expenses. Start living like a homeowner to ensure you are ready for the big moment financially and emotionally.
A growing family
As families grow, so do their needs. It's essential for homeowners to regularly review their financial plans and adjust accordingly:
- Annual financial review: Reevaluate resources, goals, and priorities, considering any significant life changes like the birth of a child or shifts to remote work.
- Plan for bigger needs: If your current home no longer suits your family's needs, start saving for a larger home. This includes setting aside money for the deposit and associated buying costs.
During this stage in your life saving up money can seem extra challenging as having children brings up all kinds of unforeseen costs and needs. It is however more important than ever to create a budget that works for you and your family and live within your means. Any extra money should be used to pay off debts and go towards savings. It doesn't mean that you should never do something nice like go on a vacation or eat out at your favourite restaurant - it just means that you need to plan out your budget to make provisions for things like that.
Planning for retirement
When one finally reaches the golden years of retirement and is living off savings or a pension fund, owning a home that is paid off in full can be incredibly helpful. Not only does this reduce monthly expenses, but it also provides an asset that could be sold if the individual runs into financial difficulty. Planning for this in one’s younger years will prove invaluable for future financial security.
Professional Guidance
Navigating these life stages and their impact on homeownership can be complex. A professional financial planner would be useful when it comes to developing strategies to meet ever-changing lifestyles, goals, and priorities. Having a working relationship with a reliable real estate professional will also prove helpful in this regard. While a household may not be in the market at the moment, life could change in an instant. Keeping in contact with a reliable real estate professional will help homeowners stay informed of current market trends which will go a long way towards helping them become better prepared for if and when the need to buy or sell suddenly arises
