Finance

CUT SPENDING – GROW DEPOSIT

Getting that mythical deposit to buy your way into one of the most exclusive clubs of all – the Property Owners Club – is it really possible? Don’t you need to be something incredibly special to get in?

If you listen to the negative folk, you are not even going to join that queue.

Why bother when it’s “guest list only” if the pugs on the door don’t like the look of your face?

And yours is a face which is not easy to like, right?

Wrong!

Big bad wrong!

1. The secret to getting on the property ladder

Getting into the Property Owners Club really is no biggie. The secret is to take determined systematic action for as long as it takes.  Small unspectacular steps – but many of them.

JOT DOWN THE MAJOR WAYS TO RAISE A DEPOSIT AND THEN METHODICALLY TACKLE THEM ONE BY ONE.

Here is the list:

  1. Using the Bank of Mum & Dad
  2. Raising money from a property
  3. Cutting down spending
  4. Boosting income
  5. Grabbing anything the government is offering.

Today I am going to take a bit of a deep dive into number three on the list: “cutting down spending”.

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Most people laugh at the idea of getting to a house deposit of say £20,000 by curtailing their spending.   Crazy they will tell you – unrealistic, impractical, over-optimist…fantasy!

Well of course, as the Rebel Property Coach, you are not going to get me to agree.

Whether it takes you one or twenty years to save £20,000 by junking your unnecessary spending, it is definitely possible.

The amazing thing about spending money is that looked at in insolation the full damage of its impact is rarely noticed. Spending £50 on a night out can seem insignificant. But £50 twice a week for a year comes to £5,200. Definitely not insignificant.

PERHAPS YOUR NIGHT OUT IS A MORE FRUGAL £5. NO MATTER. TWICE A WEEK OVER A YEAR AND THAT’S £520. OVER 10 YEARS THAT’S £5,200.

The other thing to remember is that you don’t need to cut so deep and hard that you end up a gibbering hollow shell of your former self! You should cut hard, but there is absolutely no need to cut everything all at once and to the bone – unless that is what you want.

So if you can cope with just one night a week spending £50 that is still a whopping saving of £2,600 per year – 13% of a £20,000 target in just 12 months!

However, it is important to test yourself to the max. Set yourself a target which seems impossible not a gimmie.  Make your deposit goal a necessity, not an option.

A few principles should be apparent by now:

  • The more you are spending, the more you can save
  • If you’re not spending much, you are going to have to work harder and probably longer to save  – but hard work is fun!
  • The longer you cut, the more you are going to save
  • If there is two of you cutting, that’s potentially twice the saving.

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2. Essential spending

The great news is that in our grotesquely wasteful consumer society where 1 in 3 of everything we buy is totally unnecessary and binned within  a year, it’s easy peasy to find things to cut.

By the way, all that is my opinion…but it seems pretty factual the way I see things.

In truth, most of us, even low income earners, overdose on an awful lot of “discretionary spending” – spending we don’t really need to make.

If we are truly honest with ourselves, there isn’t a huge list of essential spending we must incur to survive and thrive.

If we really need to batten down the hatches, essential spending is likely to include only:

  • Rent/mortgage
  • Gas, electricity, water, council tax
  • Food
  • Essential clothing
  • Basic furniture and household appliances and goods
  • Travel
  • Debt payments
  • Insurance
  • Health related payments.

AND UNDER FOOD I AM ONLY REFERRING TO THE ESSENTIAL VARIETY – FRESH AND UNPROCESSED, COOKED AT HOME. 

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3. Non-essential spending

If the list for essential spending seems short, the list for non-essential spending gets longer every time I write it down.

Here is my current list of prime suspects:

1. Alcohol
2. Cigarettes
3. Coffee
4. Paid TV packages
5. Paid music packages
6. Holidays
7. Nights out
8. Cinema
9. Gym
10. Takeaways
11. Work lunches
12. Fashion clothing, jewellery or accessories
13. Expensive mobile phones
14. Pricey electrical equipment and appliances
15. Top of the range furniture
16. Designer or  labelled anything – as distinct from the economy version which works just as well
17. Football season tickets
18. Almost every paid subscription
19. Unnecessary insurance
20. Interest, charges or fees you don’t need to pay. 

The coffee is that super-expensive stuff you buy from places like Starbucks.

The work lunches are the expensively packaged ones you pick up from the local fancy sandwich joint or high end supermarket.

ONCE YOU START SLASHING AWAY AT YOUR DISCRETIONARY SPENDING, YOUR DEPOSIT SHOULD START TO GROW WITH A VENGEANCE.

Everyone will have their own spending profile, but the figures set out below give a rough indication of how much you could save in certain circumstances

4. Alcohol, cigarettes and coffee

These are the unholy trinity. Slash them to make monster savings.

Based on an average pint being £3 and spending of £30 a week, by going teetotaller for a year you could save £1,560.

5 coffees at £2.75 per week comes to £715 per year; twice that if you are a 10 coffees a week sort of guy or gal. (How long before they start putting health warnings on coffee cups?)

Apparently the average UK smoker is on 11 a day. At say £10 per pack of 20 that’s £38.50 per week or £2,002 per year. Scary! And they are not good for you!

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5. TV and music packages

Why spend good money on TV or music packages? Is Freeview or free music apps really that bad?

£50 per month on TV and £10 on music? That’s £720 per year for crying out loud!

6. Holidays, nights out, cinema and gym

So you spend £2,000 per year on holidays? Would you shrivel up and disappear if you didn’t?

You spend £20 on a night out twice a week excluding your booze and fags. That comes to £2,080 per year.

And of course, as the Rebel Property Coach I have to mention it. There is other stuff some folk like on a night out and – I have been reliably informed – that  could quite easily double or treble the spending. 

Of course if you are a Generation zedder, born after 1996,  this will not be an issue. All the stuff I read suggests this generation is seriously saintly.

This is a headline I saw in the Guardian not so long ago:

“Generation Z: We have more to do than drink and take drugs”.

Looks like the feckless millennials are the only ones who are going to have problems being homeowners going forward.

CHILL! THAT IS JUST A PRIVATE THOUGHT OF MINE!

If you are a film buff, 4 nights at the cinema each month at £25 a pop comes to an amazing £1,200 per year.

If  going to the gym costs you £50 per month and you decide to exercise at home instead, there will be £600 you can add to your deposit pot.


FIRST TIME BUYER BASICS
Say no to being a tenant forever (how you can escape the tenant trap)
Buying a property fast (wacky and wicked ways to raise a deposit)
Mum & dad to the rescue (how parents can help their children to buy their first home)
Property buyer newbie (explains the basic steps when buying)


7. Takeaways and work lunches

Takeaways are one of my deadly sins. I just can’t resist the odd takeaway or two.

Like most people, I end up ordering more than I really need and £25 a time with tip twice a week comes to £2,600 per year.

Even if you are half as bad as me, that’s £1,300 per year.

If your work lunch is only one of those incredibly boring £3 meal deals, you’re still going to spend £15 per week or £780 in a year. Home made sandwiches anyone?

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8. Other non-essential spending

Say you spend £750 per year on fashion clothing, jewellery or accessories. Of course if you are truly fashion-conscious and have the money, £750 is likely to be only a fraction of the actual total.

A big brand smart phone and carelessness with your phone plan can easily cost you an unnecessary £500 to £1000 a year. Let’s assume £750 for our number-crunching.

We pay handsomely for the name and logo of brands and if you are a brand-freak and like to see your labels, you could be racking up some seriously unnecessary spending over a year. 

The total will of course depend on what you buy and could run into thousands if your purchase is a car with a fancy badge.  I’ll use £500 for our totting up.   


FIRST TIME BUYER BASICS
Raising a deposit (14 common ways to save a deposit with ease)
10 easy ways onto the property ladder (must know ways to become a homeowner)
Is getting a mortgage easy? (reveals some of the secrets of getting a mortgage)
My first property (basic stuff first time buyers must know)

 

9. What you could save

Using the above figures, here is what reducing and/or eliminating discretionary spending could do for your deposit-raising efforts:

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Don’t get worked up by these figures. They are purely illustrative. You may spend much more or much less on some items. You may spend nothing at all on some things.

If you are a gig worker on a minimum wage, your spending is not going to be the same as someone on fifty grand a year – but whatever your spending, you will have the opportunity to make significant cuts. 

To get the most accurate picture for you, take the time to work out your own figures and add up the totals. 

10. Brilliant news

Remember that these figures are what you can gain by just cutting your spending. As mentioned above, there are 5 other major ways to grow your deposit.

Far from seeming impossible, this deposit raising malarkey looks like a walk in the park.

How much do you think you could save a year by cutting your non-necessary spending? Please leave your comments below.


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Dalton Barrett
Rebel Property Coach

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My website is: www.rebelpropertycoach.com

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