Own A Home in Five Years
The National Wages and Productivity Commission reports that 623,631 families or 26.96% out of 2.46 million households in the Philippines plan to acquire a home. Sixty one percent of them are willing to pay a down payment worth P70, 000 or less. Most financing companies require at least 20% down payment before they hand you the keys to your dream home. But, with a daily wage rate ranging from P429 to P466, how can a low-income earner save money to pay for the down payment over a five year period?
For sure there are some ways to cut back in order to one buy your house one day. Here are practical ways to make sure you have money to save every month for the down payment and mortgage.
How to Save up for your house down payment.
Track your monthly expenses
If you want to save money it is important to see where your money goes. Go through your spending habits and check if you are spending more than what you have. Most Filipinos have enough earnings, but we have less money to pay for our basic necessities because we spend them on things we don’t really need. Cut down on your expenses.
Discipline your mouth. Filipinos love to eat not because we are hungry all the time, but simply because there are so many peddlers around. It can be your officemate who offers her newest recipe of “puto” or “lutong ulam” and you’ll sometimes feel obliged to buy out of your friendship. Whether you’re at a bus stop, inside a jeepney or bus there are many vendors who will show you something to buy to satiate your palate. If you haven’t eaten your lunch or dinner yet, you’ll be tempted to grab your wallet and buy.
It takes an effort to control your urge to eat. Stick your thoughts on a decent meal which is nutritious, sanitary and time-appropriate. The best way to do this is to bring your own food, even your own chicha (junk food). You can also bring your one 3-in-1 coffee sachet instead of grabbing a cup of coffee in Starbucks or anywhere else.
Be a practical ‘Fashionista’. When you buy clothes or shoes in a discount store, they don’t really shout,”I’m 50% off”. Your old clothes don’t shrink when you’re near people with new clothes. So, what’s the big deal if you’ll re-use and recycle old clothes? As long as they’re clean, presentable and comfortable, they’ll look good on you. Don’t keep up with people who can spend lavishly on their clothing and accessories. Think of long-term benefits, like having a house when you save more.
Wake up early and rise PUV. If you don’t have a car or motorbike, go to the MRT, bus or jeep instead of taxi to reduce your travel expenses. Just wake up early to avoid the morning rush and to get the best seat.
Don’t buy things which you don’t really need. Gadgets, appliances, jewelries and other “hulugan” or installment items should never lure you to shell out whatever you have in your pocket. If it’s something you can live without, don’t buy it.
Create your realistic budget and stick to it.
Now that you trimmed down your expenses, it’s time to create a budget that will meet your needs.
- Start listing your monthly bills like utilities, rent, loan payments, tuition/school fees and other monthly charges.
- List the things you need in your kitchen. Stick only to the food items you can’t go without.
- Write down your daily expenses like everyday fare and you and your kids’ pocket money (if you have kids) pocket money for the ordinary expenses (school projects, photocopy of school materials, emergency contributions).
- Reserve a small amount for your emergency savings account to take care of your emergency/ medical bills.
- Learn to say no to your relatives. You may have a golden heart but you barely make a living.
- Save the remaining amount of your home’s down payment.
Note: If you think you are not earning enough to set aside something every month, take time to use your skills to earn more. You can do extra work, overtime, or use your entrepreneurial skills to augment your income.
You earn P10, 000 a month and your dream house costs P750, 000. You must save at least 25% of your monthly payment for your housing down payment and later on, your monthly amortization. So, P2, 500 goes to the ‘house’. In 5 years, you can save P150, 000 or 20% for the down payment (12 months x 2,500 x 5 years=150,000).
If P7, 000 is not enough to cover your monthly expenses, look for an extra income. But, don’t increase your expenses. Stick to your original budget.
Figure 1. Sample monthly budget.
Take out a loan to finance the down payment for your home.
Check if a bank or a financial agency offers a loan with low monthly installment fees. Be sure that you base the installment fee on your capacity to pay using step number five above.
Apply for a housing loan with low monthly charges equivalent to your installment fee capacity as mentioned in the step above.
It takes a great amount of desire and discipline to start saving for your monthly housing fees. Once you get used to this financial discipline, it will become a habit. A financial habit becomes an automatic mechanism that will last even your desire wanes off. Before you knew it, your house is fully paid.
You can buy a house if you consider it as an investment and a solid place to carve your dreams, nurture them and see them progressively realized. Practice financial discipline and before you knew it you have a home of your own in five years.