One of the most pressing questions young adults worry about is how does one afford the expenses of homeownership, from saving for a deposit and covering the transfer costs to making the bond repayments but still have enough left over to pay for the rates and taxes.
“Everybody is looking for a simple answer to this question. And, while it would be amazing if there was, the reality is that there is no quick-fix to solving this problem. As with any asset with a high return on investment, the initial costs of owning a home can be a bitter pill to swallow. But, with careful financial discipline and planning, the dread of the pending debit orders will lessen over time,” says Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.
Translating this into practical advice, Goslett advises that potential homeowners start by organising their finances in a real budget rather than estimated.
“Start by recording your current expenses for the month, that way you can see how much you are actually spending in each area. Thereafter, you can work out an estimated and realistic goal of how much you want to spend in each category,” says Goslett.
When creating the budget, Goslett advises that future homeowners consider breaking down their finances into the following categories:
- Unchangeable essentials (fixed monthly expenses such as rent and insurance)
- Changeable essentials (variable monthly expenses such as groceries and petrol)
- Inessential expenses (variable costs such as entertainment and miscellaneous shopping)
- Long-term savings (fixed saving schemes such as pension funds and investments)
- Short-term savings (variable informal savings schemes such as holiday budgets)
As a final piece of advice, Goslett recommends that homeowners also make room in their budget for unexpected emergencies. One of the things that stresses new homeowners out the most is not having funds available for when things break or need repair.
If you are unable to make room in your budget for these sorts of expenses, make sure you’ve got some form of credit or overdraft facility set up to use in case of emergencies.
“The key to generating wealth is really quite simple: spend less than you earn. Although this is somewhat an oversimplification, if you apply this kind of logic to your finances and invest the money you already have in a way that increases your total earnings, then you’ll find that homeownership becomes much more affordable,” Goslett concludes.
