This is a frequent financial advice discussion because it is a big question with far-reaching consequences. It is harder than ever to afford your own home and it is a life-changing commitment. Disturbingly, I am meeting people who are genuinely anxious about what they perceive to be a failure to pull this homeownership trick off. They can no longer enjoy holidays, leisure and treats because they feel guilty about how this lifestyle is preventing them from stepping onto the property ladder. They feel they should swap living an enjoyable life for a much more modest existence and become homeowners.
Our parents often own their home. In fact, many paid what now seem stupidly small amounts for their first home relative to today’s prices; traded up to accommodate growing families and ended up owning an asset that dwarfs most of their other finances. It is no wonder then, that they advocate homeownership, they feel rich from the experience, but I wonder what they might have sacrificed to achieve this wealth?
If, in those early years when they saved all spare money towards a deposit for their first home, they spent the money instead, what alternative memories would they now have of their youth? Maybe they would have travelled, gone to concerts, done a course, owned a car or motorbike?
What if they hadn’t sunk all their spare money into the house? What adventure might they have embarked upon at the point you flew the nest? Instead, they kept the house going, even though most of the time it was half empty, just so as you had somewhere to gather for family get togethers.
Maybe they are grateful now to have cleared the mortgage and have somewhere to live rent free during retirement. That would surely be a comforting place to get to, right? Bet they are also really proud of the legacy they will leave you when they pass on. I wonder though, what might their retirement look like if, instead of keeping the house going, they had all that cash in the bank and permission to spend it before they die?
It is harder these days to afford to buy a home. Homes are more expensive relative to earnings. The *ONS has been collecting data on how house prices compare to our earnings since 2002 when average earnings were £20,700 and an average house cost £106,000, a bit over 5x earnings. In 2020 that has risen to almost 8x – average earnings £31,700 and house £249,000.
Getting the deposit together is harder, because the cost of renting uses up a significant portion of our income, making it hard to save fast enough to counter the speed at which property prices are rising.
It is easy for those of a bygone generation to imagine that we can just apply the strategies that served them, but very often it looks to me as though you are being asked to limit your life so you can die owning a chunk of land, bricks and mortar to pass on to someone else. Is that really your financial ambition? Or do you have some sort of responsibility to use your assets to realise your own potential during your lifetime?
Every one of us has a unique experience of life so far, and a different perspective on how we imagine things should be, and yet we all suffer from conditioning. We can’t avoid soaking up some of the stuff we are surrounded by, and before we know it, we have ideas and opinions programmed into us. Sometimes it takes some good old fashioned number crunching, combined with a few challenging conversations to work out what is actually going to serve us, regardless of the traditional brainwashing we have been subjected to. Having a professional financial coach to help you with this process is vital. With the right help you will get results that serve you financially, but more importantly, escape the anxiety and guilt once you are empowered with a plan and permission to live life the way that works best for you – maybe committing to a few frugal years because you realise homeownership is your destiny, or maybe working out a financial plan that allows you to live more fully by dealing with your future financial responsibilities differently to the way your folks did it. Either way, we are here to help you fulfil your potential.