4 STEPS TO GO FROM GRADUATE TO HOMEOWNER

After completing their studies, most graduates will enter the job market, begin their career path, and embark on their next stage in life. If you’re a new graduate, what you may fail to realise is that the financial decisions you make early on will largely dictate your financial well-being in the future. To ensure that you put your right foot forward to embark upon the path towards financial freedom, here are just 4 steps that you can take to go from graduate to homeowner…

Pay off student debt ASAP
Unfortunately, most students will graduate with substantial student debt which will hinder them financially until it’s paid off. Ideally, graduates should focus on paying off the debt as quickly as possible so that they start their new endeavours with a clean slate. Once student debt is cleared, they’ll be able to start building their savings. Many South Africans struggle with high debt levels and minimum savings, however, if graduates take the necessary steps to reduce their debt from the start, they’ll be paving the way for future financial success. 

Graduates should live within their means
When you start to earn money, the temptation to indulge and splurge on unnecessary items can be incredibly difficult to resist. However, it’s best to try and live within your means and avoid making large purchases unless you can truly afford them. Purchasing large-ticket items could leave you in further debt which can take years to pay back, which will affect your chances of bond approval if you fail to keep up with the repayments. A high debt-to-income ratio (i.e. how much you still owe compared to how much you earn) will impact your ability to show the necessary affordability levels for bond approval. To place yourself in the best position for financial freedom, practice disciplined spending habits from your very first paycheque.

Saving is crucial to homeownership
The sooner graduates start putting money aside for savings, the better. Where possible, any salary increase that you receive should go towards building up savings instead of unnecessary splurging. When it comes time to buy their first home, many prospective homebuyers don’t have the necessary savings in place to meet the bank’s deposit requirements during the bond application process. Homebuyers are also required to have money to cover the other expenses involved in the property transaction, such as the transfer duty, attorney fees and registration costs – which can end up costing buyers tens or even hundreds of thousands of Rands. To calculate how much these costs can amount to, you can use this free bond calculator.

Be prepared for an emergency
A good financial habit to put into place early on is to have a portion of your savings set aside in a contingency fund. It’s often impossible to predict what will happen in life, so it’s best to be financially prepared for the unexpected. Financial advisers suggest that an ideal goal to set when saving for an emergency is enough money to cover living expenses for around three to six months. A contingency fund will reduce the need to use credit cards or personal loans when unexpected expenses occur.

Plan with a professional
A financial adviser will be able to assist graduates with drawing up a personal financial plan to help them obtain their future goals. Healthy financial habits and the right money management techniques will ensure that graduates can take full advantage of property market opportunities. For those who already have the necessary finances in place, reach out to a real estate professional who can help you start your search for your dream home.