The consensus across the world is that Millennials can’t afford to buy houses. Sadly, this means that a lot of them have stopped trying.
To be clear, Millennials can afford to buy a house in a lot of cases. They are, however, facing more barriers and challenges in homeownership than any generation has ever faced.
Is buying a house impossible? No. Is it extremely difficult, yet still attainable? Yes.
If you want to buy a house, here are a few things you should consider. If you’re looking for other tips to help you save for what really matters in life, click that link.
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TRY to Minimize Student Debt
Paying back student debt is arguably the biggest mountain that stands between this generation and their first house.
It’s easy for older generations to say, “Look at all of these irresponsible and lazy Millennials. When I was their age I had a mortgage and a car to worry about.”
Let’s take a deep dive into that statement. Consider that:
- Baby Boomers only needed to work 306 hours of minimum wage to cover four years of college in their day. Millennials need to work more than 10x more: 4,459 hours.
- The average monthly student loan payment was $227 in 2005 but soared to $393 in 2016.
- Today’s average graduate leaves college with more than $37,000 in student debt, $20,000 more than it was only 13 years ago!
That $37,000 debt could easily be a 20% deposit on a $180,000 home. This means that it’s really unfair for Boomer parents to scold their kids for not owning a home after graduation.
However, the quest to buy a home can start in college. It’s hard to graduate with no student debt. But some of the steps you can take include:
- Creating a realistic student budget and sticking to it
- Picking up a part-time job
- Looking for lesser-known scholarships and bursaries
The more you can do to minimize your debt, the closer you will be to homeownership.
Live With Your Parents
We know. You very much want to flee the nest.
But more and more young people are staying at home a little bit longer to save money for a down payment on their first home or condo. These youngsters are no longer stigmatized as lazy slackers. They’re now financially savvy.
Keep in mind that this strategy only works if you actually save the money that you would be paying for rent. Let’s say the average rent in your area is $1,500, which is pretty conservative if you want to live in a big market.
This means you could save a down payment of:
- $9000 in 6 months
- $18,000 in a year
- $27,000 in 18 months
- $36,000 in 2 years
You can see how quickly that adds up and what a huge difference this can make.
Audit Your Online Subscriptions
Another thing that Baby Boomers didn’t have to deal with is all of this incredibly cool technology. Subscription-based services like Amazon Prime, Google Play, Netflix and Dropbox have all made our lives a lot easier…. While also costing us way more money than we realize.
How much money do you think you’re currently spending on monthly subscriptions? The average person was given a few seconds to estimate the total and guessed about $79.74 per month. But they were then given a chance to add it all up and the actual total cost was $237.33 per month.
That’s an extra $157.59 every single month. This can add up to an extra $1,891.08 per year that you can put towards a down payment on your first home.
How do you find this money? Just look at your monthly bank account summary and see where the little leaks are. Ask yourself if you really need Netflix and Disney+.
Minimize Fast Food and Fast Spending
This is another thing that can deplete your bank account without you even realizing it.
You spend 15 dollars buying subway for lunch here. You go out for a $50.00 dinner there. But, before you know it, you’re spending hundreds of dollars every month. It’s not hard for your fast food spending to accidentally exceed your car payments.
Currently, Millennial-aged shoppers are spending less money on eating out than GenXers or Baby Boomers. But you could argue that’s because they simply don’t make as much money as older people.
Let’s say you’re spending $3,500 a year on eating out. That’s about $291.00 per month, or about $67.00 a week. That’s only about 2 fast food meals and one mid-level dinner out per week!
If you can try to cut that number in half, you’re poised to save $1,800 a year. If you add that to the online subscription savings from above, you could be saving well over $3,600 a year.
The Bottom Line
Of course, there will be dozens of other factors, such as how quickly you’re able to find work after you graduate. Will you settle in a career right away, or settle for a temp job while you look for something better?
It’s not impossible for a Millennial-aged person to buy a house. They simply need a bit of luck, and to avoid the very common financial pitfalls that we’ve explored today.
Neha Nidhi
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