Owning a home is a dream for many Filipinos, but you need not treat it like one – you should commit to a plan that gets you to that goal. One source where homebuyers could get great advice are financial thought leaders, such as Fitz Villafuerte. Villafuerte is the entrepreneur behind online freelance jobs marketplace 199Jobs.com. He is also the blogger behind the personal finance blog Ready to be Rich.
Villafuerte recently collated his most valuable advice into a book entitled “The Ready to be Rich Guide to Investing.” Here are his most valuable tips to earn from a downpayment to full home ownership:
1. Get control of your cashflow.
According to Villafuerte, personal finance begins with making sure you are not spending more than you are earning. Once you get used to tracking your expenses, it will be much easier to make a large purchase like a home.
He explained,
Simply looking at the terms of a housing loan will already give you a good estimate whether you can afford the monthly payments or not – because you’re mindful of your cashflow.
2. Estimate the cost of your future home.
After analyzing your cashflow, you can estimate the cost of your future home depending on where you will want to live.
Research on the average real estate value increase in the area, and project the current figures to know the possible future cost of your desired home. Now, you have your target number that you must raise.
Having a concrete number in hand rather than just an abstract goal will make it easier to plan and to save, Villafuerte reasoned. He added,
The next step is to save and put your money on investments that will help you reach that number. And since you’re working on actual figures, you’ll find that it would be easier to work on that goal as compared to simply saving money and hoping you’ll have enough to buy a home in the future.
While it’s not necessary to consult with a financial planner, Villafuerte said by having one can help you save time since they can help you create your financial plan. He also said that real estate brokers, for example, are also the best people to consult with in getting a best estimate cost of your future home.
3. Be visual about your dream of homeownership.
Villafuerte said that to avoid unnecessary spending, it’s necessary to inspire and motivate yourself with your goal of homeownership. One of the best ways to do this is to be visual about your goal. He thus recommended posting a picture of your dream home on your refrigerator door or making it your wallpaper on your phone.
4. Save well in advance of when you intend to purchase your home.
One common mistake that Filipinos make when saving up for a home is that they only start planning within 3 years of when they intend to purchase a home, Villafuerte noted. Filipinos only try to save up only for the 20% downpayment, hoping to rely on the Pag-IBIG fund or bank financing to pay the rest.
Villafuerte said that as homebuying is a long-term commitment, saving 5 years ahead of time, at least to invest in home equity, would go a long way when the time to buy your home comes.
5. Create and maintain multiple revenue streams.
Having multiple streams will help you with your purchase of a home, in addition to other large purchases, like buying a car. Villafuerte said that every bit of extra income that you create will significantly help in augmenting your monthly loan payments in the future.
I have seen people who would actually buy small apartments or foreclosed condominium units first, have them rented out, and then use that income to pay for the mortgage of their dream home in the future.
Some Filipinos, according to Villafuerte, use the modest amount of money they have saved into starting a small business. They then have this small business pay for the purchase of their dream home.
6. Consider investing into financial instruments.
Some financial instruments are particularly well-suited for saving up for a home, but – as in keeping in with the theme of Villafuerte’s advice – it must be done for the long term.
Equity funds and the stock market are good ways to raise capital to purchase your home, but only if you can do it way ahead of your target date – at least 5 years before you plan to buy your home.
7. Choose a home that truly suits your lifestyle.
Villafuerte recommended beginning with the most basic requirements, such as how many bedrooms you need and the minimum floor area you want. From there, you can analyze your lifestyle and consider how it might affect your choice of residence. As an example, if you like cooking a lot, you may want a spacious kitchen; if you have children, you may want to live near their school.
Once you have designed your ideal home, you can then scout for actual properties and see if they fit your budget. If they do not, Villafuerte said that you have three options: Delay buying your home until you can afford it. Find ways to increase your cashflow, so you can afford it within your target date. Go back to square one and redesign a more affordable home.
Home is where the heart is
In addition to his advice, Villafuerte was quick to remind us why it’s important to buy a home in the first place. Chief among them was the fact that there is no reason to join the crowd and simply settle with renting all your life.
With a large purchase such as a house out of the way, you can redirect your money to fulfilling your other goals in life, such as maybe – traveling around the world, pursuing an expensive hobby, and of course, preparing for a comfortable retirement.
Have you found your dream home already? Share your saving tips with us!
