How to Save for a House on a Low Income

How to save enough money to purchase a new home when you’re on a low income is hard. However, it is not impossible. Properties for sale do not come cheap but with lots and lots of discipline and perseverance, you’ll will eventually be able to make a purchase. You must also take an in-depth look at your priorities and adjust your spending habits as needed. This article outlines some tips that you can adopt. You can also check out this video on our Youtube channel.

These saving tips are not just useful if you are looking at properties for sale in order to purchase a new home. You can apply the same principles if you are looking to make other significant purchases (e.g., in order to purchase a car, or to spend on your wedding and honeymoon), or want to focus on increasing your wealth.

1) Get Out and Stay Out of Debt
If you want to save and have a little money on hand, you cannot afford to have any short or long term debt whether they be credit card payments or car loans. Such payments reduce the amount of disposable income you’ll have at the end of each month, that is, the amount of money you’ll have left over after you’ve spent whatever income you’ve earned.

It goes without saying that with less disposable income, you’ll have less money to save.

2) Live Cheaply
Look at every cent you spend, figure out what you can do without, and cut back as much as possible. For example, instead of buying a patty, cocobread and bottle of coca-cola every day, make a sandwich or two with bread and left-overs from your previous night’s dinner. That’s JMD $265 per day right there, coming to approximately JMD $63,600 per year. If your lunch is a box food and juice, you’d be able to save even more (i.e, about JMD $700 per day totalling JMD $168,000 per year). Do you really need cable? How many phone cards do you buy per month? Do you really need to go to the hairdresser or barber to get your hair done? As a girl, it’s cool these days to go natural with a big chop and keep it that way for a while. That’s easily a savings of JMD $1,000 per week (i.e., JMD $52,000 per year).

You can every try to reduce your utility bills. Check out one of our article outlining 8 actions you can take to reduce your water bill.

One trick I use repeatedly is to buy local products and look for cheap brands. You don’t have to take this leap for every product that you use. For example, I simply refuse to buy cheap toilet paper. However, instead of spending JMD $1,500 for shower gel, I went for a JMD $350 bottle that was bigger than anything else I could find on the supermarket shelf. One extra benefit was that it even lasted longer than my usual brand, which meant even more savings for me at the end of the year. Cha-ching!

3) Spend On Only What’s Needed
Resist the temptation to go out because everyone else is, or to buy things because everyone else has them? If you go to the movies and for two drinks at least once per week, you are seriously looking at about JMD $2,000 in savings per week (i.e., JMD $104,000 per year). Focus on your goal.

4) Take Out Your Savings First
As you cut back on your spending, convert all that money into your savings. Setup a “true savings bank account” and as soon as you get paid, take that money right out of your “normal bank account” first thing, before you do anything else. If you can automatically make the bank transfer, that’s even better.

5) Stay In Your Job
Don’t switch jobs while you’re actively saving to purchase a new home, unless you must. It’s much easier to get a home loan if you’re able to show mortgage providers that you’ve a consistent income as well as savings. This goes for both you and your partner.

6) Earn More Money
If you’re able, see if you can do something on the side as another source of income, while you stay at your full-time job. This is easier said than done and all depends on what you’re good at and the resources you have on hand. For example, if you know someone who has a farm in the country, perhaps you can sell their foodstuffs to your co-workers and take a commission. Maybe you’re good at baking and can earn extra money by making cakes for birthday parties and other special events. The sky's the limit.

7) Try the National Housing Trust
If you earn JMD $7,500 per week, you'll be able to borrow up to JMD $4.89 million from the NHT if you are the only qualified NHT contributor. Otherwise, if there are two of you, you'll be able to borrow up to $9.8 million jointly. Even more importantly, there’ll be no interest payments required.

If you earn more than JMD $12,001 per week, interest rates apply. However, the rates are capped at 6% per annum which is way better than the lowest we’ve seen offered by Jamaican mortgage providers (e.g., 8.5% at Victoria Mutual Building Society and JN Bank).

Read our article on the NHT Mortgage Interest Rates introduced by the government in July 2016.

8) Buy in a Cheap Area or Start Small
Try to find a property for sale that matches the budget you’ve set for yourself, and remember that you’ll need more than just the deposit as there’ll be legal fees, stamp duty plus more.

If you’re single, search for a studio or a one-bedroom property for sale. If you need something bigger, extend your search to localities beyond the popular areas within your community. You’ll be surprised to find what’s out there.

You should also bear in mind that the Prime Minister, Andrew Holness, has indicated that more affordable housing will be provided in Jamaica over the next few years.

In Conclusion
It good easily take 3 or more years, depending on your financial situation, to earn enough money to afford a property for sale that you want. However, it'll be worth the effort in the end when you get to go home to your own place every day.

Good luck in your saving for your new home.

This article is for general information purposes only and does not constitute legal advice.