Before starting this blog, when I had no idea which topics I should focus on, I asked all my close friends one question. What do you think I’m really good at or know a lot about? The responses I received were definitely interesting. The answers ranged from “you give really good advice, you’re good at writing and expressing yourself,” to “you definitely know a lot about the environment.” One friend even swore that politics is the path I’m meant to take. Uh… no thanks! However, among all the responses, there were a couple that seemed to appear the most. Most of my friends seem to think that I’m good at managing money and saving.
For some reason, my friends always ask me for advice about how to save. Not to blow my own horn here, but I admit, I have always been good with money (relatively speaking, of course; I ain’t no Warren Buffett). I started saving at the age of 10. My mother would give me a $20/week allowance to take with me to school, and I would stash it. I would also babysit my two younger cousins for about $2/hour; I’d stash those profits too; I was a little hustler! I had one goal in mind at the age of 10; I knew I wanted to buy a car as soon as I would be allowed to drive. I didn’t know whether I would achieve this goal, but I did know that I had to save if I wanted to make it happen. I should thank my mother because she was always good at saving as well, something she learned from my grandfather. As an only child to a single mother, I saw her achieve things by herself, and I somehow followed her example. They say you can do anything you set your mind to, and I truly believe that.
Although technically my first job was babysitting at the age of 10, and then stuffing envelopes at the age of 11, I took my first real job at the age of 15 at a pizza restaurant during my first year of high school. Needless to say, I saved everything I made. Shortly after getting my driver’s license at the age of 17, I bought my very first car, with my very own money. I’m pretty sure I was one of only a couple of kids (and the only female) in my grade to actually buy their own car. The only other kids who drove, were driving their parents’ newer, more upscale cars. But I was proud to drive my little manual-transmission Honda Civic. I consider that to be my first financial achievement. Fast forward about 10 years, and I now own my own house. How exactly that came about is a result of a combination of things. However, I attribute my minimalist mindset as one of the main attributes which allowed me to make this happen.
One of the most common questions I get asked by my close friends is, “how did you manage to buy a house?” Like most of my friends, the financial health of the majority of millennials isn’t one that screams freedom. Most of my generation is in debt, stuck paying student loans, credit card bills, car payments, and living paycheck to paycheck. The idea of investing in real estate is simply not a viable option for most of my peers. It is the norm, and that drives me crazy! It doesn’t have to be that way for everyone. If I (an immigrant, daughter of a single-mother) was able to do it, so can anyone else.
So to answer my friends’ question on how I bought a house in my 20s, and share the answer with those of you (millennials and non-millennials) who want to follow the road to homeownership, I’ve outlined all the steps I took that led to me being in a position to buy a house. Please note that I’m not a financial advisor or a real estate guru, I’m only sharing my personal experience and outlining how I did it. My way worked for me, but it may not work for everybody. Each person’s situation is different, and there are many other roads you can take to get to the point of homeownership. Now that I got that “legal” spiel out of the way (my attorney would be proud of me for this), let’s get to it. Here’s how I bought a house in my 20s:
- I started working and saving at a young age. As I mentioned earlier, I began saving since I was 10. At some point in high school I had 2 jobs and babysat. No, I did not miss out on anything. I did my fair share of partying too, but that’s a story for a totally different blog.
- When it was time to choose colleges, instead of doing what most of my peers were doing by going out-of-state, I chose to go to an in-state university that I could afford and that was close enough to home so that I could commute instead of paying for housing. I should note that getting a quality education was not something I was willing to sacrifice for the sake of saving. I was lucky to find a school that was both reputable on a state level, while relatively affordable. If I could give any advice to college-seekers, I’d say not to place so much emphasis on the name of your school. Honestly, once you’re out in the real world, it won’t be as important as some people want you to think it is, and depending on the type of job you aim to have, the name of your school may actually be totally irrelevant, so get informed and don’t get caught up in that story!
- I worked through all of my college years and paid for a bachelor’s and a master’s degree with my own money (I did receive some financial aid for my bachelor’s, but it definitely wasn’t a free ride). Although my mother offered to pay for my education, I refused her help. Maybe it was an ego thing, but I just wanted to be able to say I did all on my own. I didn’t want to burden or have to thank anyone.
- I graduated from my bachelor’s degree almost one whole year early. How? There are actually many ways to do this, but I did it by taking intensive summer courses, and by taking a language proficiency test. Because I’m fluent in Spanish (it’s actually my first language) I passed the test with a score of 100%. This allowed me to receive enough college credits to be able to skip having to take the 2 required language courses, in addition to receiving 2 courses worth of additional credits. I practically skipped a whole semester from simply passing that test.
- I never signed up for student loans, and always avoided all types of debt. However, I had always heard about the importance of having a good credit score, so I opened a credit card when I was 18 years old to start building my credit. I paid every single credit card bill in full and on time, that way I would never pay any interest. That’s a rule I still live by and it’s the main reason for my good credit score. There are many reasons why having a good credit score is very important in the U.S. and there are different factors that go into building up your credit. Seeing people ruining their credit is another thing that drives me crazy. I never have and never will see credit cards as a means to obtain the things I don’t have the cash to pay for. If you have to resort to using a credit card to buy something because you don’t have the money to buy it otherwise, then it means you can’t afford it. If you can’t afford it, don’t get it, it’s that simple! I only use my credit card to take advantage of the rewards, for me it’s a minor financially savvy decision because not taking advantage of my credit card’s rewards system is basically saying no to free money. However, relying on credit cards for the wrong reasons will sink you and ruin your chances of a financially stable future. This is the sad mistake so many people make. Of course there are situations that are out of our control that may cause us to be in debt, but if you don’t live within your means, you’re setting yourself up for a life filled with debt, which to me is a form of slavery. That’s the truth you have to accept if you’re unwilling to be honest with yourself and change unhealthy habits about how you relate to money.
- After completing my master’s degree, I found a corporate job that paid significantly well compared to all my previous jobs. Remember how I said that it shouldn’t always be about money? Well, that includes jobs. I eventually quit that job because I was miserable. I’ve learned that If you’re miserable at your job, there is no amount of money that will ever make you love your job. You either have to change how you see your job, or you have to find another job. Leaving a job that you hate but that pays very well can be a difficult decision, and it takes a lot of courage. But having a clear mindset on what’s most important for you should help make the right decision.
- I didn’t move out of my mother’s house until I had enough money saved for a down-payment of a house. I could’ve rented all those years, I could’ve even moved in with a boyfriend, but by taking that route, it probably would’ve taken me twice as long to save the same amount of money. My advice to young adults is, unless you have horrible parents who treat you poorly, stay home and save! It’s basically a free hotel with free room service and a cleaning person. Trust me, you’ll never be able to save as much as when you have it that good.
- I learned how to invest in the stock market. Now, by this I don’t mean I became an expert or I made a fortune. I simply learned the basics of how publicly traded equities work and the different styles of investing. I learned how to research a company’s financials and how to use a brokerage firm’s research tools. I also learned about the basic tools available for placing trades. I am not claiming to have it all figured out, because trust me, there is so much to learn! But I am saying that an earnest interest in investing, mixed with patience, diligence, some good common sense, and maybe some intuition can turn anyone into an investor, even if you just make a little bit of money through the stock market. It’s not rocket science.
- When I finally felt ready to buy a house, I took my time looking for the right one, over a year, to be exact. Getting a feel for what I could afford, and how much I want to actually pay, and coming to terms with the fact that not everything with a lower price point means I’m going to save money in the long-run. Those are some of the things I learned throughout the process. In the end, I truly feel like I found the perfect one. For me, buying a house was more of an investing decision than anything else, so I approached my decision making process that way.
- I put down 20% so that I could qualify for a conventional loan as opposed to an FHA loan, which automatically requires you to pay for mortgage insurance. This may only be relevant to those in the U.S., but the principle is the same no matter where you live; the more money you give upfront, the lesser the burden later on. Some may argue that you’d be better off putting down a smaller down payment so that you can have more money available to gain interest elsewhere. But let’s face it, are most people going to take that extra money and put it into a high-yield account? Probably not.
We live in a world where being in debt is virtually unavoidable, making the path to homeownership far more difficult than how it was for older generations (despite interest rates being relatively low today). However, to continue with my example, if you pay attention to how I did it, you’ll realize there’s a theme there. What is that theme? You guessed it, It’s mi-ni-ma-lism! As you can see, I’ve always approached money with a minimalist perspective. It’s simple; spend the least possible, and save the most possible. That’s what I tell people when they ask me how I managed to save for a house.
Minimizing your expenses is a must if you want to be able to save. However, it’s important to leave room for some fun, because life should never just be about money. You’re not guaranteed to wake up tomorrow, and you can’t take money to the grave, so make sure you allow yourself to live and indulge every once in a while. It’s not about being cheap, it’s about prioritizing and being frugal.
Cheap = not fun; frugal = smart.
One useful way to think of it is to pick one (or two) hobby that makes you the most happy. Once you identify what that is, minimize and cut out all the other expenses that you can live without, like eating out often, going shopping, etc, but don’t sacrifice that one thing that makes you happy. That one thing should be non-negotiable. For me, my non-negotiable is traveling. I prioritize traveling as my most important and most pleasurable hobby, so I sacrifice many other things that are simply not important to me, and that is worth it for me.
Some of these things include shopping, buying the latest phone, having a new car, getting routine beauty services, eating out all the time, going to music festivals, etc. I actually would rather go kayaking than shopping; I’d rather spend money on a plane ticket than on a phone; my car is a sexy hybrid that I bought used and as a bargain; I know how to paint my own nails and cut my own hair; as a vegan/vegetarian, it’s hard enough for me to eat out sometimes anyway; and as much as I like EDM music, I can live without going to a music festival.
As I mentioned, my biggest (and most expensive) hobby is traveling. Of course, the concept of minimizing expenses applies to traveling as well (learn how to travel like a minimalist), because I’d rather go on 3 trips on a budget each year, than go on 1 expensive luxury trip every 5 years. Again, everyone’s preferences are different. But to this day, I don’t deprive myself from at least one big trip per year. After all, I have no debt other than my mortgage, which if all goes well, will practically pay itself. Now, I’m sure someone reading this might look at the fact that I bought a house and perhaps question how that is connected to minimalism and the “owning less” part of it. I want to make it clear that just because you are a minimalist doesn’t mean you don’t buy things. As mentioned earlier, it’s about only owning what makes you happy. In my case, I approached my home purchase as an investment and a financially savvy decision compared to renting.
If one of your goals is to buy a house, my advice is to start by analyzing how you think about and relate to money and saving. You may need to make some major adjustments, or you may realize that making a few sacrifices is all you need to make a big difference. Either way, I’d love to hear how you are working toward that goal. Leave some comments below about how you accomplished that goal, and what steps you took to get there!
#minimalism #howtobuyahouse #howtosave