I'm 23, living at home, and still can't afford my own property. What could I do?

Question

Most of my friends have their own places, either rented or mortgage.

Should I be concerned that I still live at home?

I bring home around £1300 after tax, £400 of that goes on car finance+tax, £200 on rent then the rest goes towards other monthly bills / petrol etc

My car costs me £300 a month, over 5 years and I started in March 2008, so I'm locked into that until 2013 (i made the mistake of paying 13k for a car thats now worth 5k, did this about 3 months before the markets went bad so I was unlucky there)

I have about £2500 on credit card, and no savings.

Am I in a normal situation? or should I be worried?

I don't know where I'm going, ultimately I'd love to clear all that and get a deposit down on a place, or think about going to work abroad for a few years, either way I need to clear the backlog and get some savings.

What would you do in my shoes?

Answer 1

I wouldn't be too concerned, yet. You're young. Many young people are living longer in the family home. See this Guardian article: Young adults delay leaving family home. You're in good company. Yet, there will come a time when you ought to get your own place, either for your own sanity or your parents' sanity. You should be preparing for that and building up your savings.

Since you've got an income, you should – if you're not already – put away some of that money regularly. Every time you get paid, make a point of depositing a portion of your income into a savings or investment account. Look up the popular strategy called Pay Yourself First.

Since you still live at home, it's possible you're a little more loose with spending money than you should be – at least, I've found that to be the case with some friends who lived at home as young adults. So, perhaps pretend you're on your own. What would your rent be if you had to find a place of your own? If, say, £600 instead of the £200 you're currently paying, then you should reduce your spending to the point where you can save at least £400 per month. Follow a budget.

With respect to your car, it's great you recognize your mistake. We're human and we can learn from our mistakes. Plan to make it your one and only car mistake. I made one too.

With respect to your credit card debt, it's not an insurmountable amount. Focus on getting rid of that debt soon and then focus on staying out of debt. The effective way to use credit cards is to never carry a balance – i.e. pay it off in full each month. If you can't do that, you're likely overspending.

Also, look at what pensions your employer might offer. If they offer matching contributions, contribute at least as much to maximize the tax free extra pay this equates to. If you have access to a defined benefit plan, join it as soon as you are eligible.

Last, I think it's important to recognize that at age 23 you're just starting out. Much of your career income earning potential is ahead of you. Strive to be the best at what you do, get promotions, and increase your income. Meanwhile, continue to save a good portion of what you earn. With discipline, you'll get where you want to be.

Answer 2

You have made the most important first step by starting to think about your money, well done.

Firstly pay of all credit cards as quickly as you can and start to live within your means. Until you have paid of your credits cards don’t spend any money of unnecessary items, e.g.

• Take a pack lunch to work
• No smoking
• No Drinking
• No new clothes, unless you will get sacked if you don’t buy them
• No driving (or other travel) that is not needed to keep your job.
• Etc

Once your credit cards are paid off you can start living a more normal life. Each time you spend money you need to ask yourself:

Is this worth more to be then being able to buy a new house in a few years time?

You should be able to save at least half the amount you were paying of the credit card each mouth and still leave a reasonable life, so setup a standing order at the start of the month to your saving account.

Given your age you are like to get promoted and hence have increased pay or get increments for each year of service. Therefore

Every time your pay goes up, set up a standing order to transfer at least half of the pay increases to a saving account. You did not have this money before, so you will not miss it when you save it.

In the long term, you should be able to keep your car until it is about 15 years old, so will not have the cost of buying another car. Therefore once the car loan is over, you can save that money as well.

Answer 3

When I was 23, the Toronto housing market was approaching a record high, and I thought, "I must buy a place or I'll be locked out." And I did. Bad decision. I should have waited and saved my money. For the record, I thought I would never recover, but I did. Patience grasshopper.

In actual fact the U.K. housing market is probably approaching a low, and you have a job that is paying you well enough.

BUT the lesson I learned wasn't about buying at a high or a low, it was about the need never to let external factors rush your decision making. Your decisions have to make sense for your own unique situation.

If you're living at home and you have domestic bliss, mum and dad aren't crimping your style (if you know what I mean), then, enjoy it.

Your credit balance sounds understandable. It's not fatal. But it's a budget killer.

Make adjustments (somehow/anyhow) so that you are paying it down month by month. Take it down to £0. You will feel amazing once you do it.

After that, use the money that you were paying onto your credit card and start saving it.

Whether you ultimately use the money for a house down-payment or your retirement, doesn't matter. Just get into the situation where you're saving.