By now, you know already the criteria for setting the right financial goals for yourself. We hope you take these S.M.A.R.T. criteria to heart because this is how successful and goal-oriented people reach their goals!

However, we understand if the 3-Step Goal Setting Process still might seem a bit confusing for you, especially if you do not have any background in finance or economics.

Don’t worry. As always, Money University is here to help!

In this article, we’ll show you how to set financial goals for one of the most common things that people aspire for.

What’s this? Your dream home, of course!


Goal Setting: Your dream home

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We start with how to set a financial goal for your dream home because when it comes to dreams and aspirations, most people will have their dream home at the top of their list.

And it’s not that hard to imagine why. After a long day’s work, who wouldn’t want to come home and relax in a house that they own?

You wouldn’t have to worry anymore about rent rising really high next year. You can refurbish it to your heart’s content. And you can pass it on to your children in the future!

20 - Expensive house -However, for most people, a house is also the most expensive goal they’ll ever plan for.

Though it’s usually a long-term goal, miscalculating on setting your goal can really hurt you as you might end up not being able to afford your dream home in the future! (You’ll see a valuable example of this below.)

This is why it’s really important to carefully plan for it using the 3-Step Goal Setting Process!


Your financial goal: The 20% downpayment

Because the cost of a home typically ranges in the multi-millions, it is rare for people to pay outright in cash for the whole cost of buying a house. Thus, most people take out a home loan from the bank.

And in case you don’t know, banks typically require a 20% downpayment when you take out a home loan with them. This helps them ensure that you indeed have the wealth to pay for the house.

For example: If you are able to determine that your dream house costs P5 million, the bank will require you to pay P1 million upfront. It will then loan out the remaining P4 million to you. You’ll then have to repay them for that P4 million by shelling out an agreed upon amount every month for several years — plus interest, of course!

Thus, for most of us, what we should be planning for is the payment for the 20% downpayment of your dream home.

Pro Tip: This, of course, comes with the assumption that you can afford the monthly payments that the bank will ask from you so you can repay your loan (with interest). Because if you can’t, you might not be able to pay for your house — and the bank will then just take it away from you! So make sure that you can afford your monthly payments (called “loan amortization”) to the bank!

But hey, if you have the wealth and high cash flow to plan for the payment of 100% of the cost of your dream home, go ahead! By being able to do this, you won’t have to take out a loan from the bank and you’ll be saving a lot on NOT having to pay for interest!

Having said all these, let’s now follow the 3-Step Goal Setting Process:

1.   Determine what exactly your goal is and when you plan to achieve it. Remember to make it specific!

First, you have to determine, in the most specific way possible, (1) how big your dream home will be; (2) how it will look like; (3) where it will be located; and (4) when you plan to buy it.

These 4 factors — size, type, location, and time frame — are the most important things to determine when it comes to houses as they significantly affect the costs associated with achieving your goal.

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Here are some questions that you can ask yourself to make your dream house goal as specific as possible:

On Size:

  • How many square meters will the floor area of my house have? 5o sq.m. or 500 sq.m.? Of course, the bigger the house is, the more expensive it becomes.

On Type:

  • Do I want a house and lot, a condominium unit, or something else? How many floors/levels will my house have? You can expect the cost of a 3-level house to be triple that of a single-storey house.
  • Will my house also have high ceiling? For flooring, will it use marble, tiles, or wood? Take note that the type of materials to be used can significantly alter the costs of constructing the house.

On Location:

  • Do I want my house located near business districts (like Makati or The Fort BGC) where the cost will be much higher or in other cities or provinces where cost of land is cheaper? Also note that if a house is in a convenient location, say, near schools, hospitals, or markets, the cost of the house could increase.

On Time Frame:

  • When do I want the construction of my house to start? When I’m 35? 40? 45? The further away it is, the more time you’ll have to save up for it. But at the same time, it’ll cost more as inflation and rising property prices may keep pushing prices higher! In general, however, the further away it is, the more time you’ll have to save.


2.   Know the cost of your goal today.

With a specific goal in mind, you will have to determine the cost of that goal today.

So how can you find out the actual cost of your goal?

If you know people in construction and real estate, it would be good to share with them the details behind your dream home so they can give you estimates on how much it would currently cost. Perhaps they can even give you tips (and friendly discounts!) on how to lower the cost of your goal!

Photo courtesy of Alaskan home.

Photo courtesy of Alaskan home.

You could also check out real estate listings in the classified ads section of newspapers, in property magazines, in buy and sell websites likes OLX and MyProperty, and in listings of banks to see costs of properties similar to your desired home. You could get an indication of the market value of various property types in different locations in these listings.

Of course, you probably won’t find a listing that’s exactly the same as your dream home. That’s OK as long as you get a reliable estimate on how much your dream home would cost.

For this example, let’s say that by seeing the costs of similar properties, you’ve estimated the cost of the downpayment for your dream home to be P1 million. This is the cost of your goal today.


3.   Adjust the cost of your goal for inflation.

Now that you have an estimate of the cost, you should do what any smart Money University student would do: Adjust the cost of your goal for inflation.

Why do this?

In our earlier Learning Modules, you’ve learned that inflation is the silent killer of your financial goals. Inflation accounts for the constant rise in prices of goods and services, which means the same goals in the future will cost much higher than today.

Simply speaking, the downpayment for your dream house you’ve found which costs P1 million now will NO LONGER cost P1 million in 10 or 15 years’ time. That’s the sad reality.

We will help you develop — right now! — a useful Money Skill and that is the ability to incorporate inflation in the cost of your goals.

First, here’s the formula to adjust the cost of your goals for inflation:

Cost of your Goal in the Future = Cost of Goal Today x (1 + inflation rate) no. of years

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Let’s apply this to compute how much your P1 million downpayment will cost in the future.

Let’s say you gave yourself a target of 18 years to attain your goal of buying your dream home. Let’s also assume a 4% inflation rate. Using the formula above, what is the real, inflation-adjusted cost of your goal?

Get ready for this: your P1 million downpayment, in 18 years, will cost you P2,025,816.52! Yes, your goal actually more than doubled from its current cost!

This means, in 18 years, if you were only able to save P1 million, you WILL NOT be able to buy the same dream house you’ve wanted all along. In 18 years, the dream house you’re planning to buy have already doubled in cost.

Why? Blame inflation, the silent killer of your financial goals.

This is why adjusting the cost of your goal is super important! To make sure that you don’t mistakes doing this, always use the My Goals worksheet in the Worksheets section of your Money University account to accurately determine the cost of your dream home that’s properly adjusted for rising prices.


Action: Set your financial goal for your dream home

With your new found knowledge on how to set goals for your dream home, try it now for yourself! Head over to the “My Goals” section in the Worksheets section of your Money University account so you can accurately and automatically determine your financial goal for your dream home.

Once you’ve done that, don’t forget to save it so you can always track and update your progress towards reaching that goal!



Seems easy enough so far, right? Doesn’t it feel good to finally know how much your dream home is truly worth?

And with the help of the My Goals worksheet, you can be sure that you’ll be able to quantify your goals accurately and easily!

With quantified goals, you can truly be able to track how near or how far you are from your goals. Unlike random and unquantified dreams that, usually, are left as just that — dreams!

In the next article, we’ll tackle the next common goal that you probably have as well: your future car.

We’ll see you there!