QUESTION: Please provide me with some guidance. I am 26 years old earning a gross monthly salary of $115,000. I have no debt and I will only undertake short courses for lifelong/continuous learning. I use my credit card just to pay utility bills and for grocery shopping, and for the past six years, I have been paying the balance on time.

My next goal is to save for a house and establish a retirement plan. I do not want a pension or investment plan that can lapse if I become unemployed before I reach retirement age. I do hope that I can benefit from an employer-sponsored pension arrangement soon.

I have no savings currently as I just finished paying for my graduate studies. Though a motor vehicle would provide me with a better income (employer pays car upkeep of $18,000), based on my lifestyle, I believe it would increase my expenses. Any entertainment expense is often covered by my partner.

My monthly expenses are $35,000 and I plan to start saving $50,000 towards my house. Do you think this is a realistic plan? What would be a good way to start?

- Debra

PFA: You are able to shift your attention to the major goals of home ownership and retirement because you have been focused and have been managing your finances well.

Being debt free, you are in a very good position to concentrate on saving towards these two goals. It is important, though, that you set a time for realising them so you can save more effectively.

That you have no savings is not a serious setback; remember you have no debts and have many years before you to build up your savings. The advantage of this is that you can amass a large pool of funds by saving relatively small sums over a long time.

Let us look at your goal of home ownership. First, have an idea about where you would want to purchase your home, its size and style, among other things, to get an idea of what it is likely to cost you considering what a similar house costs today.

Buying or building

Consider if you have a preference for buying a house or building one.

The latter course is generally cheaper but comes with many challenges, including proper management of the project.

Mortgage funding is available from the National Housing Trust (NHT) from which you could borrow as much as $3.5 million. At your salary, you would qualify for an eight per cent mortgage rate.

You could join with another NHT contributor to borrow twice that amount.

Funding can also be sourced from building societies and credit unions for buying land, building on land, or buying a house on the open market. Those mortgage rates vary, from about 13.75 per cent and up.

You can also borrow the maximum from the NHT and the rest from a private mortgage institution to keep your loan-servicing costs as low as possible.

The building societies will lend even if you do not have an account with them at the time of the application. Usually, though, it is likely you will have to open an account with them before the funds are disbursed.

Credit unions require that you have been a member for a set minimum period and that you have saved a sum equivalent to a certain percentage of the funds you intend to borrow.

Generally, the building societies will lend a sum equivalent to about 85 per cent of the purchase price or valuation, whichever is less, but 100 per cent mortgages are available.

The credit unions tend to set a limit in dollar terms. This sum varies.

Save enough to make the deposit on the property. This is usually about 15 per cent of the price. Save to fund closing costs, which should be at least six per cent of the value of the transaction and costs you will incur in your dealings with the vendor.

It will take some effort to realise your target of saving $50,000 per month. You can, and have the discipline to own your home in a few years, but you must be able to pass the affordability tests of the lending institutions.

Approved retirement scheme

You do not have to be in an employer-sponsored pension scheme to save for retirement. You can participate in an approved retirement scheme if you are self-employed or are employed but not a member of an approved superannuation scheme.

Should you become unemployed while a member of an individual retirement scheme, advise the administrators of the scheme to get whatever protection the law allows.

Job loss does not mean loss of pension rights for members of superannuation schemes either. The current pension-reform exercise aims to let members move their contributions to the schemes of their new employers or let them remain in the former scheme, and to restrict the return of contributions if employment is terminated.

Implement your plan. Begin with an account at a building society or another financial institution.

Oran Hall is co-author of the Handbook of Personal Financial Planning. He offers free money management advisement. Email: finviser.jm@gmail.com.