So you have decided that today is the day to start saving for your first home deposit. You are enthused about the idea of becoming a first home buyer, you are looking forward to seeing your bank account savings get higher and higher and you are ready to tackle the challenges often presented by having to cut back on your finances here and there…but where do you actually start? The good old budget is the answer.
Saving enough money for your first home deposit can seem like a goal with no end date sometimes but with a budget, home buyers can stay motivated and on track towards saving for their home deposits. Here we outline how to determine your budget in 4 steps.
1.How much money do you have?
Step 1 in determining your budget is to check the current balances of all your accounts, from your everyday bank accounts to investment accounts. If you are putting aside cold hard cash, include that here as well. You will also need to find out the interest rates on each of your bank accounts and whether they have any management fees. Make note of all of this information as this will be used to calculate your current financial standing.
2. How much money do you make?
For those of you on a salary, determining your income will be relatively straight-forward, simply take a look at your paychecks and calculate what your income per month is. For those of you that work on an hourly basis or who have an unpredictable cash flow, take an average of the income you have received over the past 6 to 12 months and work off this figure. If you work in an unpredictable environment where there are large variations in how often you work month to month, take the lowest amount your were paid per month over the past year and go off this figure just to be safe.
3. How much money do you owe?
Existing debt is a very important factor to consider for first home buyers as financial institutions will asses your level of debt to determine whether you have bad credit or not and whether you are a “safe bet” when it comes to getting a home loan.
If you have any debt, determining your recurring monthly repayments is the 3rd step in developing your budget. This should be easy enough to do by looking over your past statements or by contacting your financial institution if needed. If you have credit card debt or personal loans to pay off, don’t worry too much because you are on your way to developing a sound budget that can adresses your bad credit issues.
4. What are your monthly expenses?
To accurately determine your monthly expenses, you will want to look over the past year of your financial records. Since we accounted for any current debt in step 3, expenses include every other item that you spent money on. To make your expenses as easy as possible to determine, group them into the following categories:
Bills – phone, water, internet, paid TV etc
Grocery expenses – food shopping only
Insurance & licensing – car insurance, health insurance, license renewal etc
Lifestyle – dining out, entertainment, shopping etc
Once you have thoroughly and honestly looked at each of the 4 steps outlined, you will be ready to determine your budget. Your budget and the amount that you can start putting towards saving for your first home deposit will be:
Budget = Income – Expenses
A budget will enable you to direct your money to where it matters most, so you can start saving for your first home deposit.
Have you been struggling to get into a home of your own because of financial difficulties? At No Savings our goal is to open the door to home ownership for as many West Australians as we can. We specialise in helping first home buyers who have had trouble obtaining finance before with our no deposit home loan options. Contact us today and see if you qualify.