The rumours you’ve heard about saving for a deposit are true – it’s damn hard work, plus to prevent extra charges such as lenders mortgage insurance (LMI), you should be aiming for over 10%.
But it’s well worth it, and that feeling of whacking that sold sticker against the oversized picture of your new home is a truly special one.
Read more: Is your deposit under 20%
In order to save, you need to budget
Here’s a few tips to getting your money in the bank and not in the shop assistants/waiters/bartenders/airlines hands (delete as appropriate).
Budgeting 4 step process
- List your income – including salary, dividends from shares, interest on bank accounts and anything else that generates income.
- List your unavoidable expenses – including rent, utilities, car repayments, car registration and insurance, HECS repayments, personal loans and credit card repayments.
- List your avoidable expenses – including clothes and shoes, restaurants, entertainment, hair and cosmetics, taxis and gifts.
- Calculate what’s left over – this exercise should help you review your spending patterns and make alterations.
Here’s some practical budgeting tips:
- Keep a record of everything you spend over a 30 day period. It’s amazing to see what you actually spend your money on.
- It’s better to overestimate rather than underestimate your expenses.
- Organisation is paramount – don’t guess at the figures, rely on old bills and check the real amounts. You need to know how much you have, down to the last cent.
- Regularly review your bank records, balance your cheque book and reflect on your budget strategy.
- Become a conscious spender by making a list before you grocery shop and sticking to it. Compare prices before buying large items and never buy on impulse.
- If things are still tight consider giving something up – your gym membership (go for a run outside instead), takeaway dinners (buy a recipe book instead). Even if it’s just for a couple of months. Money saved each month could be added into your savings plan.
- If you smoke, forget the health reasons for quitting – just think about the money!
- If you know you have big occasions coming up, plan for them over a period of months, don’t just chuck it on the credit card.
Make the most of your new-found savings – put them in a high interest, online savings account where you can’t attack it at the ATM.
Budgeting & your home loan
- Never borrow more for your home loan than you can afford – ensure your income exceeds your mortgage repayments, with funds left over to cover planned and unexpected costs.
- Factor interest rate rises into your calculations. Assume rates are 2% higher than current levels and then work out if you can afford mortgage repayments.
- Assess fees and charges. Check whether there are early repayment or exit fees for the mortgage products you’re analysing.
- Say no to increased credit card limit offers – at least until you are easily managing your mortgage repayments.
- Live simply – the simpler you keep your spending habits, the more money you will have to pay off your mortgage.
- Repay more than needed if you can – the more principal repaid, the lower the interest costs. Making extra repayments when you can means that if you have to take time off work, say, on maternity leave, you may be able to reduce your repayments and not be too far behind.
- Make timely debt repayments to keep your credit history clean. If at any time you separate from your spouse or partner, keep up debt repayments on your home loan. If you don’t you may blemish your credit profile.
The above are some top tips to get you started and get you thinking like a saver.
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