Saving for a home loan is a daunting task. The end goal is so large that it sometimes seems unachievable, but strict cash flow management and a good understanding of your finances play a large part in accomplishing your goal.
In this article we cover some basic steps to get you on your way to saving for a home loan deposit. Please note this is general advice only and is not tailored to your financial situation. For specific advice, contact us at Track Financial and we’ll be happy to help you with your savings goals.
Understanding Your Budget
Before you can make any budget adjustments you need to know where your money is coming from and how you are spending it. It’s easy to spend money without realising – eating out for lunch every day, buying clothes and ongoing subscriptions can all eat away at your capacity to save.
To analyse your budget, go through your bank statement and make a note of everything you’ve spent in the last month. Classify it into categories, and then break those down into 3 sub-categories:
1. Must-haves: includes expenses like rent, petrol and transport, medical and home insurance costs, schooling.
2. Maybes: this category should include items where you could potentially reduce costs with minimum impact to your lifestyle, such as food costs, gym memberships, second car and entertainment.
3. Goodbyes: this is the easiest category and includes anything that you can cut immediately with no impact on your day to day life. For example, subscriptions that you still pay for but no longer use or insurances that don’t actually cover anything useful.
After you’ve cut costs from the Goodbyes category, go back and look carefully through the maybes. Set yourself a goal to cut expenses in this category and work out how the savings could be achieved. For example, rather than eating out every day, could you bring lunch to work? Is there a cheaper gym nearby, or can you change your utilities provider for a discount?
Setting Savings Goals
Setting smaller goals that build into one big goal is a great way to keep on track with your savings. A target of $60k sounds huge, whereas 4 targets of $15k is much more achievable. Each time you reach your smaller goal, reward yourself with something you’ve missed (perhaps if you’ve given up eating out to save you could reward yourself and a friend with a night out at a restaurant). This way, you’ll have something to look forward to and are much more likely to stay on track.
Once you’ve determined your goals, set up a savings account and an automatic payment to deduct your savings from your account on the day you get paid. Even better, remove the savings account from your internet banking or set it up at a completely different bank to reduce the temptation to dip in when funds are short.
Apply for Assistance
Most states have first-home buyers grants that can go a long way toward helping buy your first home. The grants have specific terms & conditions, but may reduce the amount you need as a deposit to help you reach your home ownership goals sooner. Aside from first-home buyers grants, you could also be eligible for tax or stamp duty concessions.
Speak with a home loan specialist to find out what assistance might be available to you and get started on your savings plan today.