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Dreaming of owning your first home but feeling overwhelmed by the financial hurdles? Trust us, you're not alone! Budgeting can truly be the key to turning your first home dream into reality. In this blog, our colleague and first home buyer Suzanna shares her personal journey and the practical budgeting tips that made buying her first home possible. Let's dive in and get you one step closer to your dream home!
“Whatever system you use, find one that works best for you.“
There are plenty of free apps you can download, like Booster's MyBudgetPal, and some fantastic free spreadsheets available for Excel. No point paying for one when you're trying to budget! If you're a pen and paper person, keep it somewhere visible, like on your fridge.
Personally, I'm a notes person. My husband and I use a simple shared note on our iPhones to list all our weekly, monthly, and yearly bills and income. Every expense is categorized, but more on that later.
"Figuring out where your money is going and what purpose it serves is key!"
You might think you spend $30 a week on lunch, but is it really $30? Or is it $50? All those little things add up quickly! When was the last time you sat down at the end of the week or month and reviewed your actual spending? Are there things you could cancel or cut back on? For example, do you have Netflix, Disney Plus, Neon, and Sky? Can you cancel one or two of those and shift that money towards your goal (since you're used to spending it anyway)?
Knowing your income is super important too! It might sound silly, but if you're a contractor or on wages, how much do you really make? My suggestion, from experience, is to either average your last year's income (or as many months as you can) or use your lowest month's income and base your budget around that. This way, any extra can go towards your goal.
Speaking of goals, what is yours? How much money do you need, and how far away is it? It's impossible to budget for a goal if you don't know these three things at least! Do you have one big goal, like buying a new car, an overseas holiday, a wedding, or purchasing your first home or even a second? Or do you have 2-3 goals, maybe one is a little goal and one is a big goal?
"Saving for our first home was possibly the hardest thing we've had to do, but we also recently paid for a wedding, which took a lot of planning and budgeting as well."
If you're a first home buyer, an easy way to save is to increase your KiwiSaver contribution to as much as you can within your budget. When my husband and I were saving, we upped ours to 10%, so it was like forcing savings before we even saw the money. If you have some savings already, maybe chat with your adviser about putting that into an investment – that way it's harder to dip into but also helps grow your money while you're saving.
"My husband and I are very visual people, so we need to see where our money is and what it's for."
Our account structure looks like this: we each have one transactional and one savings account, a joint savings account specifically for holidays or long-term goals, a subscriptions account for things like Netflix, gym, and phones, an insurance account for house, car, contents, health, and life, a utilities account for power and internet, a pets account for their monthly food and an emergency fund, and a house account for our mortgage, rates, and any renovations or unforeseen things (like the leak we found last month!).
Each time we get paid, we transfer a set amount into each of these accounts, making sure every dollar has a job. We also let these accounts build up as mini emergency funds. For example, instead of transferring $20.99 for Netflix, we transfer $24 or $25 so that this account can slowly build up over time. This way, all the accounts combined can act as an emergency fund, and if things increase, it doesn’t hurt as much because we're used to putting that money aside. If your mortgage is $1,200 fortnightly, can you afford to put $1,300 aside? This can build up to be an offset or go towards your revolving credit account, or you could even use it as a lump sum once a year.
You may not need as many accounts as we have; you might be happy to combine some of these categories into one account, knowing that the money in that account is for various purposes. One great tip for anyone with a mortgage is to consider making it a revolving credit account or, depending on your bank, turning multiple accounts into offset accounts. We are with BNZ, which allows us to link up to 50 accounts to an offset, but talk to your adviser to see which option is best for you.
Another important thing is knowing when your bills are due. Try lining them all up – for example, all our bills are due on the 10th of each month. This makes it much easier to keep track of bills and budget for them when they’re not due on random days of the month.
"Depending on your goal, make sure you include a line item that's just for fun!"
This is especially important if your goal is a long-term one. If your goal is 6 months away, you might want to knuckle down and be strict with your budget. But if it's a few years away, being too strict and not allowing yourself any reprieve can be detrimental and make you unmotivated. Whatever amount you budget, make sure when you spend it, you don’t feel guilty!
A good tip is to leave any leftover money in your account at the end of the week or put it towards your goal (even a few dollars here and there all adds up). Remember to practice delayed gratification. We live in a world where we constantly want everything now.
"Have an emergency account! I cannot stress this enough."
No matter where you are in your home buying journey, unexpected things happen all the time – a leak, a flat tire, a trip to the vet, you name it. There's no need to pull money from your goal or savings account if you have an emergency fund. If you're still living at home, your emergency account might only need to be a few thousand dollars.
If you're already a homeowner, aim for 3-6 months of your basic living expenses (think transport, roof, food, kids/pets). Just transfer a little bit extra every payday, and it’ll slowly build up over time.
"We tried a bunch of budgets that didn’t work for us until we finally found our groove with what worked best."
There are so many budgets out there, and you just have to find the right fit – whether it's the Zero-Based Budget, the 20/30/50 Rule, Pay Yourself First, or the Envelope Budget (also known as “Bucket accounts” budget).
KISS – Keep It Simple Stupid! If you struggle with budgeting, keep it simple. Have a spending account, a bills account, and a budget account. Set up automatic payments so you don’t even have to transfer your money on payday.
Suz.
About Suz:
Hi, I’m Suzanna. I am a Client Services Manager/Loan Writer for Graham Goodisson’s team. As well as Graham, I will be alongside you from the start of your house hunting journey until you find a home, as well as helping to maintain your loans in the future. It is my job to prepare a mortgage application making sure that I present you and your situation to the bank in the best possible way. I will also help you with top ups, restructures, refixes and anything else you may need. I have recently bought my first home and understand how stressful it can be, we are here to guide you through the process, helping to take some of that stress away. When I am not working, I study part time and like to spend a lot of time with friends, family, my pets and working on my house renovations.
Always get professional advice
The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation. As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures https://www.velocityfinancial.co.nz/disclosure-statement.