Budgeting to Buy a Home

Buying a home is a goal that most Australian’s aspire to achieve. Budgeting is a key element that will assist in helping you save for your own home and also give you insight into the amount you can afford to borrow.

Setting a Goal

Setting a realistic savings goal will assist you in keeping focus and achieving your goal of owning your own home.

This goal may be a deposit to help you buy a home. Knowing the amount you need to save gives you a target. This target in turn ensures that you focus on the job at hand and helps structure your budgeting to achieve this goal.  Saving is not an easy thing to do, but having a goal that is realistic and achievable will produce results.

Know What You Spend On

Knowing where you spend your money is crucial when planning to buy a home, so a budget is very important.

You need to separate what expenses you must pay (e.g. power, gas and water bills) and what expenses you have more discretion over (e.g. dining out, holidays, and takeaway food).

There are two variables to your budget, income and expenses. After subtracting the must pay expenses and savings from your net income, you are left with what you have to spend on the discretionary items.

Set Limits

Knowing what you spend your money on will help you set limits on various discretionary spending. A budget helps set limits and will ensure that savings are taking place so you can obtain your goal of buying a home.

Budget for Interest Rate Increases

Interest rate rises is an important factor to consider when budgeting to buy a home.

Budget for at least a two percent increase in interest rates this will make certain that you have available cash flow to meet future interest rate rises.

Budget for Future Events

The budgeting process should take into account future events. These events may include starting a family or replacing a car. Such events may have an effect on your cash flow which will affect your ability to commit to monthly repayments.

Protect your Income

You can protect up to 75% of your income through income protection insurance. Having your income protected is extremely important as it helps mitigate future risk.

Reward Yourself

In your effort to budget for a home, reward yourself for reaching savings milestones. You can set a savings target and reward yourself once it has been reached. This is important as you saving should not feel like a burden.

Budgeting to buy a home is not meant to be a negative experience you just need to set goals that are realistic & achievable.

By Income Solutions