Saving for a first home deposit can be hard work. We all know the key to getting there is by spending less than you earn and to keep track of your savings in general. It’s easier said than done though, so here are some tips to help you save money and craft the perfect budget to meet your financial goals.
1. Set Small Milestones
Focusing on shorter time frames is a highly effective way to reach a financial goal. Again, it comes down to being realistic and including detail. Let’s say your goal is to save $10,000 for a home deposit. Rather than focusing on that overall goal, break it down into smaller milestones. Focus on saving $1,000 in a month, or $200 in a week.
By breaking your goal down into smaller pieces, the day to day actions you need to take become clearer and the overall goal seems more achievable. It’s much easier to figure out how to save for a weekly period than it is for a longer time frame.
2. Organise Your Spending
Break down your income into categories of regular expenditure, then include your savings goals. For example:
- Fixed costs (rent, utilities, etc.) – 50% of income
- Investments – 10% of income
- Home deposit savings – 10% of income
- Spending money – 30% of income
Knowing you have 30% of your income for guilt-free spending makes it easier to prioritise what you spend your disposable income on without accidentally dipping into other areas. You may need to make adjustments as you go because it’s difficult to predict spending habits, especially if you’ve never budgeted before. Remember to be realistic. There’s no point budgeting 10% of your income for spending money if you know it’ll be impossible to stick to.
3. Include Contingencies
Budget for unexpected costs, emergencies and fun. While you should try to overcome areas of weakness (impulse purchases, eating out, etc.), don’t be too meticulous. Give yourself reasonable expectations. Emotions play a big role in successful saving. If you budget too meticulously, you may end up stressed out or miserable, meaning you’re more likely to be tempted to splurge or abandon budgeting altogether.
4. Use Separate Accounts
It’s harder to track money when it’s all lumped together in one account. It’s much better to have one account for your savings (which is difficult to access), one account for fixed expenses and for emergencies, and another for spending money (everything from groceries to fine dining). This makes it easier to keep track of your budget and only lets you use your spending money when you’re out spending.
5. Use a Budget Tool
Track your budget with a tool that works for you, whether that’s a simple spreadsheet or one of the many smartphone apps available. Many budgeting apps are free to download and come in a wide range. Try different ones until you find what’s right for you.
Contact Mortgage Masters – Independent Brokers in Auckland
Mortgage Masters are your independent mortgage brokers in Auckland, servicing the community in home loans since 1998 to find our clients the best deal on the market. If you need tailored financial advice or helping finding the right home loan for your needs, please get in touch with our team today.