How to set a budget to buy your first home

Owning your own home is the great Australian and New Zealand Dream, but for many first-time buyers that’s exactly what it can feel like – a dream.  We’ve got some tips to help put you on the right track to making that dream a reality.

Analyse your current financial situation

First-time buyers will need to have a home loan deposit upfront. When it comes to saving and setting a budget for this, the first thing you need to do is assess your current financial situation. Analyse what you’re spending your money on during the month. It may seem overwhelming and a lot of work initially, but once you do this, you’ll be able to work out exactly how much you can afford to save each month towards your deposit.

Track your expenses

The easiest way to start this is to set up a spreadsheet and list all your monthly expenses.  Don’t forget to include things such as:

• Rent
• Car loan plus insurance and registration
• Gym memberships
• Private health insurance
• Spotify
• Netflix
• Takeaway and coffees
• Entertainment
• Petrol
• Lunches

Every item of spending should be recorded in this spreadsheet (no matter how little or insignificant you think they are). This will help you see exactly where your money is going and will also highlight which areas you may need to cut back.  

Set a budget

Once you have worked out your monthly expenses, you can:

• Break it down into weekly amounts and then decide how much you can start saving each week.
• Set a realistic budget that is achievable. Unrealistic goals mean you are likely to fall short each month, and this can be very discouraging! You need to set a budget that you can stick to.

Budgeting tools

If this seems overwhelming, there are lots of online tools you can use to help you.  Check with your own bank first as many offer their own budgeting calculators and software.

There are also many free, and subscription based, budgeting apps which are popular such as:  

• Pocketbook
• MoneyBrilliant
• Goodbudget
• Pocketsmith
• Mint

For more information on how these budgeting apps work, read the Canstar review here.

Long term goals

When it comes to saving for your home deposit think long term, because when you reach your goal and purchase your first home, you will need to be able to pay off your mortgage.

Try setting a weekly savings goal to match your expected mortgage repayment. By the time you purchase your home you will have developed great saving habits and will see clearly how much you can afford to spend each month to maintain the lifestyle you enjoy. 

There are many incentives currently on offer to help you reach your home ownership goal sooner, such as the Australian Government's New Home Guarantee program or, State or Territory First Home Owner Grant offers.

Make sure you do your research to determine what offers you may eligible for in your particular region or state.

Happy savings!