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Get the kids into homes

Review spending and get budgeting

A big part of obtaining a home loan, is your ability to service the loan. Understanding how to service the loan requires a good sense for budgeting.

You can help your children to understand how their spending and ability to budget will help them save for a deposit and ultimately maintain their home loan.

The below steps will help your kids get started. Discuss how this works for you as this will give your kids a practical example for management of their finances. You could also seek advice from a budgeting or financial professional, however the below points will help steer the conversation in the right direction.

Getting started

We suggest using the frequency of your pay as the timeframe for a budget. For example, if you get paid weekly, set up a weekly budget.

Consider your income after tax

Record how much money is coming in and when. If you don't have a regular flow of income, work out an average amount.

Make a list of all the money coming in, including:

  • How much
  • Where from
  • How often (weekly, fortnightly, monthly or yearly)

This money could be from your wages, pension, government benefit or payment, or income from investments.

Add up your expenses

There are two buckets of expenses to consider. Your regular day-to-day expenses that cover your needs and your discretionary expenses, those that aren’t essential, and which you could cut back or stop if the need arose.

Regular day-to-day expenses - the essential items you need to pay for to live. These include:

  • Electricity, gas and phone bills
  • Council rates
  • Household expenses, like food and groceries
  • Medical costs and insurance
  • Transport costs, like car registration or public transport
  • Family costs, like baby products, childcare, school fees and sporting activities
  • Debt expenses, for example:
    • Personal loan repayments
    • Credit card payments
    • Store cards and lay buy
    • Existing home loan repayments
  • Unexpected expenses, for example:
    • Car repairs and services
    • Medical bills
    • Extra school costs
    • Pet costs

Discretionary expenses – non-essential items that are nice to have rather than a must have. These include:

  • Subscriptions like Netflix, Disney+, magazines, newspapers
  • Holidays and travel
  • Alcohol, tobacco, and vaping
  • Restaurants and other entertainment-related expenses
  • Coffee and specialty beverages
  • Hobby and sports-related expenses, such as crafting, sewing, and gym memberships

To make sure you've recorded all your expenses, look through your bank statements. Include what the expense is for and then total these up into categories, so you have a good understanding of what you spend and where. You might be surprised at what you find.

Set your spending limit

The money you have left after expenses is your spending and saving money. Your spending money is for 'wants', such as entertainment, eating out and hobbies. Plan for what you want to do with your spending money. This will help you see where it goes and keep within your spending limit. Remember, buying a home will likely be the biggest spend of your life, so work hard to put as much money aside for the deposit. It’s a short-term sacrifice for a long-term gain.

Set your savings goal

If you have a savings goal, you can use your budget to work towards it. Once you know how much money you have for 'wants', you can work out how much of it you'd like to save. Having some savings can create a safety net for unexpected expenses. Even a small amount set aside regularly will make a difference.

Adjust your budget

Your budget needs to work for you and your lifestyle so it's important to adjust your budget as things change. It’s not uncommon for first home buyers cut back all discretionary spending for a good period of time in the build up to buying their first home.

Tidy up your debts

Where you can, clear or reduce small debts such as credit cards, lay buys and overdrafts. It’s often not easy to reduce your student loan, but make sure its in order.

Make budgeting easier

To help make budgeting easier, consider having separate bank accounts. You could have:

  • A transaction account for bills and expenses
  • A transaction account for spending
  • A higher interest savings account

You can then automate your budget by setting up a regular transfer via automatic payment to your savings account on pay day. You can also set up direct debits when your bills are due.

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