If you are on the pathway to home ownership you will benefit from these savings tip’s for first home buyers.
Create Your Budget
If you are serious about saving then you need a written plan, and we generally call these a budget.
There are a number of budget spreadsheets and Apps that you can get with some being really simple (too simple) and others being way to complex. What we suggest is the Budget Planner software which is a set of smart spreadsheets with a simple dashboard so you can track your spending, your debt repayment and your savings goals all in one place.
You can buy a copy of the Budget Planner software HERE and if you use the code “FHB20” then you will get a 20% discount too.
When doing a budget a good start is to download your bank statements and enter what you’re actually spending over the past 3-months. When you see the numbers in black and white you may be shocked with your spending habits, but that’s okay – you can then work on changing things in the future.
For couples you should mark some time to do this together and be honest and open with each other really helps with ensuring that you can keep to your budget. Then also set a regular time each month to review your budget.
Budget Planner helps you set a budget that’s realistic.
You want to get your money in order and that includes setting goals.
Setting Your Goals
Successful people will make a plan which includes setting goals, and then they will review them regularly to ensure that they stay on track.
If you want to be successful then you should do the same, and with the right tools like Budget Planner it does not need to be too hard. You will love the dashboard where you can see your overall financial position.
You can set goals for debt repayment within the software, and then watch as it tracks down to zero.
You can also set goals for your savings and investments and watch these tracking up.
While you will set your initial goals, you should continue to review your goals and you might be pleasantly surprised at what you can achieve if you have visibility to everything and remain focused.
Reduce Your Debt
Interest payments on consumer debt really eat into your ability to save. Every chunk of debt you can pay down, reduces the outstanding interest. Pihema worked with a client who had a significant amount of short-term credit card and buy-now-pay-later debt. “They focused on paying down as much as they possibly could and 12 months later, they had paid off a lot of their consumer debt. That was January and by June they were in their first home.” Try to continue to save into KiwiSaver even while you’re paying down debt because it can be a valuable investment towards your first home.
Add To Your Savings
It’s easy to just say “save more” but often harder to keep saving, and this is where you will find the Budget Planner really helps.
Savings is generally just depositing money into bank accounts, to be used at some point in the future. Unfortunately banks do not pay very much interest, but some banks and some accounts are better than others.
Don’t just assume you should use your existing bank – you probably shouldn’t.
Typically we would suggest that you have three separate savings accounts:
- Emergency Funds – like the name says this is so you can always access money for emergencies. It might be to buy a new washing machine, to replace the tyres on the car or an unexpected trip to the dentist. Having savings means you can avoid taking on debt when these circumstances catch you out. You need to think about how much you might need, but in most cases it would be just $1,000 – $2,000.
- Short-Term Savings – everyone has things that they want and need to be saved for. Things like holidays, the new television or BBQ and then there are the more serious and expensive things like weddings and a new vehicle. Unlike emergencies these can be planned and saved for over time.
- Serious Savings – now this is your deposit for your new home. Often people will use their KiwiSaver, but there are some good bank accounts for these savings. We like the option of Notice Saver Accounts where you need to give a notice for any withdrawal. Not being able to access money immediately means these types of bank accounts are not great for emergency funds or those short-term savings, but are perfect for the house deposit.
Of course everyone will have different needs and wants, but the concept really works.
Watch Every Dollar
Now this sounds obvious and maybe it should be; however most of us don’t worry about those small costs – but we should.
If you could save five dollars a day over our working life (probably 50+ years) then you would have saved $91,250 but if you earned 3% on this then that grows to $211,705 or if you could invest at 5% then that’s over $400,000. Now that’s quite a bit of money, and would certainty be useful in retirement, but it shows the principal of how small amounts add up.
Often budgeting and setting goals (as mentioned above) is really all about creating good habits. It’s about making small changes that you can cope with, but doing these small adjustments over and over again.
You might start by redirecting just a few dollars into a savings account or to an investment plan, and then next week or month adding a little more to that plan.
While we have talked about savings, if you have more time then investments can produce greater returns and that includes both KiwiSaver and other investments.
Review Your KiwiSaver
KiwiSaver is now the most popular way for Kiwis like you to save the deposit for your first home.
Its a structured approach to the saving and investment process and for anyone that is employed it is paid by your employer at source (before you see your money). You contribute a portion of your income (from 3%) and then your employer and Government also contribute. Most employers will match your 3% and some will do more than this, and the Government makes an annual contribution to a maximum of $521.43 only if you contribute at least $1042.86 of your own money between 1 July to 30 June each year.
Also, after three years any first home buyers can benefit from the First Home Grant. You could get $3000 to $5000 (after five years of saving) or double that if buying a new build – and that’s per person so a couple each could receive this.
If you are on the pathway to home ownership and if you plan to buy your home within 3-years then you should discuss this and review your KiwiSaver to ensure that you get maximum benefit but understanding and managing the risks.
If you would like to discuss your options just reach out to speak with a financial adviser.
What About Other Investments
For many people Kiwisaver is the only investment, but there are also a number of people that have other investments. But as with your KiwiSaver you need to think about the timeframe that you are working towards, and that may help determine what investment options would suit.
Sharesies is a very popular for Kiwis to invest in shares and managed funds, and they can invest at their own pace. A lot of people will be investing small amounts but as with many investments over time the investment grows. The key to consider is what you are investing in as these platforms have no advice and so it can be easy to invest in companies that you know rather than completing research and due diligence.
Crypto has also become popular over recent years and some people have made a lot while others have lost a lot. Crypto has become more of a mainstream investment but is not without risk, and you need to be aware of this is you plan to invest. New Zealand have some good companies like Easy Crypto that can give you access to a variety of options, and for those that are more conservative and into mining and investment then there is BeepX which we’ve found to be a good option.
Like all investments, do your own research or reach out to speak with a financial adviser.
Focus On The End Result
The end result for this is buying your first home – of course that will not be the “end result” but for the purposes of what we’re trying to achieve here it is.
So we’ve covered some popular savings tip’s for first home buyers, but if you are really dedicated to buying your first home then you need to be prepared to learn and do whatever it takes to get onto the property ladder.
At times it will feel hard, but that is just for now – when you look back after purchasing your home you will not be too concerned about the sacrifices and hardship that you went through.
You will be a home owner and that’s what matters most!
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