Growing your savings to put towards a property is no easy feat.
Blogger: Lielette Calleja, director, All That Counts
As a potential new homeowner, chances are you are feeling many different emotions.
Perhaps you are thinking: how can I afford the deposit? How can I service the loan and how long will it take me to save for the deposit?
It’s one of the biggest financial decisions you will make in your life.
The term household budget might even be a foreign concept to you. Most people know they need a budget, but when it comes time to creating one – and then sticking to it – it can be tough.
If you run a business, you probably understand the importance of good bookkeeping and budget management. And I always tell my business clients, why not apply the same good book-keeping practices towards your personal life and saving for that first home deposit.
Here are our five tips on how you do this and achieve your dream of owning your first home.
1. Get connected online – Turn your household accounts into a mini business
If you thought accounting software was just for businesses, you are wrong! Many householders subscribe to micro online cashbook accounting tools to manage their finances.
Getting connected online with a cashbook system enables you to connect all your bank accounts and credit cards into your own personal accounting file. It automates the process of tracking your spending.
Now imagine all your income and expenses being categorised into rent, car payments, school fees, and entertainment, and so on. You can print a cash flow statement to show you how much money you have left to save.
This removes the hassle of creating spreadsheets and having to look for those annoying receipts. I remember when I purchased my first home I was the queen of spreadsheets. I created budgets and forecasts as I wanted to know where I was spending and where I potentially could start culling back.
2. Get budgeting – A goal without a plan is just a wish!
Now that you have your online cashbook file setup you can start to identify your spending pattern which is a key element in creating a budget. See which categories of spending can be reduced substantially, maybe you’ve been eating out too often, or taking too many little holidays… whatever the case, by identifying those costs and making a budgeted plan to curb your expenditure you can accelerate your savings and be ready to buy a home sooner. And, one golden run don’t spend more than you earn!
3. Get tracking – Focus on the things that count and what you can control!
Now is the time to track your progress against your budget. You can generate a report from your online cashbook system which identifies your actual spend to what you budgeted. Ideally you would want to see your spending pattern on par with your budget. If it’s not, don’t be hard on yourself. Remember your budget is a work in progress and it may take you 12 months to cut back on some of your expenses. Keep telling yourself you now have the tools in place to take control and you are no longer blinded to where your money is being spent.
4. Get reviewing – Make this a habit
Make a habit of reviewing your budget every month, particularly in the early stages. It’s also helpful to get a qualified second opinion. That might come from a book-keeper/accountant/financial advisor or anyone that is skilful with spending, savings, and investing. Ask them to review your budget, offer suggestions and help answer questions.
There will be emergencies and one-off expenses that will divert you off your target, but if you make budgeting a lifetime habit, you will undoubtedly have the tools to get you back on track.
5. Get excited – This is your opportunity to plan your future
If you’re not going to get excited about your budget and new online cashbook system, chances are you won’t do it properly. So, get excited about it all! Budgets are your opportunity to plan for your future and your first home. Creating a budget brings you one step closer to your goal. No one can take that away from you.
By sticking to a budget you can transform your life from out of control to fully in control and pursue your dreams of owning your first home… as Dorothy from the Wizard of Oz would say… there’s no place like home!
Lielette Calleja is director of All That Counts, a bookkeeping services company based in Sydney and also a Tradebusters Connect Top 3 Local Business Pick. With over 20 years experience in bookkeeping and accounting with multi-national organisations, she has been using the latest financial software to educate clients, accounting firms and small businesses with the right financial information. All the Counts was named finalist in the 2015 Australian Accounting Awards for "Bookkeeping Firm of the Year".