Buying your first home is an exciting goal but saving the deposit can often feel like the hardest part. It can take years of dedication and a sturdy budget. Before you head to the bank for a loan for your new home, we wanted to distill a few simple habits to help you save more, boost your borrowing power, spend with greater purpose, and take meaningful steps towards owning your first home.
Thankfully, we have some tips and tricks to help you on your way.
Review your finances
It’s time to discover what you really spend your money on. Lenders do go through your bank statements so if the spending looks reckless, they are going to look at your application less favourably. We all have those little miscellaneous spends that add up! Find out what this is for you and come up with a plan to address your squeaky wheel. Some banking platforms even help with this step now by categorising your spending for you. It’s a quick way to identify where the bulk of your money is going. Check out Up Bank.
Credit cards
They sound amazing, but did you know, when applying for a loan banks and lenders assume you use the entire credit limit each month?
This means even having one in your name, even if it is just for “emergencies” means you have an automatic amount of debt against your name.
If it isn’t absolutely essential for you to have a credit card, paying down your debt or cancelling it before you apply for a loan is recommended. You can also try reducing the limit, or transferring the balance to one with a lower interest rate, both will help to improve your overall borrowing capacity.
Buy Now Pay Later
It’s lay buy but with a twist where you get the goods first and pay the balance off later! Too good to be true? Sadly, yes. It’s another factor lenders will be looking out for when they assess your home loan application. It doesn’t send the right message to the lender as you should be able to afford to pay for the things you need to buy in full at the original point of sale. It’s also super easy to rack up a lot of debt really quickly which doesn’t signal that you’re particularly good at managing money or a home loan. A good rule of thumb is; if you can’t afford to buy it twice you can’t afford it at all.
Subscriptions
Now that you’re committed to saving, it’s a good time to check your savings bucket for any holes – aka, subscriptions. Those expenses that are coming out of our account unnoticed that you really aren’t getting much value for.
Do a review of all direct debit subscriptions that are coming out of your account. Which subscriptions are you actively using and which ones have you not been using as much as you thought you would.
If you have multiple streaming services; make a decision to stick with one and cut the rest. The beauty of these services is that you can binge one show on one platform one month, suspend and watch another show on a different platform the month after. Put a date in your calendar each month to review where you look at your calendar for the month ahead and make a judgement if you will use it this month. Suspend if you’re going to be busy and keep it if you’re planning to have a quieter social month. Plans fall through? You can resubscribe in an instant. Also, beware of subscription offers! First month free, 3 months for a lower rate. It’s not saving you money if you don’t use it.
Having a regular check in like this will make sure you’re not paying for it whilst off on a holiday too.
Another common subscription black hole are gym memberships. Gym memberships are a little more complicated in that they cannot usually be suspended and unsuspended as easily as they take the shape of more formal looking contracts. Before taking out any new gym subscriptions, it is a good idea to prove to yourself that you will regularly go first. You can do this through a ‘new member’ discount that some gyms offer, ask after one if it is not advertised or pay the casual rate for a month first. Once you’ve proven that you will use it the 2-3 times a week (usually the amount required for the fixed contracts to show ‘value’), you now have the confidence that securing the fixed contract term will be worth it.
One great thing about lockdown was that a lot of people uploaded a lot of free exercise content online. Check out MadFit on Youtube.
Shop Around
Before you get too excited, this relates to insurances, mobile and internet services and the like. Unfortunately, loyalty is rarely rewarded very much anymore. Insurance premiums and service providers raise their prices and increase fees every year and if you don’t take the time to review the services, you often just get stuck paying the increase. This can really sneak up on you if you stay with the same provider for a couple of years. Changing providers will often save you money as companies will offer ‘new member’ discounts to entice you away from competition. Create a list of all services and insurances you have, then schedule a money date with your partner or host an admin party with friends to tackle them. Socialising that could actually be saving you money? We’re there!
Tips & Tricks
Another subscription based one! If you are always tempted by Ads, it’s probably a good idea to remove your most tempting brands from your social feeds and unsubscribe from marketing emails if not permanently (your mailbox will thank you) at least for the short term. Out of sight, out of mind!
Catching up with friends in new and interesting ways: Think outside the box for different at home or local activities to do with friends instead of restaurants and nights out. Our favourites are trying a new coffee place and a walk when the sun shining, game nights when the weather is cooler and checking out free local events like farmers markets or art exhibitions. A great resource to do this is What’s On Melbourne.
Create Money Rules. What’s a money rule you ask? A money rule is a decision you make about what you’ll spend your money on ahead of time. It is designed to take the decision process out of the equation which you might be led to do under pressure (enter sales). There are three types of money rules you can set up; “I always….” for example; “transfer ‘X’% of my pay to my savings first”, “I never… purchase a big ticket item without waiting a couple of weeks first” and “I only….buy coffee at work 3 days a week”. These are some examples but can all be adopted to work for you!
We hope these tips will be beneficial to your savings goals.
Our friendly sales team are happy to help and answer any queries you may have.
If you wish to speak to our sales team, please feel free to reach out on either of the following methods:
Phone: 1300 983 889
