Saving for your first home can be a daunting and overwhelming task. It can be hard to know where to start and how to get to where you want to be. I still remember when we were newly married and set the goal to purchase our first home. It took my complete focus - from when we created our plan, until we signed the contract for that home. It was something we really wanted, so we prioritised our finances and focused on this goal.
The goal of home ownership takes persistence in each part of the process – here’s what I’ve learnt on our own property journey.
1. Set your Goal
Get your pen and notebook out and start thinking about your goals. This can be a scary prospect - how am I able to predict what my life will be like in one year, let alone five! The purpose of this is to help provide clarity on your direction and where you want to be. Without direction you won’t know what you’re aiming for, how you’re tracking, and when you get there.
We suggest making a list of what you want in your first property – consider location, size, number of bedrooms, etc, and then do some research to get an idea of price range for homes which meet these criteria.
At this early stage ask yourself why this goal is important to you. Understanding why - not just the what, will help you understand your personal motivations for achieving this, and why it’s important for you to stick at it.
2. Work out Your Position
Before you make a plan to get to your goal, you need to know where you’re starting from, so it’s important to take stock of your current financial state. Start with preparing a personal financial statement, which will outline all your assets and liabilities, showing your total net worth. Then create a budget spreadsheet to show all your income and expenses - how much you’re currently earning and then how you spend it. There are plenty of online resources to help you through this, like Kiwibank’s budget advice, but what’s important is that you’re honest with yourself and take time to do a frank and full assessment.
This is a great point to talk to your local bank or mortgage broker to understand what a bank requires from you to get a home loan, including how much in savings you’ll need for a deposit, and what size loan your income can service. This way you’ll understand where your finances need to be to allow you to purchase your first home. It will help you understand the gap from where you are currently to where you want to be and may make you reconsider what your first home will be.
For us, we made the decision that our first home was not going to be our ‘forever home’, so our first home goal was less about getting the perfect house which ticked all our boxes, but rather just about getting a home. We lowered our expectations to allow us to get there quicker.
3. Create a Plan
Now you know where you are and where you want to go, it’s time to create a plan to get there. To buy your first home you need to be saving, and the more you put away the quicker you’ll get there. Here comes the nuts and bolts of setting yourself a budget which will help move you towards your goal. Working out how you’ll manage your spending, savings and investments to get you towards your goal.
Take time to think about current and future opportunities. This could be in many forms, but consider ways and ideas to increase your income, alternative spending patterns to reduce expenses, or putting your savings somewhere with a better return (that suits your attitude to risk).
Set yourself targets along the way, rather than just the end result of having your deposit saved and buying your first home. By breaking it down into smaller goals and shorter timeframes it will feel more achievable than one big goal, and you can then measure and celebrate your progress along the way.
4. Get Started and Don’t Give Up
Now it’s time to put your money where your mouth is and put this plan into action. Depending on your situation, it may be months or years before you reach your goal of owning your first home, so staying focused and motivated is essential.
We all have different personalities - some of us will be blindly focused on the goal, while others will be looking for excuses to stop. Understand what works and doesn’t work for you and help create the environment to set yourself up for the win.
Alice and I are very different in our approaches to money (and most other things). I enjoy the process of researching, seeking out advice and strategising, while Alice likes to find out what to do and go for it. If you’re wired like my wife and just want one practical step at a time towards home ownership, I’d recommend starting with KiwiSaver. Put money into a KiwiSaver account as early and often as you can. This is a simple way to start without getting into the nuts and bolts of budgeting, or even fleshing out your goal. KiwiSaver has some instant benefits such as employer contributions, and if you’ve been a member for three or more years you can withdraw funds to put towards a first home purchase.
We’re all different in our attitudes and approaches to this topic, but I think the key step is to do something. Whether its home ownership you’re working towards, or something else, you’ll likely regret doing nothing. You don’t need to take giant leaps, even the smallest step forward is progress. But just do something.
This blog was sponsored by Kiwibank. Whether you're taking your first step or next step on your property journey, Kiwibank's home loan experts are available to through the process.
Their Mobile Mortgage Managers can come to your choice of location and their Banking Consultants are available at your local Kiwibank branch. Call 0800 000 654 or visit kiwibank.co.nz/homeloan for more information.