Saving for a 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 focus on this goal.
The goal of home ownership takes persistence in each part of the process, here is what I have learnt on our own property journey.
1. Set your goal
Get your pen and notebook out and start thinking about your goals. This alone can be a scary prospect. Let alone - how am I able to predict what my life will be like in 5 years time, let alone 6 months! 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 your aiming for, how you’re tracking, and when you get there.
Specifically for a first home, make a list of what you want in your first property - location, size, bedrooms, etc. And then do some research to get an idea of price range for homes which meet this 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, 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 of your assets and liabilities, showing your total net worth. And a budget spreadsheet will show all of your income and expenses - how much you are currently earning and then how you use it. There are plenty of online resources to help you through this, like sorted.org.nz, but what’s important is that you are 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 out what a bank requires for you to get a home loan for your home - how much savings you will need for a deposit and what size loan your income can service. This way you will 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 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 be able to save for your first home you need to be having money to save, and the more you put away the quicker you can 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 will manage your spending, savings, investments to get 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 openness to risk).
Set yourselves some targets along the way, rather than just the end result of having your deposit saved and buying your first home.
Break it down into smaller goals and shorter timeframes. Lots of smaller targets can seem more achievable than one big one, and you can then measure and celebrate your progress along the way.
4. Get started and don’t give up
You have put pen to paper, but now it’s time to put your money where your mouth is - and start putting this plan into action. Depending on your situation, it may be months or years before you reach that goal. So staying focused and motivated is essential.
We all have different personalities - some of us will be blindly focused on a 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 this process, researching, seeking out advice and strategising. While Alice likes to find out what to do and go for it. So if you are wired like my wife, and just want one practical step at a time towards home ownership I would recommend starting with KiwiSaver. Put money into KiwiSaver 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 and can be withdrawn for a first home purchase.
We are all different in our attitudes and approach to this topic, but I think the key step is to do something. Whether it is home ownership you are working towards, or something else - you will likely regret doing nothing.
You don’t need to take giant leaps, even the smallest step forward is progress. But 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.