Buying a home is an exciting time and often represents a major milestone in your financial life. While homeownership is a dream for just about everyone, with the mortgage and other associated costs of purchase, it can be a disruption to your financial situation. Here are some practical strategies for getting your finances back on track after buying your home.
Setting a budget
Ideally you’ll start planning your budget well before buying your home. In this budget you should have provisions that take into account both purchase and post-purchase expenses. Things your budget should contain include:
- Projected spending. This is how much you expect to spend on things such as mortgage fees, deposit, and lawyers’ fees. For post-purchase expenses, this category could include the costs of running your home, such as groceries, energy costs, and car running costs.
- Savings goal. Setting a savings goal is vital if you want to realise other financial goals. These might include building a share portfolio, saving for overseas holidays, and buying an investment property.
- Estimated income. Estimating your income for the coming year will help you with planning a sensible spending and savings budget. Take into account you and your partner’s incomes as well as income from other sources such as dividends from shares.
Your budget can be as simple as three columns in a notebook, or you may prefer to use a computer-based spreadsheet to keep track of your spending and income. Other options include smartphone apps or professional budgeting software. The latter can be useful if you have a range of personal investments to keep track of.
Defining a savings goal
Look to your estimated income and projected spending to set a realistic savings goal. This will tell you how much time you’ll need to reach your savings target, whether you’re saving for an overseas holiday or to buy a property. If you want to cut the time to achieving your savings target, you’ll need to either cut back on expenditure or increase your income.
Factoring in major expenses
Major expenses are the key areas in which you can realise large savings. You could compare energy deals, look at ways to cut back on household groceries, review your transport and commuting costs, and look for a more competitive insurance package. Other expenses, such as entertainment and eating out, can also represent opportunities for saving.
Making time to do a bit of research can save you cash in a range of household spending categories. Much of the time homeowners fail to shop around and compare for these spending categories. Remember, something as simple as an online comparison website or making a few phone calls for quotes can help you save a considerable amount of money.
Review and keep reviewing your budget. You should look at your budget at least once a month. Check what you’re spending on, why you might have spent more or less this month, and how you could aim to cut back next month.
The budget-review process allows you to check what you’re spending, identify areas of unnecessary spending, and change your spending habits. It’s also a chance to refine your ongoing financial goals and adjust your savings goals where appropriate.