Budgeting & The First Home Buyer

PREPARE TO BUY YOUR HOME

Sick of renting? Paying out dead money for something that isn't yours? Or, you'd really like to upgrade your home, but know that you couldn't meet a higher mortgage payment.

In order to maximise your credit rating, or, establish a credit rating if you do not have one, there are a number of things that you can do.

BUDGET!

Yes, it can be a nasty word, full of limitations. Have you ever sat down and calculated just how much money you fritter away, daily, weekly, monthly and yearly? If you haven't, this will be a frightening exercise, trust me! For example: lunch daily = $6; lunch weekly = $30; lunch monthly = $120 and yearly = $1320

That's about equivalent to registration and insurance on your car, or probably 75% of your rates, in some areas.

How about a can of coke a day? $1.50 Multiply that by a year's supply for a working week, less a month's holidays and that adds up to $502 a year! Astronomical! Wait until you calculate how much you spend on alcohol? Clothes? Shoes? Make-up and accessories? Or, dining out?

Of course, many purchases will go on your Credit card, which will cost anything from $10 to $100 and more in interest per month, making it difficult to clear the debt.

However, as you can see from the above calculations, you can create spare money if you really put your mind to it!

So, grab a notepad and draw it up with your Expenses on the left and your Income on the right.

Jot down all your current expenses, including lunch, entertainment and all that you enjoy. Remember to include any automatic payments such as insurance, medical cover, car payments, rent, mortgage and credit card interest. (Getting scary yet?)

On the credit side, include all income received regularly, and any dividends or credits from anywhere else. Make sure this amount has been taxed, so that you don't have to suddenly pull Income Tax payments out of the hat!

Ready for this? Deduct your Expenses from your Income and hope like the devil there is a positive outcome!

If there isn't, then it's time to tighten the belt! Pull your horns in! JUST STOP SPENDING!

Yes, you're going to have to spend some time at home - if you're not out you can't spend!

Take an empty wallet or purse with you when you go out, to work or to play. It's hard to spend money if you don't have any on you. Leave those credit cards at home! Better still, cut them in half until you have cleared the debt! Take your lunch to work and make everyone else jealous because you'll never complain again that you're broke.

Learn how to eat more cheaply, avoid coffee, tea and soft drinks; and shop for clothes that are cheaper. It's very easy to spend $15 or more just on a daily cappuccino! For clothes, you will find what you need at factory outlets and opportunity shops galore!

Restrict your alcohol intake! You'll really save money, then. Yes, you think that alcohol will soothe your now shattered nerves, but it won't. Alcohol is actually a depressant to the nervous system, which makes you feel worse. Plus it plays havoc with your liver and your brain cells, particularly if alcohol is a continuous presence in your life. Everyone should have at least 3 or 4 alcohol free days (and nights!) per week. And some people should never drink; it just isn't good for them. Accepting these hard truths can be difficult, but, you'll feel a lot better for it. Now, I'm going to really make you happy: drink water instead!

NO LARGE PURCHASES

If you are contemplating buying a home and want a good credit rating, then don't make any large purchases, like a car, or a boat, or an expensive holiday. If you take out a loan for these items, then it will impact on the amount of loan that you will be able to borrow, to pay off a home.

Plus, some of these items will incur ongoing expenses that are going to regularly impact on your ability to save money. I won't believe you when you say that the car is going to sit in the garage! If it is, then don't buy it!

SAVINGS

You will need to save up a deposit that's calculated at around 5 to 10% of the purchase price of a home. When you can show the bank or finance institutions, an unbroken (read untouched) savings record, your application will be considered more seriously. So, every pay day, salt away a certain amount in the bank - AND DON'T TOUCH IT! NO MATTER WHAT!

CREDIT HISTORY

Did you know that if you are late paying a bill, that it could impact on your credit history and credit rating? Look up a Credit Rating Agency in the Yellow Pages and spend some money to find out your credit rating. That way, you can take action to rectify your situation before you decide to take out a loan for that mortgage, for that home you want.

Every time you are strong and save that money instead of spending it, pat yourself heartily on the back and feel gratified by your strength of will and character! You are being a strong person who is not bowing to the public advertising model, who does not respond to:

•  Scarcity principles (buy it now or miss out)

•  Fear tactics (you'll be the only person not wearing it; you'll get sick if you don't take it)

•  Sexual targets (the models in skimpy ultra chic outfits; you won't be part of the in-crowd if you're not drinking it!)

Okay, there you have it: Budget for what you want, so that you can purchase your home. Saving up for what you want and having to wait for it, is called delayed gratification.

Don't forget to visit www.firsthome.gov.au for Information about the First Home Owners Grant

This Report is aimed at helping you learn more about managing your budget and how to get the best result for you. Thank you for calling on me for help. If there is anything further that you require, do call.