I recently posted a question on my 360 Mortgage Solutions Instagram account asking everyone what their biggest hurdle was (or is) in getting their First Home. The most common answer was ‘Getting a deposit saved’
That’s a pretty common issue I see with a lot of the First Home Buyers I meet and particularly for some First Home Buyers who are already renting.
Why are so many First Home Buyers struggling to save a deposit?
It was during a recent recording of The First Home Buyers Program Podcast, with Therese O’neill, ‘3 Killer Hacks to get you Buyer ready in 2020’ that she made me realise, we are living at, or in come cases above, the HEM (household expenditure measure) which is why there is no money left for saving!
So what is HEM?
Put simply, the HEM is an estimate on what living expenses certain house holds have based on their income, the number of family members ect. These days lenders use HEM to compare with a borrowers declared living expenses to ensure the new loan amount will not mean a reduction in the borrowers lifestyle.
When you do the maths, or listen to Therese do it on the podcast, it’s easy to see, if we could keep our actual living expenses to HEM, there would be savings left over each year to put towards your Home deposit.
How to live by your HEM?
The first step is to see where your money is currently going. To do this I suggest you do up your Monthly living expense. I have a free template you can grab a copy here to help you.
Once you know what your current monthly living expense is you can look at what the your HEM is for your situation (Married, Single, Kids ect)
Using this HEM as your baseline, you can start to eliminate out and reduce your discretionary living expenses and build your savings.
There’s a couple things to mention here…
Firstly, I don’t know about you, but when it comes to diets, I do better with a slow approach, rather than eliminate everything out of my diet in one go, I will make smaller, smarter decisions which help me work closer to my goal while still feeling motivated and not like I’m missing out.
I would suggest you do the same with your budget!
Don’t take everything away all at once, rather, build up to it. Start with something simple, like making the morning coffee at home and build up to Uber eats once a week and away you go.
Secondly, you need to know why you are budgeting. I know that sounds pretty straight forward, in most cases my clients are saving to buy a house but it can help to go deeper than that and really think about why you want to buy a house, and what owning a home means to you.
I recommend this because there will be times when things get tough, and times when you’re tempted to splurge your savings on a once in a life time trip, or you’re thinking about getting take away for the third time this week because you’ve had a hard day and don’t feel like cooking… you can consider your why and you’ll truly know at that point if it’s something you really want to do or not.
In Summary
The best way to get serious about getting into your First home is to know your budget and stick to it, so you can save as much deposit as possible. to get a copy of your Free Budgeting Template click here.
The other option is, by joining The First Home Buyers Program, you will not only be taken through setting up your budget, but over the course of the program, you will learn about the whole home buying process as well as loan types, repayment types and what professionals you need when.
To check out the different modules covered in the First Home Buyers Program click here.