SmartyPig

Is it time to start aiming for your own piece of the Great Australian Dream?  It's such a daunting prospect and unless you're planning on winning lotto, unexpectedly inheriting a small fortune, or are one of the lucky few for whom money is no object, you're probably wondering how you'll ever save enough money for that all-important deposit. Hate to break the news to you but there's really no other way around it - you need a goal, commitment and willpower.  But with the right attitude and a budget, anything is possible.

Now that we're on course to join the home owners club, there are a few things that need to be considered first:

• Can you afford to live in your location of choice or are you ultimately willing to compromise on location to achieve the dream? If your heart says Toorak but your hip-pocket begs to differ, it might be time to take an overdue reality check. Find out how much you can potentially borrow first, then start researching the areas you can afford to find that dream abode.
• Have you thought about all the "hidden" costs associated with buying a house? You may think you know how much money you need for a deposit, but have you factored the costs associated with stamp duty, legal fees, insurance and rates into your budget? Money Magazine details the maze of fees and outlays which are all part and parcel of buying a home, and that's before you've even booked the removalist!
• Can you manage your debt? Be wary of biting off more than you can chew just to get into the market. You may be able to make your payments now, but what would you do if interest rates rise? It seems a long time ago now, but in the not-too-distant past, interest rates were skyrocketing and many people were struggling with meeting their mortgage repayments. Most financial institutions have online home loan repayment calculators to help you work out how much you'd need to repay if interest rates rise (or fall). Ignorance, as they say, is really no excuse so do your research now to avoid any stress later.

Anyway, that's all very serious stuff (and terribly grown up).  It's now time to get on the budget bandwagon and make tracks towards your goal.

As a starting point, realestate.com.au has some fantastic tips on saving and buying your first home.  The Home Buying Institute (based in the UK) has also pulled together its top 15 savings tips for future home buyers. 

Then you know what you have to do next - your sums.

• How much have you saved already? It really doesn't matter what it is, it's a start (yes, even if it involves scrounging 'round the back of your couch cushions for spare change).
• What's your timeframe? Regardless if it's six months, a year or much longer, setting a target date will help you determine how much you need to save every month to reach your goal. Lucky for you, SmartyPig is here to help. Just set up your profile with a target goal (eg, the deposit on your home) and SmartyPig will calculate how much you need to save each month, direct debit that amount from your everyday bank account and pay you interest. So while you're working hard to achieve your goal, your money is hard at work too! As you know with the social side of SmartyPig, you might get some help directly from your friends and family so be sure to share your goal!
• If you're not sure how much you can afford to put aside each month, consider using a budgeting tool to help you work out what your disposable income is and what you can put aside. ANZ MoneyManager is a completely free semi-automated budgeting tool that anyone (no matter who they bank with) can use.
• If it all seems a bit too much like hard work... remember: people have done it before. You can too.

Finally, don't forget you're in this for the long-haul.  Buying your first home will be an expensive exercise but just think of the long-term investment.  So keep your eyes firmly fixed on the prize and before you know it, you'll be hanging that "Home Sweet Home" sign right beside the front door and hosting your first house-warming party.  Just hope we're invited!

Until next time,

Team SmartyPig