Creating strong saving habits: your path to your dream home

two story new build house with landscaping

In the pursuit of a fulfilling life, beyond just satisfying short-term wants like the latest TV or trendy clothes, you might also have a dream of owning your own home. Owning a home is a big commitment, but it’s also a great achievement.

Essential preparation for home ownership:

  • Knowing what you’re trying to achieve in the short, medium and long term.
  • Creating a budget and understanding your fixed commitments (must haves and nice to haves), so that you can focus on where you’ll allocate your hardworking income.
  • Making sure you pay your rent on time – it’s essential for a clean credit history and good practice for when you have a home loan.
  • Gradually building up a good amount of savings.

How it works:

  • Imagine a couple who put $800 each week toward rent and $200 into savings. In total they make weekly commitment of $1,000, plus their KiwiSaver contribution (usually 3% of their salary).
  • By using a mortgage repayment calculator, they can see what kind of loan this commitment will support. For instance, if they had a $550,000 mortgage with an estimated 9% interest rate over 30 years, their weekly mortgage payment would be around $1,021.

This example is simplified. In reality there are other costs that home owners have to pay e.g. council rates, insurance and maintenance expenses.

Four steps to financial stability:

  1. Create a budget and keep an eye on it, adjusting as your income changes.
  2. Stick to the ‘pay yourself first’ approach. Set aside money for your commitments and savings before spending on other things.
  3. Treat yourself when you hit certain milestones on your financial journey.
  4. Protect your most important assets (including your life and income) with relevant insurance protection.

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