How to buy a home and still have a life… (yes it can happen!)
So you’ve got the job, the partner, maybe even the kids… it’s probably time to do the adult thing, live the dream and buy your own home. But will you have to give up that gym membership? The takeaway on a Friday night? The latte you desperately need every morning?
With the cost of buying property rising steadily, many families and individuals are sacrificing other financial commitments to afford the home they want. But do they need to? Is it possible to budget for a home without ‘going without’ completely?
Here are some tips for buying a home and maintaining a good quality of life.
It comes down to prioritising lifestyle and financial goals.
It’s so easy to put your goals in order when you know what they are, and what it’s going to take to achieve them. Here’s a simple 7-step process for clarifying your goals… it will give you a great place to start!.
1. Give your goal a name that’s meaningful and motivating.
2. Write down your goal with a clear description that will give it life.
3. Put a dollar value against your goal, taking into account all the costs involved to achieve it.
4. Set a timeframe for achieving your goal.
5. Look at the benefits… Ask yourself “what would I be thinking and feeling having achieved this goal?”
6. And with those benefits in mind, ask yourself if the goal is worth the effort it takes to achieve it.
7. Review, review, review. You’ll be encouraged and determined… your goal is important and reviewing will help you stay on track when plans and circumstances change.
After you’ve gone through these steps, a financial planner like MoneyLink can help you achieve them.
How can I achieve a healthy balance between owning my own home and other financial priorities?
So you’ve applied the 7-step process to your financial goals – including buying your own home. But it’s important to understand the value of short term goals as well as your long term goals. For example, you might be determined to save all your extra income now to buy your first home. That might leave you with no savings for that big overseas trip you’re planning in 5 years’ time, or lead to having a lot less super saved for your retirement. Finding a balance between short term and long term goals is crucial.
And while owning your own home is a dream for most, every person regardless of their age should be ready to take control of and prepare for their financial future. The financial advisers at MoneyLink can help you understand the power of compound returns, and by saving and investing sooner, the reinvestment of earnings on your asset can bring you long term financial benefits.
Now you have a financial plan in place, you’re addressing your goals, and you’ll find it’s easier to understand the tangible benefits of saving and investing for the future.
A MoneyLink financial planner can help you forecast the outcome you can expect from taking steps towards those goals – and the extra financial security you’ll enjoy in retirement if you were to salary sacrifice some of your income now.
Can I borrow more and what are my priorities?
Increasing your level of debt, for a mortgage or any other type of borrowing, will impact your financial plan in 3 ways:
1. Cash flow – Do you have enough surplus income to support higher repayments… and what happens if and when interest rates go up?
2. Other financial goals – with higher loan servicing costs, it won’t be as easy to save or invest elsewhere. And that could have an impact on other financial goals like saving for a holiday, your children’s education or your retirement. You’ll need to be sure this is a trade-off you’re willing to make to buy or upgrade your home.
3. Personal insurance – increasing your loan should trigger a review of your personal insurance plan. You need to have an adequate financial safety net in place to cover the loan repayments in case something should happen to you.
How important is it to be mortgage free before retiring?
The answer really depends on your circumstances and the financial plan you’re following. However, being mortgage free on the home you’re living in before retirement seems to be an important goal for most of us. By having your mortgage repaid by retirement, you won’t need to draw extra income from your retirement assets and earnings to fund mortgage repayments.
So will I need to give up my gym membership to own my own home?
Cutting back on unnecessary expenses could be the difference between being a homeowner, or a tenant. But you have to keep your goals in sight, and understand what the difference between a necessary and unnecessary expense. Your MoneyLink Financial Adviser can help you budget appropriately, and get your spending (and saving) on track so you can have a life while saving for your own home.
And btw, that latte you have every morning? (What’s your coffee really costing you?) It’s pretty simple. If you have one coffee, every morning, every day of the year, it will cost you $1825 per annum. That’s one hell of a good flat screen TV… in your new home!
MoneyLink Financial Planning Pty Ltd is an Australian Financial Services Licence Holder. No:.247360
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