Unlocking Home Ownership: The Power of Budgeting
For many Kiwi, purchasing a house represents one of the biggest milestones in our financial lives. A house is more than just a long-term investment. It brings stability as you can put down roots without the risk of a landlord kicking you out – a great benefit when raising tamariki. It also means financial security – knowing that you can be rent-free in retirement is priceless (provided you’ve paid off the mortgage by then, of course).
However, becoming a homeowner is a very distant dream for a lot of Kiwi. New Zealand notoriously has one of the least affordable property markets in the world, with houses still costing over 7years of an average household’s income[1] despite prices dropping from their 2021 peak. The cost of living has been biting too. Prices of goods and services are now on average 17.5% higher than they were 3 years ago[2]. Fortunately, wages progressed as well, you’ll say. But not as fast – they are only 10.1% more than 3 years ago[3]. In this context, saving up for a deposit proves to be a massive undertaking.
But that doesn’t mean it’s impossible. There is an underrated, yet incredibly efficient way to save up for a whare deposit – it’s called budgeting. Oops, I just used the B-word!
Why budget?
A budget is an empowering tool! Admittedly, it takes a little bit of mahi to build and maintain. But it will enable you to live within your means whilst you prioritise spending on things which you really value.
Think about your budget as the steering wheel in your car – this is what will help you drive in the right direction. Having more fuel in the tank (aka money) can help you go faster and further, but it won’t be much help if you’re not going in the right direction to start with.
For aspiring homeowners, budgeting even has an additional benefit. A budget is a guarantee of credibility in the eyes of the bankers when they assess your ability to service a mortgage. It will show you are in control of your finances and you will make mortgage repayments reliably. In short, budgeting is the way to go – whether you are looking to buy a home or not!
Great, how do I start a budget?
First, write down your income. (Psst! It’s a good time to figure out if you’re being paid fairly and ask for a pay rise if needed. The higher your income, the more options you’ll have further down the line.)
List your expenses & average them out. Including the annoying annual ones such as your car’s WOF, you need the full picture.
Apply the ‘intentional filter’. Prioritise spending on things that make you happy, be ruthless with spends that do not align with your priorities and values.
Maximise and automate savings by setting up automatic payments to your savings account the day after you get paid. You won’t miss money which you don’t see, but that pūtea will grow nicely in the background.
Make sure your income, your expenses and your savings all add up to $0. Track your progress. Your budget loves a weekly date!
There are 2 methods which I recommend overlaying. The zero-based budget ensures that every dollar you earn has a role to play and you don’t spend more than what you earn. It’s all about planning. Then, use the 50/30/20 method as a guide and aim to allocate 50% of your income towards your ‘needs’ (rent, petrol, groceries, insurance, debt repayments, etc), 30% towards your ‘wants’ (socialising, selfcare, travel, etc) and 20% towards your ‘savings’. Because a budget is NOT about deprivation!
A budget doesn’t have to be complicated. You can use pen and paper if you want it to be tangible. But you can also use a spreadsheet for flexibility. There are even budgeting apps that can help you track your budget more conveniently.
Wait, how long is it going to take me?
You’ll be surprised how quickly a little bit of discipline and consistency add up! I see this every day with my clients. Some of my clients, Paula and Paul[4], are in their late thirties, have 2 young kids and earn a combined $5,300 net fortnightly. When I met them at the end of 2022, they had about $27,000 worth of debt and over $500 of their income was going towards paying it down each fortnight. They were living paycheck-to-paycheck and thought buying a house was completely out of reach. We built a budget together that would enable them to save $500 fortnightly, just through spending more intentionally. They started using this money to make extra debt repayments, so it would take them just over a year to clear. After that, they would have much more money available each fortnight to put towards their house deposit and it would only take them another 2.5 years to top up their KiwiSavers to a comfortable $200,000 deposit (20% of a $1 million home).
Fast forward 9 months, Paula and Paul have been hugely disciplined and motivated. In short, they are absolutely smashing their goals. They are about to finish paying off their debt and increase their KiwiSaver contributions. They are on track to buy their first whare in the next couple of years.
What to do if you need a little more support
At The Money Journey, I offer independent 1:1 financial advice in the form of online subscriptions. I help my clients with budgeting, paying off debt and saving up for a first home (or other life projects).
A few years ago, I was also struggling to get a hold of my own finances. I was then a solo māmā and, despite my good income, I never knew whether I’d end up going backwards at the end of the month or manage to make any savings. I took control of my money through starting a budget and found out that, by being more intentional with my spending, I could save 50% of my income. I realised that the financial services industry was insufficient at supporting so many hard-working Kiwi with the fundamentals of personal finance such as budgeting, paying off debt and saving up. Kiwi are in huge need of affordable, independent financial advice at an earlier stage of their financial journey, yet there are few businesses which cater for them. So, I made it my mission to develop a solution which could help them.
After qualifying as a Financial Adviser, I founded The Money Journey in April 2022 to fill this gap in the market. The Money Journey aims to improve the financial wellbeing of Kiwi by helping them become more intentional with their pūtea.
My subscriptions are between $100 and $125 per month, which is about the cost of a gym membership. They include:
· A thorough initial catch up
· A recommendation with both a budget and detailed options on how to achieve your objectives
· A catch up to present my recommendation
· A monthly hui (12 in total) for support and accountability
· Unlimited email support
Subscriptions are for a year, which is the time you’ll need to get used to your new budget, create new habits and see the first results. Meetings are held 100% online, which means I can offer a personalised service with more flexibility and less costs.
I offer a 30-minute strategy session to outline options for achieving your goals and figure out if we would be a good match. You can book it here. Alternatively, you can follow The Money Journey on Instagram using the handle themoneyjourneynz.
You got this!
Article by Christel Maurer
The Money Journey
christel@themoneyjourney.co.nz
021973080
FSP775371
[1] Corelogic, Housing Affordability Report New Zealand, Q2 2023, released Aug 2023
[2] Stats.govt.nz, Consumers Price Index, annual inflation June 2021-June 2023 (compounded)
[3] Stats.govt.nz, Labour Cost Index, annual adjusted inflation June 2021-June 2023 (compounded)
[4] Not their real names