Buying a home in New Zealand takes careful financial planning, especially when it comes to budgeting. A clear understanding of financial situation is crucial for first home buyers who face challenges such as high prices, tough competition, and strict lending rules. Whether you’re already preparing to enter the property market or just starting your journey to home ownership, here are 3 essential budgeting tips to help transform your financial goals into reality.

Tip 1: Set SMART Goals

Before diving into the home buying process, it’s essential to set financial goals. These goals will serve as a roadmap, guiding your financial decisions while keeping you motivated and on track to home ownership.

Using the SMART goal system, set financial goals that are:

• Specific: Clearly define your ideal property in terms of location, size or any other deciding factors.
• Measurable: Calculate how much it will cost and the necessary deposit.
• Achievable: Get help assessing your financing options and determine the feasibility of your goals.
• Relevant: Ensure that your aspirations align with your budget and lifestyle.
• Time-bound: Set a realistic timeline for buying your first home.

Setting SMART goals provides clarity and direction, and helps you approach the home buying journey with confidence and purpose.

Tip 2: Avoid Paying "Lazy Tax"

When it comes to household expenses, complacency can lead to overpaying what’s commonly known as “lazy tax”. That’s the sneaky surcharge consumers get stung with for sticking with the same service provider and not switching to a better deal. 

Whether it's utility bills, insurance premiums, or loan repayments, sticking with the same provider because it’s too hard to switch could mean missed opportunities for savings. By staying vigilant and regularly reviewing your expenses, negotiating better deals, and exploring alternative providers, it’s possible to avoid paying lazy tax.

Tip 3: Use the 50-25-25 Rule

Navigating the financial landscape as a potential homeowner in New Zealand can be daunting, especially for those who are new to budgeting, where the task of managing finances – organising income and expenses and deciding how to allocate funds – can feel overwhelming.

One approach to simplify the budgeting process is to use a percentage-based budgeting method, such as the 50-25-25 rule which offers a practical framework for allocating income, ensuring that essentials are covered, savings are prioritised, and discretionary spending is limited.

Here’s how it works:

• 50%: Allocate half of your income towards essential expenses such as mortgage or rent, utilities, and groceries.
• 25%: Dedicate a quarter of your income to long-term financial goals, such as saving for a deposit or reducing debt.
• 25%: Reserve the remaining quarter for discretionary spending on leisure activities, travel, or personal luxuries.

Sticking to the 50-25-25 rule promotes financial discipline while allowing some flexibility to still enjoy life's pleasures responsibly.

Equip Yourself For Home Ownership Success

Empowering first home buyers to make informed decisions throughout the home buying process can help them to navigate the complexities of the housing market more effectively, improving their chances of successfully achieving home ownership.

Partnering with a knowledgeable mortgage adviser is another vital step in your home ownership journey. Mortgage Express branded mortgage advisers can offer comprehensive insights into the local property market and provide tailored financing solutions to meet your specific needs. Contact our team today for mortgage advice.