Budgeting

Most importantly you need to make sure you have enough money to have a life as well as a mortgage.

Fortunately at the moment paying the interest component of your mortgage is very similar in most cases to what you would pay in rent. The additional 'Principal' component comes off what you owe, making your interest charge shrink over time. As we said before it is always good to allow for some upward rate movement when formulating your budget. I have included the interest component of the repayment, this will change slightly with every repayment, but it is important to know all the same. That is how much it is costing you to rent the money from the bank, so you know if you are paying $200 extra per week or $867 you will be paying at least $10,200 off your loan each year. This will help you to get out of debt much sooner as well as building a healthy excess into your loan.

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Now we have our repayment amount, it is time to account for living expenses, these will include food, power, gas, fuel, car insurance, maintenance, repayments and registration, credit card payments, health cover, savings, clothes, home wares and entertainment. Take a few weeks or longer to write down what you are spending here and see if you are prepared to compromise and reduce any of these expenses.

There are some new costs associated with owning a home you will have to contend with, these will be things like Income replacement insurance, council and water rates, building and contents insurance, maintenance costs and strata/ body corporate fees if you are in group housing. You can find out about insurance costs by clicking here, also most properties will have the rates and strata fees listed in the advertisement.

I strongly recommend reading the book 'The Richest Man in Babylon' to help you formulate your budget and savings plan, a simple book with a simple plan which will help you plan for now and the future. It appears in almost all of the world's most successful peoples top ten reading lists too,
so don't just take my word for it.

to speak to a professional about your budget click here