How can a saver and spender budget for their first home?
By Amie Parker
I recently spoke with a couple of first home buyers who had a very common problem.
They were a lovely couple and clearly adored each other, but they had grown up with very different attitudes towards money. He was naturally a saver, while she was more comfortable spending and enjoying her income.
They both worked full-time and earned respectable incomes- they had no children and relatively few major financial responsibilities, yet they felt as though they were constantly going backwards.
They wanted to buy their first home, but their deposit did not seem to be growing.
It is a common situation. As our income increases, our spending often increases with it. When you are managing money as a couple, it can become even more complicated. One person may enjoy spending, while the other feels safest when money is sitting untouched in the bank.
Neither person is necessarily doing anything wrong. They simply have different relationships with money.
The problem arises when you are earning good money but do not have a shared system for deciding where it should go. Conversations about spending can become tense, purchases may be judged, and the goal of buying a home can start to feel impossible.
You may not need to earn more money. You may simply need more structure and a clearer target.
How do We Start Saving For A House Deposit?
“Saving for a house” is a good goal, but it is too vague to build an effective budget around.
Start by considering where you would like to buy and what type of property you are looking for. Are you hoping to buy a house, townhouse or apartment? What are properties currently selling for in your preferred area?
Once you have a rough property price range, you can start estimating:
your likely house deposit
upfront purchasing costs
an emergency buffer
when you would ideally like to buy
Your deposit is only one part of the amount you may need. Depending on your circumstances, you may also need to budget for costs such as conveyancing, building and pest inspections, government fees, moving expenses and any immediate work the property may need.
You can read more about deposits and upfront purchasing costs in my Ultimate First Home Buyer Guide.
It is also important to know that you do not need to have your entire deposit saved before speaking with a mortgage broker.
An early conversation can help you understand the approximate price range you may be working towards, how much deposit you may need, what purchasing costs to allow for and whether any first home buyer programs may be relevant to you.
This gives you a meaningful target rather than choosing a random savings amount and hoping it will eventually be enough.
For example, “we want to save more” is difficult to measure.
“We want to save $40,000 within two years, which means putting aside approximately $770 per fortnight” gives you something specific to work towards and review.
Where is Our Money Actually Going?
You cannot create a realistic budget until you know where your money is currently going.
You may feel as though you already know, but most people are surprised when they look closely.
Go through at least three months of bank and credit card statements for both partners. Review every transaction and place it into a category, such as:
mortgage or rent
household bills
groceries
fuel and transport
takeaway and eating out
clothes and personal shopping
entertainment
subscriptions
debt repayments
holidays and travel
health expenses
gifts
miscellaneous spending
The purpose is not to work out which partner is “at fault”. It is to understand your household as a whole.
You are looking for:
your average essential expenses
your discretionary spending
your current debt commitments
recurring subscriptions
irregular expenses
how much could realistically be redirected towards a house deposit
Try not to exclude an expense because it was unusual.
There will nearly always be a birthday, medical bill, car repair, wedding, holiday or unexpected purchase. Even if the exact expense does not happen again, something else probably will.
It is also worth looking back over twelve months for annual expenses that may not appear in your three-month review. This could include car registration, insurance, professional registration fees and Christmas.
If you forget these expenses, you may commit to saving an unrealistic amount each fortnight. Then, when a large bill arrives, you will need to withdraw money from your house deposit account and feel as though you have gone backwards again.
Once you understand your spending, decide what is genuinely important to you.
The aim is not to remove every coffee, dinner out or enjoyable purchase. It is to reduce the spending that happens automatically and does not add much value to your life.
How Should We Organise Our Bank Accounts?
Budgeting becomes much easier when all your money is not sitting together in one account.
When bills, spending money and savings are mixed, it can be difficult to know what is genuinely available to spend.
A simple account structure could include:
Household bills account:
For rent or mortgage payments, utilities, insurance, internet, subscriptions and other regular household commitments.
Shared everyday spending account:
For groceries, fuel, household items, takeaway and shared outings.
Personal spending accounts:
One for each partner to use without judgement or explanation.
Sinking fund:
For predictable but irregular expenses throughout the year.
Emergency fund:
For genuine emergencies that are urgent and unexpected.
First home deposit account:
For the money you are building towards purchasing your property.
The distinction between the final three accounts is particularly important.
Your first home deposit account is for buying your home.
Your sinking fund is for costs you know will arise during the year.
Your emergency fund is for something you could not reasonably have predicted or planned for.
Christmas is not an emergency. Car registration is not an emergency. An annual professional registration fee is not an emergency. These expenses are predictable, even if they only happen once a year.
Separating the accounts prevents a common cycle:
You save money towards your first home.
A large annual bill arrives.
You withdraw money from the deposit account.
You feel as though you are making no progress.
You become discouraged and give up on the budget.
To create a sinking fund, list all the irregular expenses you expect over the next year. Add them together and divide the total by 26 if you are paid fortnightly.
For example:
Car registration and servicing: $2,000
Insurance premiums: $2,400
Professional fees: $800
Christmas and gifts: $1,500
Medical, dental and pet expenses: $1,100
The annual total is $7,800.
$7,800 divided by 26 fortnights equals $300 per fortnight.
By contributing $300 each fortnight, you gradually turn large and stressful annual bills into manageable regular expenses.
Your figures may not be perfect in the first year. That is okay. Adjust them as you learn what these categories actually cost you.
Does That Mean We Don't Get Any Spending Money?
When one partner is a saver and the other is a spender, the solution should not be for the saver to control every purchase the spender makes.
That will usually create resentment rather than better money habits.
Once your shared bills, sinking funds, emergency savings and house deposit contributions have been covered, each partner should ideally receive an agreed amount of personal spending money.
This money can be spent without criticism, monitoring or explanation.
One person may spend theirs on coffee, clothes, lunches or hobbies. The other may leave theirs untouched for several months and use it for something larger.
Both choices are valid.
This gives the spender permission to enjoy some of their money without feeling guilty. It also gives the saver reassurance that the important commitments have already been funded.
Personal spending money should be genuinely guilt-free. It should not later be brought up during an argument or used as evidence that one person is less responsible than the other.
Start Slowly and Share the Responsibility
You do not need to overhaul your entire financial life during one money date or one weekend.
Trying to analyse every transaction, create a budget, open multiple accounts, compare providers and develop a long-term plan all at once will probably become overwhelming.
Break the process into manageable stages.
The responsibility should not fall entirely on one person.
You could divide the tasks according to your strengths. One person might enjoy creating the spreadsheet, while the other compares electricity, insurance or phone plans. One could organise the accounts while the other gathers annual bills and expenses.
You are building a shared future, so the financial administration should also be shared.
You do not need a perfect budget or your full deposit saved before asking for help.
If you are hoping to buy your first home but are not sure what deposit you need, what costs to prepare for or where to begin, you are welcome to arrange an initial conversation with me.