Budgeting for your first home and beyond

Start with where your money goes

Before changing anything, look at the last three months of bank statements together and sort your spending into three groups: fixed bills, everyday spending, and savings or debt repayments. Most couples find a few surprises, usually subscriptions, takeaways or small purchases that add up.

Then set up a simple system so the plan runs itself:

• A bills account. Rent, power, phone, insurance and loan payments go out automatically.
• An everyday account. Groceries, fuel and spending money. When it's gone, it's gone.
• A savings account. Your deposit and emergency fund, topped up automatically on payday.

Some people start with a rule of thumb like 50% on needs, 30% on wants and 20% on savings and debt. It's a starting point, not a rule. What matters is that the numbers work for your family.

Budgeting to buy your first home

When you apply for a home loan, lenders usually review your recent bank statements. A tidy, consistent budget helps your application as well as your savings.

• Set your deposit target. With a Kāinga Ora First Home Loan, you may only need 5%. Read buying with a 5% deposit.
• Make the most of KiwiSaver. Contribute enough to get the full government contribution, and check your fund. Try the KiwiSaver first home calculator.
• Tidy up your accounts. Lenders often count credit card limits and buy now pay later accounts, not just what you owe. Close what you don't need.
• Practise the mortgage. If your repayments will be higher than your rent, save the difference each week now. You'll know you can afford it, and your deposit grows faster.

For more ideas, read seven habits that help families save a deposit.

Paying down debt: avalanche or snowball?

If you have more than one debt, make the minimum payment on all of them, then put every extra dollar toward one debt at a time. When it's gone, roll that payment onto the next. There are two popular ways to choose the order.

The avalanche method pays off the debt with the highest interest rate first. It saves the most money.

The snowball method pays off the smallest balance first. You see results sooner, which helps many people keep going.

An example

Here's a couple with three debts, putting $900 a month toward them in total:

In this example, the avalanche saves about $240 and a month. But the snowball clears the first debt nine months earlier, and for some couples that early win is what keeps them on track. Both are far better than only paying the minimums.

Budgeting as a couple

Money is one of the most common things couples argue about, usually because they've never sat down and agreed on the plan. A few things that help:

• A short money meeting once a month to check progress and plan ahead.
• One or two shared goals you both care about, like a home or being debt-free.
• Some personal spending money each, with no questions asked.

Budgeting after you buy

Owning a home brings new costs: rates, home and contents insurance, water and maintenance. A common guide is to set aside around 1% of your home's value each year for maintenance. Keep an eye on when your mortgage rate is due to refix, and rebuild your emergency fund as soon as you can. This is also when protecting your income matters most. See insurance for families.

Money coaching for couples

If you'd like help putting this into practice, I offer money coaching for couples. We'll look at where your money goes, agree on your goals, set up a simple system and check in as you go. Get in touch to find out how it works.