Managing your money is essential if you are looking to save for a down payment. If owning a home was easy then everyone would have one!  Learning to plan and budget is a crucial element of success when you have a financial goal to reach. If done correctly it can bring significant gains to the individual.

Follow these three straightforward steps to help you get started with your planning and budgeting for your down payment.


What Comes in VS What Goes out?

The very first step of any budget or spending plan is to work out precisely what you have coming in; your income; and what is going out; your expenditure. Most people will tend to do this on a monthly basis, as weekly income and outgoing can often tend to fluctuate greatly from one to the next. If doing this online, some people will choose to color code outgoings in red, and income in green, but this is entirely a personal preference.  What is key, are the figures; as this will show exactly the figure you are left with once all your outgoings are considered.  This is your starting point when learning to plan and budget.

Colour Code, Categorize and Be Ruthless

Being organized is an essential skill you will need to deploy time and time again.  Having a plan and budgeting effectively will take a little organization too.  Categorizing your expenses into a logical order is a good starting point.  There should be a firm list of need to haves, and nice to haves, essentially these are must pay items; such as your mortgage and utilities; then your extra items such as daily coffee and meals out.  Being ruthless, you will instantly be able to see what items can be quickly cut-out.  For example, your daily coffees will start to add up if you look at how much you are spending each month; could this be replaced with a home-made coffee in a carry-out cup instead? Could you forgo your weekly night out and bottle of wine, for a monthly night or, or even change it to a nice meal at home with friends instead?

Being ruthless is tough, but having a clearly labeled and categorized list will help you to easily identify any areas that you will be able to cut back on, quickly. Plan and budget without remorse!

Outlining Your Plan

We have already covered the important of having a clear goal in a previous article, along with the importance of reduced spending and having a dedicated savings account.  Now you have your shop in order, so to speak – outlining your plan is the next logical step to help you to see and actualize exactly how you are going to get to that 20% down payment goal.  If you have followed this series of articles then you will already have your magic number, you will know the number of years you have set as your target, and the amount you need to get to, in order to reach that number over the period.

So it’s number crunching time again – how much “left-over” income do you have? What amount, after putting into practice some belt tightening activities can you afford to now set aside each month towards your goal? The important thing right now is not the number, don’t worry if it’s not as big an amount as you would like, you need to get it written down. Commit to a number and stick to it – this is what outlining your plan, and budgeting is all about.   Look initially at the first six months to a year, then as you’re getting close to the end of that period, perhaps circumstances have changed and you will need to review your performance against your plan to date, then set out a new plan for the next year ahead.  Don’t put too much pressure on yourself initially, set realistic goals which are achievable.

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You don’t need to be a whizz on a computer to be able to budget and plan, but you do need to be realistic and honest from the very start.  Whether or not you choose a spreadsheet to keep track of your expenditure and income, or you use a pen and paper; is irrelevant to the end goal.  As long as you can create a plan, and be disciplined enough to stick with it, then your already half way there! Plan and budget and reach your goal.