Looking to be more financially responsible? Then follow these budgeting tips for new homeowners and you'll have a better understanding of how to spend your money wisely and cautiously.
Your budget is the ultimate tool that can help you achieve your financial goals in life. With it, you will have an overview of how much money you need for your expenses, investments, savings and many more.
You can make one starting from scratch or download templates online. There are a lot of different budgeting techniques that you can choose from such as the envelope budgeting system. Whatever works best for you, it's important to know that making a personal finance plan is one step in securing your financial future.
Before proceeding with other suggestions, here are some general tips on how to start creating a household budget:
Determine Your Income and Expenses
Before anything else, it's crucial that you know exactly how much money you'll be earning every month (or week). This will give you an idea about what kind of monthly budget would be ideal for you. If you have high expenses and low income, then your budget will be tight. On the other hand, if your income is higher than your expenses, then there's a chance that you'll have some extra cash to play around with.
Set Realistic Financial Goals
Before creating a detailed budget for yourself, it's important that you already know what kind of lifestyle or financial goals are most important to you right now. Based on this, every month (or week) when making a new household monthly expenses plan, make sure that each cost benefits one of these different financial goals and tasks.
Pay Bills First
Paying your bills is one of the aspects that can't be neglected as a homeowner. It's important to keep these costs in check so you can avoid accumulating more debt.
Here are some tips on how to manage your mortgage and other debt when creating a detailed budgeting plan for yourself:
- Keep a separate bank account for your home loan. That way, you can see how much money is left over for other expenses.
- Ask your lender about the different repayment plans and determine what plan will work best for you. For example, if you're cash-strapped, it may be better to do monthly payments instead of making payments every 6 months or yearly ones.
- If your budgeting doesn't include other types of debts, make sure that you allocate enough money to pay everything off. Just make consistent monthly payments so you can get rid of your liabilities one day!
- It's important to remember that even if you have a high income, it doesn't mean that you spend more than what's necessary for yourself and your family. You may also want to establish a separate budget for your investments and savings.
- Know the rules of your mortgage lender such as how much you're allowed to borrow when buying a new property or pay off on another house on instalment basis. What should you do with all the money left over after paying all housing expenses every month (or week), etc.
Pay Yourself Second
Paying yourself second may seem counterproductive but it's actually the best way to make sure that you'll have enough savings for those rainy day emergencies when you need cash fast. You may be earning more money than what you're spending at this moment but it's also possible that your expenses will be increasing once you live in a home.
It's important to calculate how much money will come out of your income if you allocate a certain amount every month (or week) for your savings and investments funds. If it would take away all of your earnings, then you may need to lower your budgeting goals or consider trying to bring in some more income.
Take Advantage of Tax Breaks
It is important to take advantage of all the tax breaks you can as a homeowner. For example, when you file your property taxes, you can claim deductions for certain expenses such as mortgage interest or property tax payments. This results in a huge reduction in taxes.
It is important that you get familiarize yourself with these different tax breaks and rules so you'll have a clearer idea on how much savings will be coming out of your income every year.
Save Your Extra Money
Don't just spend all of your extra cash every month. Put some in savings and create a separate bank account so you'll have enough money for emergencies or other important situations that may arise when living independently from your parents (or guardians).
This way, you won't find yourself falling behind with bills and payments because of unexpected problems along the way. You should also consider coming up with a monthly budgeting strategy like the 50/30/20 rule to help manage your money.
Get Help with Bills & Payments
If there are particular bills or payments that you feel overwhelmed with because of their high costs, consider getting help. If you have financial problems with your mortgage payment, your parents can be used as co-signors so you'll get lower interest rates and monthly amortizations on the loan's principal.
The same goes for cable and phone companies - if you use them regularly, ask your parents or someone more financially stable to sign up with them together in order to take advantage of special offers.
Create a Household Budget Plan
Now here's the tricky part: how exactly do you create an effective household budget plan? There are many ways actually but there are two basic steps that will probably stand out among other tips for new homeowners:
Understand your financial situation: Do you have any debts to pay off or need to save up for? Do you live with parents and need to pay for a room? If you're paying for your own phone, do you know how much it should cost?
Figure out if this will be a one-person household: Do you live alone? For example, one person might spend more on entertainment, groceries, and eating out because they don't have to limit their food intake. Whereas the other may only spend more on household bills or ordering items online.
Track Your Expenses
There are times when it's difficult to keep track of your expenses not only because you need to write them down on paper first before recording them in a document, but also because some transactions have more than one expense attached.
For instance, if you need to renew your driver's license, you'll be paying for the documents in a pay period that normally wouldn't have that. The best way to avoid confusion is to separate every transaction through different payment methods.
Be a Money-Savvy Homeowner
Oftentimes, new homeowners find it difficult to create and maintain a household budget plan. However, the above steps can be taken in order to make this process easier.
Track your expenses so you know how much money has been spent on certain items or services during the month (or week), then put aside any extra cash into savings accounts for emergencies or other unexpected circumstances as they arise.
You may also want to consider getting help with bills and payments if there are particular ones that seem too high-costs. You can always apply for instant loans even with low credit with direct lenders to help cover those expenses.