HOW TO SAVE!
Written By: Alex McFadyen & Kevin Parton
Combining good spending habits and a realistic, attainable budget is really the key when saving for any large purchase. A house purchase is no different, the most important step if you are interested in buying and staying ahead is smart planning.
Cash Flow Analysis
Using a cash flow analysis is the best way to figure out how much you spend every month and how much money should be left over. You should never start taking on additional expenses without knowing your your monthly cash flow and what you can actually afford. When you add a monthly expense the money has to come from somewhere and often times you will be required to make minor lifestyle changes to accomodate the new expense. It is important to prepare yourself well in advance for these lifestyle changes to avoid the sudden shock of increased expenses when you finally buy.
How To Save and Still Live
Now that you know your current cash flow you want to figure out your future cash flow. Calculate all of the new costs associated with have a mortgage.
Utilities (Estimate $75 per month)
Cable and Internet ($100-$200)
Bigger food budget (if you are still living with mom and dad)
How much more are your monthly expenses? The difference between current expenses and future expenses is the minimum amount you need to be saving to prepare yourself to buy. If you haven't saved up a down payment yet then you will continue saving this way until you have your down payment. If you have a down payment already then I would recommend saving this way for a few months while you look for a house to get familiar with the increased expenses well in advance.
Create a Plan
- Download the cash flow analysis form and complete a current budget. This will show you what should be left over each month after all of your expenses
- On a new cash flow analysis form, input your future cost of living expenses (Mortgage, Strata, Utilities, Food, Cable/Internet, Insurance). You will now have an accurate future budget to help you understand what the costs will be when you buy.
- Figure out how much of a down payment you want/need to make and begin saving the difference between future cash flow and current cash flow until you have your down payment.
You have now created your time frame for buying a home. Regardless of whether it is 3 months or 3 years you now have a plan which can be altered and adjusted if necessary. Most importantly you can begin to work with a realtor and mortgage broker to find places that are in your price range.