How to save for your first home

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If re-elected next month, National promises to double grants for first-home buyers on modest incomes to up to $20,000 for a couple buying a newly built home. The existing KiwiSaver grants will remain for qualifying buyers of existing homes, but the cap has been raised to up to $550,000 for properties in Auckland, $450,000 in Hamilton, Western Bay of Plenty, Kapiti, Porirua, Hutt Valley, Wellington, Nelson and Christchurch and $350,000 elsewhere.

If you are thinking of purchasing your first home, here are some top tips to help you save:

1. Sort your finances

Short-term debt (think credit cards, store cards, car finance) is not a good look when you apply for a home loan. Try to pay off all your short-term debt and build up an emergency fund before you begin saving.

2. What are you saving for?

Having your goals written down and placed somewhere visible will serve as a helpful reminder of what you are working towards. So when you're tempted to splurge, you might stop and think twice.

3. Stick to a budget

If you know where your money goes, it's easier to keep track of it, and ensure you are saving as much as possible. There are many budgeting advisors and information, but it takes real commitment to keep on top of it.

4. There's no time like the present

You don't need to wait for your pay-rise or for the baby to be born, or anything you can start saving today by making simple and practical lifestyle changes.

5. Determine how much you can afford

Some experts believe a mortgage should be around 25-30% of your income. It's important not to over-extend yourself so you are still able to meet your daily obligations and save for retirement.

6. Paperwork costs

Building inspections, LIM reports, lawyer fees insurance and rates need to be considered in your savings plan. It's upsetting to spend money on reports if you don't end up purchasing a property, but this due diligence is an area where you don't want to cut corners.

7. When you save, you're paying yourself

Do this first. Sort out an automatic payment to yourself so that as soon as your payment comes through, some money is put away for savings. Expenses such as insurance, rent and power should be covered and anything that's left can go on discretionary spending.

8. Cut back on small luxuries

Taking your lunch to work and drinking less takeaway coffee will soon add up. Also, reign in your spending on things like gifts. Friends and family understand how hard it is to save, it's not necessary to splurge on expensive gestures.

9. Little luxuries are still important

I realise this looks conflicting to the above point, but factoring little treats into your budget will help keep you on-track. If you try to live off only the essentials in order to save the rest, chances are you'll splurge and use far more of your savings than if you had intermittent luxuries to look forward to. After all, life is for the living.

10. Where to get help

There are many resources for budgeting advice:

• Sorted is an independent money guide. It offers free information and calculators.
• Housing New Zealand website: Buying a home with KiwiSaver
• Welcome Home Loan website: Low-deposit home loans
• Contact your KiwiSaver provider to discuss the KiwiSaver first home savings withdrawal.