OK, we know it’s no fun, but it’s really important to determine what you are planning in the years ahead, and what home loan repayments you can afford.
As well as your basic budget, you need to consider more abstract thoughts, such as where you think your careers are heading financially, whether you need to save for your childrens’ education and even if you are thinking about having more children.
Where to start?
✓Begin with your total monthly income.
Use your after-tax salaries as well as any other regular income you get from term deposits, cash management accounts, share dividends or property investments.
✓The next step is to determine your total monthly expenses.
Examples of expenditure include food, clothing, electricity, phone, gas, medical insurance, other insurances, entertainment, personal, car running costs, public transport, childcare, school fees…consider whether your new home will have higher running costs than your current home.
✓Subtract your total monthly expenses from your total monthly income and you will have a positive number that is roughly what you can afford to repay each month on a loan.
Be honest with yourself from the outset. There are no prizes for having the biggest house in the street and not being able to afford to live in it.
A handy tool you can use to help you with your budgeting calculations is the Government website, MoneySmart budget planner: