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The money mistakes you don’t know you’re making.

Saving for your first apartment is a scary task. How long will it take? How much will you need?  How many two minutes noodle weekends will you have to endure before you have enough for a deposit? The questions are never ending. Buying an apartment is a big commitment and, and according to Chris, Director of Master Your Money Now, there are a few common mistakes people make when it comes to achieving their savings goals.

These are seven of the biggest money screw ups you probably didn’t know you were even making.


1. You don’t know your goals

One of the biggest mistakes people make when they set out on their saving journey is that they don’t know what their end game is. “There is no point saying, ‘we’re going to save for our own home’ and then away you go,” Jeff says. “Often people just try and save and nothing happens then, eight months later they’re in the same position they started in. They don’t understand what they’re savings end goal is so, ultimately, they don’t change any of their spend habits either. If you’re a runner, you train differently for a sprint than you do for a 5kn run, but it’s hard to tailor what you do if you don’t know what your end game is/

2. Your goals are too big

Too often, people get so focused on the amount they need to save that they get demotivated or stress themselves out. “Saving for a apartment can be one of the most scary things in your life, especially if you’re aiming for 20 per cent deposit,” Jeff says. Saving for an apartment is all about baby steps. Sometimes the most effective approach is to break your goal down into smaller, more achievable goals. Saving $20,000 a year for five years seems much more achievable than just telling yourself you have to save $100,000.”

3. You don’t actually have a plan

As the old saying goes; if you fail to plan, you plan to fail. This is especially true when it comes to saving for a deposit. “One of the biggest things we see is that people do not follow a structured approach to meeting their savings goals,” Jeff says. “To be successful at this, you need to understand how much you need to save, what options you have if you save that amount and the most effective way to make that happen.”

4. You’re not very accountable

It’s all well and good to have a plan, but what’s even more important is making yourself stick to that plan. Once you understand what your goal is, sit down with a friend or your partner and map out how you are going to achieve it. In most cases that means you’re going to have to do something different from what you have been doing, such as separating your savings from your living expenses and setting yourself a simple budget. As a minimum, your savings goal should be mirroring the minimum repayments you would be making on a apartment once you’re paying it.

5. You have too much personal debt

When it comes to applying for a loan, lenders and banks look at your total finance net position. Too many young people these days now have extremely high credit card limits and too much personal debt before they apply for an apartment loan. What they often don’t realise is that, when it comes to credit cards, it’s not what you have outstanding but your overall credit limit that is taken into consideration by the lenders and banks. Jeff suggests paying off any outstanding amounts then reducing your credit limit to $500 to minimise the chances of your personal debt getting in the way of your home ownership dreams.

6. You have bad credit history

Another thing that bites a lot young people is bad credit history. If you’ve ever defaulted on a mobile plan, didn’t pay an internet bill or you’ve had multiple enquiries for short-term finance – to pay for a car or a holiday, for example – this all gets recorded against your credit history,” Jeff says.  “All these things can serve as negatives for people applying for finance, especially if you’re applying on a low deposit, which is considered to be anything under 20 per cent savings.

7. You can’t demonstrate good money habits

While it’s all well and good to save a deposit, banks and lenders also want you to prove that you have good money management skills. “You should be aiming to put away at least $2,000 per month plus buffer money, because once you settle on a apartment you’ll have to pay it anyway,” Jeff says. “It’s all about mimicking those habits. Even if you have the money for a deposit, if you can’t demonstrate the behaviours of having a apartment, you won’t get access to the funds.”

This isn’t just for the bank or lender’s sake, Jeff says, but for your own, too.

“It’s as much as proving to yourself that this is the right decision for you as it is showing the lender that you can manage the repayments post settlement,” he says.

Having a strong, systematic savings plan and clear goal, and working towards it consistently for a period of time, will not only put you in the mortgage good books, it will also help you establish solid money foundations which will set you in good stead for any future financial or monetary goals you may have.

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