By Soniya Gaonkar on Jun 7, 2021 6:22:25 PM
For many and especially first-time home buyers, balancing between the monthly household budget and the home loan EMI refers to walking on a thin rope, wherein every step demands careful planning and execution. On the one hand, where you cannot give EMIs a miss, you cannot always compromise your monthly home budget either.
So yes, balancing these two critical factors is a genuine challenge. However, not as much when you plan it well. Of course, regardless of the extent to which you plan, at times, you might experience a few months of crunch, requiring you to cut down on various luxury expenses.
But with these tips at hand, balancing between home loans and monthly budget wouldn’t remain as complex, challenging, and daunting as it might apparently seem.
3 Most Common Challenges for First Time Home Buyers After Buying a New House
At the outset, let us look at three common challenges first home buyers encounter after buying a new house.
1. Juggling With Expenses and EMI
The first few months, especially those who haven’t planned their finances well, can prove genuinely challenging. They involve continuous juggling with expenses and EMI to make ends meet and keep the head above the water, without letting any financial concerns surface or allowing their routine lifestyle to affect.
2. Inadequate Savings
Often, many people pour a considerable part of their hard-earned savings into the down payment. As a result, they are left with little or almost no savings to support their routines otherwise. As a result, they face an initial crunch.
3. Regulating the Household Financial Cycle
EMIs, expenses, and then before you could breathe, EMIs again, and then expenses and so on. For people with no or very little savings on their purse to survive, regulating the household financial cycle becomes an extreme challenge. Unfortunately, many end up in debt borrowed in the form of personal loans or from friends and family. And then, repaying those debts forms another challenge!
5 Money-Saving Tips for First Time Home Buyers - Balance Your Monthly Expenses With Home Loan EMI
1. Start Saving
You dream of buying a home today, the following day, you rush to the bank, apply for a home loan, get it approved in a few hours, and the installments begin the very next month!
No, home loans and the home buying processes do not work in this manner and aren’t as quick either. Both require you to go through a plethora of processes. Hence, often, home-buying should be planned well in advance and months before the actual processes begin. Accordingly, the first step to balance a monthly budget and home loan is to start saving, apart from the amount that you have reserved for a down payment.
For instance, roughly, based on the property price, your monthly income, the approximate loan amount, if you will be paying an EMI of around 20,000 INR, you can start saving around 7000-8000 INR a month. Doing so for the first few months before the EMI begins will enable you to have enough finances to support the first few months of EMI, thus mitigating the impact that the EMI might initially have on your routine expenses.
Even better, if you follow the same trend, and keep saving more or less the same amount and continue contributing to your EMI savings account to avoid defaulting and the embarrassment that follows it.
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2. Jot Down Your Monthly Income, Expenses, and Home Loan EMI
Having a clear picture of your monthly income, expenses, and the home loan EMI enables you to plan your finances revolving around it. So, take a pen and paper, and start with writing your monthly income. You can factor in your spouse’s income, just in case you might require support.
Further, create a list of your monthly expenses that include groceries, medicines, entertainment, school fee, insurance premiums, other ongoing EMIs (if any), etc. Ensure that you include every possible expense to strengthen your plan.
Additionally, remember that paying home loan EMIs and managing expenses isn’t the only aim of your life. You have to save as well. So, ensure you factor in your savings and investments also while planning.
Write down the home loan EMI next to both these elements, and then start with the thought process. Calculate your expenses. If your joint income outnumbers your expenses and the EMI amount by a considerable difference, you do not have to worry much.
However, if you see your expenses outweighing your income and EMI, consider curbing a few non-essential ones without letting essential ones like savings, medicine, education, insurance, etc., hamper.
3. Prepare a Family Budget for a Month
This one is pretty much aligned with the above. It involves allocating a certain fixed amount (with some space for flexibility, of course) to family expenses, based on the monthly income and the EMI.
Remember, you might not achieve 100 percent accuracy every month, as managing a family and a household involves several unforeseen expenses.
However, benchmarking helps a lot as it enables you to exercise better control over the expenses without letting them blow out of proportion, or affecting your EMI payments, on the other hand.
4. Revamp Your Monthly Budget Plan
With inflation and changes in income emerges the need to revamp your monthly budget plan.
If your increased income is higher than the current inflation rate, and depending on the impact that the inflation will have on your other essential expenses, you might consider reintroducing an expense or two (sometimes) in your routine lifestyle; however, if the situation is otherwise, you must revamp the plan, and manage your expenses accordingly.
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5. Create an Additional Source of Income
If you have the resources and the capability to start a small home-based business and earn some money to support your household, you may want to consider creating an additional legitimate income source that demands hard work but doesn’t require you to compromise your routine lifestyle or curb your expenses.
However, it requires a careful assessment of your existing financial condition (whether it allows investments), time, energy, family support, etc.
Kohinoor Group - Offering Best Residential Projects for the First Time Homebuyers in Pune
Remember, the idea is to live seamlessly, without allowing any of the elements discussed above, affect your lifestyle considerably. You can follow the above guidelines while creating a plan specific to your lifestyle objectives.
Are you looking out to buy the best properties in Pune? Connect with Kohinoor, and book a new home in Pune with us. For more details, bookings, and virtual site visits, call 020 6764 1839.