End of Financial Year - The perfect time to evaluate your financial position
So you want to build a new home? Whether it’s your first home or perhaps your first ‘brand new’ home, or even starting with a block of land – the end of financial year (EOFY) is a great time to take stock of your current financial position. Why not think about your goals and ascertain whether or not they are achievable and within your timeframe. Perhaps there are some budget adjustments to make?
Ok, so we’re approaching ‘tax time’, which means we can assess our year to date (YTD) earnings and address future income in combination with relevant budget components. Your earnings create the basis of your overall budget. Taking a closer look at our earnings and financial goals means that we can break everything down, ensuring that we make smart, measurable, attainable, realistic and timely decisions; to keep us on track (SMART goals).
It’s all about the target and how we get there. When we have a clear picture of what we are trying to achieve, the steps of how we can get there are more easily defined. Do you know how much upfront funds you need to buy your land and build your new home? This is a great starting point and it’s an important conversation to have with your lender; they’ll assist and direct you to the amount you need (funds to complete and genuine savings) to substantiate a loan application.
Sometimes when we just save for the sake of saving with no clear goal, we can easily drain all our hard work on an impulse purchase or a holiday because we don’t have in site what we are clearly trying to achieve. Life should absolutely be about balance, but sometimes to meet financial goals, it also means some sacrifices in the short term.
Once your savings goal is set (your target), it’s time to come back to those other budget components we mentioned earlier. These include your earnings, current debt and ongoing expenses. When lending money, you will be assessed on your creditworthiness (credit risk); in a nutshell, this is your ability to repay current debts and your capacity to take on more. This is where you might consider any tax return amounts to put toward paying down personal loans or any credit card debt? The lesser the debt, the greater lending capacity you will have. Or if you’re well and truly on your way to achieving your savings target, a refund might be a nice injection to those savings. Perhaps this next financial year, you will be ready to put that deposit down on your block of land and start chatting with your builder – how exciting!
Coming back to your ‘budget’… we know, we know, it’s a difficult word. Yes, it requires patience, dedication and hard work. It means saying ‘no’ sometimes, it means going without from time to time, after all its an absolute sacrifice to meet so many goals we set in life. Being a grown up is tough and we understand. Yet, when you can clearly outline your current financial position and where you would like to be including how long you think it will take to get there…. Measuring its success and progress is actually kinda fun! Keep focusing and visualising and your hard work will pay off.
Stay tuned for next month where we share some great apps to track spending habits and how you can organise your Pinterest photos to gain clarity and direction when it comes to home selections (eeeek…. the exciting part)!
Simply by reading this article and putting on your ‘budgeting hat’ to get serious about your financial future, means you are taking the first steps in striving towards financial fitness, and financial freedom to execute your ‘new home’ dream.
Extra bits and pieces to speak about with your accountant or tax agent:
- If you work more than one job (or you are considering taking on extra employment to obtain that deposit sooner), ensure that your jobs are structured correctly to avoid tax implications.
- Tax time is a great opportunity to plan for the next financial year. What expenses are you entitled to claim, could something be structured differently to minimise tax?
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