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Small changes, big outcomes: taking control of your spending

We’re on a mission to improve the lives of Australians – and we want to empower people to live their best life, free of financial stress.

In the first of this two-part series, we delved into how Aussie millennials spend their money, focusing on how easy it is to spend money in the digital age of subscriptions, ride-share and food delivery services. Today, we’ll look into what impact these expenses have on getting a home loan.

Let’s take a step back in time, briefly…

In the last 50 years, there have been several radical changes in how we access and use our money. In the 70s, bank records were slowly transferring to databases, but most records were still physical and ATMs were only just becoming widespread. Now, you can access your cash from just about anywhere – if you even need it at all. Contactless and phone payments mean if you’ve got enough money in your account, you’re good to tap and go.

This shift means we spend less time counting change and balancing books, but it also means people might be less likely to be able to estimate their expenses accurately, which can be a problem when applying for major loans like mortgages. Loan providers are also looking more closely at spending history when approving loans. This includes finding out how effective applicants are at spending cash, saving cash, and servicing any existing loans.

How much can your spending impact on your potential loan amount?

Let’s look at a couple of scenarios.
 

Scenario One

Say that you:

  • Have an income of $80,000 before tax per year.
  • Have yearly expenses of $18,408, classified as “basic” spending.

Depending on your personal situation, you might be able to borrow up to $518,504, 6.4x your current income*. 
 

Scenario Two

On the other hand, if you:

  • Have an income of $80,000 per year.
  • Have yearly expenses of $50,000, classified as “lavish” spending.

Depending on your personal situation, you might be able to borrow $132,680, 1.6x your current income.
 

That’s a pretty big difference.
 

NB – “basic” and “lavish” spending classifications are taken from the House Expenditure Measure (HEM).

So, how aware of your spending habits are you?

The good news: 43% of Australians surveyed by us are completely or moderately aware of the need to track their spending for their loans. And like we covered in our first article, 42% of people check their banking apps every time they make a purchase. 

However, the 41% of people that aren’t aware of the need to keep tabs on spending and saving are also less likely to know exactly how much they spend a month, and less likely to monitor their spend closely.

Tips and tricks to master spending

Not sure how to get your spending under control?

One of our favourite tips is to pay yourself first. Most people spend their money, then try and save whatever is left at the end of the month. To help make reaching your savings goals easier, think about transferring savings out of your account immediately after your paycheck lands.

Still not convinced by your savings abilities? Our in-app tool, Free2Spend, is here to help you master saving and spending by giving you one number that lets you know how much you have to spend, every day, to make sure you meet your savings goals. Because we believe getting your finances in order and getting the loan you need should be achievable for all spending and savings-savvy young Aussies.
 

* Assuming no extra income, no dependents, no loan repayments, no credit card limits, and rent or home loan repayments included within the yearly expenses figure.


The information contained in this article is of a general nature only. It doesn’t take account of any person’s objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate for your circumstances and seek independent legal, financial, and taxation advice.