A wise person once said: failing to plan is a plan to fail. As probably the most significant purchase of your life, saving for a home definitely takes prior preparation and planning! We're part of a group that has teamed up with the Federal Government's MoneySmart program to help you plan for success and save for your home.

How much can I afford?

You may have a dream home in mind but you first need to work out if you can afford it. There are many factors that feed into our decision around what to buy and where - proximity to work and family and our stage of life are just a few - but the single biggest decider is nearly always what we can afford.

It's really a case of looking at the big picture and working your way back from there. Consider your household income and what you realistically can afford in loan repayments, taking into account all of your expenses.

As a guide a mortgage calculator can be a great place to start, but it won't take into account all of your personal circumstances or eligibility for a loan so talk to your broker to get your plan underway.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/mortgage-calculator

How much do I need for a deposit?

Ideally, you should start with a 20% deposit to avoid paying lenders mortgage insurance (LMI). This is a one-off insurance payment charged by lenders to those borrowers who are considered a higher financial risk. Your risk is determined by your loan to value ratio (LVR), which is the amount you wish to borrow divided by the lender's valuation of the property you wish to buy. Lenders generally like to have at least a 20% buffer so if you have to default on the loan, they stand a good chance of recouping the loan amount through the sale of your property.

Although LMI can add several thousand dollars to property purchase costs, many borrowers consider it a worthy investment to help secure a loan with a lower deposit. The critical factor is whether your income can support the higher loan repayments. Ask your broker for an LMI estimate based on your financial situation before deciding how much you need for your deposit.

Saving for a deposit

Working out how much you need for a deposit can be fairly easy compared to actually saving for it. Sacrifices are generally in order!

Budget cuts

The best place to start is a budget. Review all of your expenses, including day-to-day costs like lunches, coffees and transport, and your bigger bills, such as rent and electricity. Don't forget to also include any annual bills such as car insurance and registration, which can sabotage your savings. Then it's times to get a little ruthless and look for ways to cut back on costs.

Here are just a few ideas:

• Make your lunches.

• Dine in, not out, with friends.

• Ditch the gym membership and start exercising outdoors.

• Make a list for your groceries and stick to it.

• Save, don't spend, your tax return and/or salary bonus.

The SmartMoney program has set up a First Home Saver Calculator to help you get started.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/first-home-saver-calculator