According to Ray White, the average First Home Buyer in Australia is between the ages of 31 and 33, which is roughly the same age young Australians, on average, start having children as well. Meanwhile, at this age, the average Australian has just finished a great deal of expensive travel and likely still has a significant HECS debt too. As you can imagine, this all together can cause some financial strain especially, if you’re renting and wanting to save for a house at the exact same time as all of this.
So, how do you save a great deal of money while juggling so much in such a short period of time? The answer, honestly, is that there are no special tricks but there are some methods that make it all easier, which I’ll explain. Theories by Scott Pape, author of the Barefoot Investor and Graham Stephan, millennial millionaire and property investing YouTuber, are quite similar and do work from first-hand experience.
Their advice is basically to pay yourself first. What they mean by this is that you should create a separate high-interest bank account, which you must not touch. Basically, when you get paid from your employer, immediately take out a portion of that for savings. You can even automate this through your internet banking to make it even easier. This is your long-term savings and is money reserved for this and only this. That means that you shouldn’t dump in too much, as you may start to use it when the bills come. You need to know what you can put away, without touching it.
It all comes down to resilience and the ability to work hard to achieve your goals. If that means that you can only put away $100 per fortnight then that’s still better than blowing it on something unproductive. $100 a fortnight is $2,600 per year and in 5 years, that’s $13,000 and potentially a 5% deposit for a home worth $260,000.
Now, I know what you’re thinking, where are you going to find a place for that price? Well, you might struggle but you should also take into account that your wage could increase in that 5 year period, which you can use to increase your savings and you can also earn interest on your savings. Therefore, it’s likely that combine those elements together and you will have more than $13,000. Especially, if you half-way through your 5-year-journey, bumped up your $100 per fortnight to $200. That would leave you with an additional $6,000, which with interest, gives you just under $20,000 and a 5% deposit for a $400,000 home instead. That sounds a lot better now doesn’t it?
The best assets most First Home Buyers have is time. The younger you start, the more time you have. Starting to save as early as possible and keeping to it for as long as possible, will help you save for that deposit. However, I myself am guilty of this as well, choosing to splurge or living above your means can be fun but it will hurt you and lengthen the time before you can buy your first home. Yes, having time means that you have more time to start saving but that also means you have to wait longer as well.
And going from my own personal experience as a banker, the longer you take to start saving and fixing your splurging, the harder it is to start. Also, the longer it can be to get out of if you’re raking up high-interest personal debt as well. So, their advice is, start earlier and you’ll be rewarded earlier.