How I Saved For A House Deposit As A 20-Something
I swear I’ve read about two dozen ‘news’ articles that praise a 23-year-old ‘property mogul’ who built up a portfolio of 72 apartments using nothing but hard work, research skills, some nifty renovations and – oh yeah, that $96-thousand-dollar gift from their great aunt. Don’t worry though, this is not one of those stories. It also has zero references to avocados (except for that one. Sorry.)
Yes, the property market is cooked right now and yes, it’s incredibly hard to save for your first place when you’re renting (and aren’t handed a magic pot of money from your family) but you know what? It can be done. I know because I bloody well did it, while also paying rent as a single lady in Sydney.
Here’s a few tips on how to work towards grabbing onto the bottom rung of that property ladder.
#1 Saving must be your priority
When your pay check hits your bank account, you need to IMMEDIATELY siphon off the largest possible chunk you can afford into an untouchable savings account. You then need to siphon off another chunk into a separate ‘emergency fund’ that you also don’t touch unless your car explodes/you need a root canal/your washing machine leaks vast amounts of water all over your nice rented floor.
What this means is that your actual savings account is sacred – and you still have some cash available for the random shit life throws at you. For most of the time I was saving I was spending a quarter of weekly my income on rent, and another quarter was divided between my saving and emergency accounts.
#2 Make a realistic budget
To be able to save money effectively you need to know –down to the last dollar – where your money goes. I was a regular on the ASIC Budget Planner and updated it as often as I remembered.
The real trick here is to be brutally honest with yourself – if you pretend like you don’t buy a pack of smokes a week and omit that from your budget to make yourself feel better, you’re probably lying to yourself to the tune of about $1500 bucks a year.
Factor in things like haircuts, car insurance and a new pair of winter boots. That way you know how much you can realistically save every week and you shouldn’t have to dip into those savings when life expenses crop up.
#3 Spend ONLY what you have
After that savings money has left your account, what you have left for the week/fortnight/month is all you should spend for the rest of the pay period. If you want to have a blowout night with mates, or need to book flights for a hens weekend go right ahead, but this just means you’re going to probably have a quiet fortnight otherwise.
Those couple of days before pay day can be brutal (and tempting to touch your savings) but get strict with yourself and instead learn all the glorious recipes you can create with a few tins of beans and some cheap mince.
#4 Be cautious with credit
Yes, those jeans are amazing. Yes, they look great on. Yes, you should buy them if you really want them – but not on credit. If you don’t have the money available for a large purchase right away, sleep on it. Most shops will allow you to lay buy, or you can just spend a couple of pay periods putting aside a little cash until you can afford it.
A few times I did this and came to realise at the end that I didn’t actually want those jeans/boots/dress anyway. Other times it made me really appreciate the big-ticket item I was splurging on even more.
#5 Put any and all bonus money straight to savings
It might be incredibly tempting to spend your tax return on new shoes or a holiday, but if property is your goal then unfortunately you just can’t. Every year I would put whatever tax return I received straight into that untouchable savings account.
If I got any kind of pay rise, the difference between my old pay and the new went straight into savings at the start of the fortnight. It’s all too easy for your lifestyle to slowly creep up and absorb any incremental increase to your cashflow but if you could to live on your old pay check then stick to that same budget and save the difference.
#6 Booze less
This won’t apply to everyone but putting together a budget made me confront just how much I was spending on alcohol. As a twenty-something lady in Sydney I was often spending upwards of $100 a week on bottles of wine/fancy cocktails/jugs of beer while playing Buckhunter with not much to show for it other than a sore head and a shitload of excess calories.
Don’t get me wrong – it was fun and I still love a drink with mates but by swapping to a water for every second bev I was slipping a pineapple a week (or $2600 a year) into my own purse.
#7 Don’t Try to Eat the Whole Elephant
So this is one of my mother’s stranger expressions, but it really does apply here. The eventual deposit on my one-bedder plus all the associated costs (stamp duty, conveyancing fees, strata reports, mortgage insurance etc.) came to close to $70k and seemed completely insurmountable at the outset but I did it slowly over 7 years by simply saving as much as I could afford, not touching those savings and chipping away at it.
Eating a whole elephant at once is clearly impossible, but can be done if you just go slowly – a single bite at a time.