For decades the ‘great Australian dream’ has been owning a home, but with the current property market and ever rising costs of living this dream can seem like an elusive one, particularly for many younger Australians.
A recent annual survey by Demographia revealed that of the 54 Australian markets’ surveyed, 33 were rated ‘severely unaffordable’. This has the millennial generation in particular resigned to the idea that they’ll rent forever.
Yet with some smart saving strategies, it doesn’t have to be this way. Here are our top tips for helping you fast-track your way onto the property ladder sooner than you might think:
1. Monitor your spending
It may not sound like much fun, but tightening your belt a little doesn’t have to mean surviving on a diet of Mi Goreng for the rest of your life. The key here is to make small changes, perhaps downgrading one different luxury per month on a rotating basis. For instance, one month you could put your online TV subscription on hold, then the next month take a home-made lunch in to work every day, and the month after make a pact with yourself not to buy any new clothes. Simply pocket the savings each month before moving onto the next month’s goal. Over the course of 12 months, you could easily save yourself a few thousand dollars, just by cutting back on a few of life’s more frivolous luxuries.
2. Set aside 10% of your paycheck each month
This is one powerful tried-and-tested route to fattening your savings. Simply set up a high-interest savings account (ideally one with restricted access, to help remove temptation) and then set up a direct debit transfer of 10% of your net pay every month, ideally just after pay day. It might mean you’ll need to cost-save in other areas, especially towards the end of each month, but the rewards can be great – and because most of us can generally adapt and manage to live within our means, you’ll likely find it easier than you thought to do without that extra 10%.
3. Put together a budget
The trick here is to develop a realistic savings plan that won’t excessively compromise your lifestyle. There are plenty of tools out there that can help you work out how long it will take you to save for a deposit, and how much you’ll need to regularly put aside. Use our handy budget planning tool to find out how much you need to put away each month. The key is to be realistic, but develop a plan and then stick to it, keeping your end goal constantly in mind.
4. Use cash
One clever route to staying within your spending limit is to stop using your bank card to pay for items, and instead withdraw a set amount of cash each week to cover expenditure. This ensures that you don’t overspend, and you can more easily keep track of your outgoings.
5. Investigate a Limited Guarantee
If you don’t quite have enough for a deposit, and don’t want to spend thousands on Lender’s Mortgage Insurance a limited guarantee could be a great option.
With a Limited Guarantee, a parent (or close relative) can secure the amount you need for a deposit. This offers less risk compared to a traditional guarantee and might not be needed after the first couple of years. This one action alone can take years off the time required to save for a full deposit. Check out Regional Australia Bank’s Head Start Family Guarantee.
Buying a home can be a daunting proposition – especially considering the large sums of money involved. Yet with some careful planning, and a disciplined, determined approach, you could be well on the way to making that dream a reality, a lot sooner than you imagined.
If you'd like a hand putting together a budget, or want to talk to someone about saving for a home, contact us today.