Turn the mountain into a molehill
For lots of people across Australia, the idea of saving up for a deposit on their first property is a looming mountain, and they don’t have walking boots. But with the right financial guidance and planning, that mountain can be broken down into easy-to-navigate steps, and soon be turned into a molehill.
How much capital do you need?
When you imagine a deposit, how much money do you picture in your mind? $20,000, $50,000, $100,000? Deposit rates vary from property to property, from person to person. How much capital you need is dependent on a whole host of factors, including your desired loan-to-value ratio (generally, the more deposit you have the better interest rate you can get), your current wage, and whether you have a guarantor or partner you are buying your property with. You should do some initial research with a broker about how much you might be able to borrow and how much deposit you will need.
Assess your assets
This is a chance to take stock of what you have. If you already have a home that you live in, and you’re looking to save for a deposit for an investment property, it is worth speaking to financial adviser about the possibility of releasing some equity from your home. If you don’t have property, you could be eligible for the first home owner grant, where you receive money from the government towards your deposit. You can also look at other assets that might be of value – perhaps you have existing investments that would be better served in property, or even your self-managed super fund. Assets can be a great base to kick start your deposit fund, but don’t worry if you don’t have valuable assets yet, there are other ways to get the capital you need.
Budget and save
Raising the money for your first deposit doesn’t come easy. It’s time to sit down and do some serious financial planning. You have already worked out how much deposit you need – this is your target. Now it’s time to get out your spreadsheet, your bank statements, your rental agreement, your bills, and anything else that can help you to work out how much is coming in and going out of your account each month. You can then start working out how much you might be able to put aside; you should be realistic, but don’t go too easy or you might be waiting a long time to gain your dream investment.
Check your lifestyle
This is the part that most people don’t like. Sacrifices are necessary if you’re going to be building up a deposit. You have your bank statements to hand, now go through and ask yourself what can be eliminated. Do you need to have a $4 coffee every day or could you bring one from home? How about taking a packed lunch to work instead of treating yourself at the office cafe? Could you take your workouts to the park instead of an expensive gym membership? These kind of lifestyle costs add up, and you would be surprised at how much you can save with a few sacrifices. Remember, this stage won’t last forever, and you might pick up some good spending habits along the way.
Time for a raise?
Plenty of people go through their working life waiting for that promotion or raise. But it’s unlikely you will progress up the income rankings if you do not actively pursue it. When was the last time you sat down with your boss for an appraisal? If it was a long time ago, ask for one. Discuss your career progression, and what you’ll need to climb that ladder. You might even consider shopping around the job market for higher paid roles, which is one of the quickest ways to boost your income.
Remember the reward
Throughout your period of saving, keep in mind that you have a goal. Whether you’re saving for one year, two years, or three, imagine the kind of lifestyle that you will be enjoying at the end of it once you have your own property either to live in or rent out. Once you have your first property, you have an asset, a place in the world, and a sense of financial security to then build your wealth further. Your future self will appreciate your hard work.
Get financial support
It’s difficult to set spending goals and stick to them without support. At Reventon, our team can help you to set your spending goals, plan your budgets, and manage your accounting. Once you have a deposit saved, we can then support you throughout the process of buying your first property. To take the first step, get in touch with the team or book a free consultation.