We hear it time and time again: it’s tough to save for your first home deposit.
And I’m not going to argue with that. It is tough.
Saving for anything big takes a fair amount of self-discipline, dedication and hard work.
But it’s not impossible.
There are many reasons why now is a good time to save for a home deposit.
For one, well located properties in most of our capital cities are likely to increase in price again this year, while interest rates remain at extremely low levels.
And it’s easier than ever to choose from a competitive range of lenders (no sitting down with the serious-looking bank manager any more) and many offer excellent financial incentives to sign up.
Having said all that, many people still struggle to save for a deposit.
It makes me wonder what’s holding them back.
Some common factors may be:
- YOU’RE A BIG SPENDER
For some young people, saving is something that their parents did but it’s not something they feel they need to worry about.
However they’re going to end up in big trouble, as this devil-may-care attitude will see them fall behind in life financially.
They’ll wake up one day and realise they have no assets accumulating wealth, and they have spent their money on expensive cars and nights on the town.
Be honest with yourself: do you spend too much?
- YOU WANT THE BEST NOW
All of us want to own the best house in the best suburb, but very few of us start there.
Your property journey often starts in a slowly gentrifying suburb with good prospects for capital growth.
If you can’t afford to buy in the top blue-chip suburbs, very few can, you need to start looking outside of those areas.
Perhaps look in surrounding suburbs which will benefit as house price growth “ripples” to adjoining suburbs
Slow and steady wins the race. You can’t expect to start off in the type of property it took your parents 30 years to acquire.
So don’t give up just because you can’t afford your dream home NOW.
- YOU CARE WHAT PEOPLE THINK
It may sound harsh, but how much money do you spend on keeping up with others?
Do you spend because you need to and you genuinely enjoy your purchases, or are they ‘status buys?’
Only you can answer this question, but it’s important to be honest with yourself.
If you’re spending to keep up with others, you’ll have real trouble saving for a deposit because there will always be something that you need that someone else has.
- YOU DON’T KNOW HOW
This is a more common problem than many realise.
Many people don’t go to the effort of saving because they never had great financial role models.
Perhaps your parents lived from week to week or you were simply never shown how to budget or save for a big purchase.
It’s a skill that can be learned, however, and it just takes a bit of education and a shift in the mindset.
- YOU AREN’T MOTIVATED
Ask yourself: why do you really want to save for a home?
The answer should be much deeper than ‘I want to own something.’
Look a little further inside yourself and ask yourself what home means to you, what it signifies and how home ownership would change your life.
Do you want to be able to provide for your family?
Do you want the security that comes with not having to rent?
If you can identify a deeper reason for your desire then it will act as a long-term motivator and will help keep you on track.
- YOU DON’T EARN ENOUGH OR HAVE DEBTS
Sometimes the reason is wholly practical.
Maybe you simply don’t earn enough yet. Or you have a large debt you’re paying off first.
This doesn’t have to mean the end of home ownership, however.
All it means is the goal is a little bit farther down the track.
The main thing is: stay on that track.
In fact, none of the above reasons are too big to overcome.
We often tell ourselves there is a huge reason as to why we can’t do something, an external problem that’s out of our control.
But in truth, the real reason is often staring back at us in the mirror.
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Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.