Getting a Deposit | Climbing the Savings Mountain

Getting a Deposit | Climbing the Savings Mountain

You need anywhere between $40,000 to $100,000 to amass a sufficient deposit to buy in Australia. So how do you get there?

Are you reading this, at the real beginning of your property journey? Chances are, you’ve got next to nothing in your bank account right now. Or just a little bit.

This little bit you’ve got sitting there, you’ve probably been dipping into it on occasion to pay for extras, items that aren’t necessarily needed, but rather wanted.

Lets turn this small heap of loose change into a money mountain. Like the sound of that? You have to start somewhere.

The $40,000 -$100,000 you’ll need for Stamp Duty, or the Deposit can sound incredibly daunting, but its important to start. That first dollar in the savings account, the piggy bank, counts just as much as the next when your putting away $10,000, or $60,000. The important thing is that you start.

We are going to help you, here are the top savings tips for your first house deposit.

Discipline is more important than the quantity

Unless the quantity your putting away is regularly $50,000 or something like that (in that case you don’t exactly need to save), having a regimented plan and the discipline to put away the money on a regular basis, at each pay, is the most important.

It can be hard at first, to start that plan, and hard to stop the temptation to withdraw it, but muster through it. Lock it away. Force yourself. Eventually, it becomes a habit, and it’ll get easier, and more motivating.

Motivation is important in some respects, but I personally don’t believe you should ride motivation. See, motivation is fleeting, it is instant when it comes, and can easily disappear. It can cause a positive action, but once it goes, and it will inevitably, what are your drivers? The motivation is no longer raw and exciting. It’s almost daunting and boring.

Discipline is more important. You can be unmotivated but disciplined. Don’t be reactive, but proactive and have the discipline to keep saving, keep pushing through. Motivation comes and go, but discipline will keep you going between spells.

Set up a savings plan

Not only a budget, obviously have that, plan where your money is going. The first importance of this is you can see what you’ve spent in a month or week. Plan it out, look at spending habits in your bank accounts and compare it with your budget. Adhere to remove the silly spending habits, and replace them with thrifty savings habits.

Now the budget is managing your wealth and your bills, and hopefully removing negative spending habits. You can focus on a Savings Plan. The importance of this is that you can now track the savings. Where it’s going, how on track you are, how much interest it will accrue, how long you have to your goals are achieved. It’s important to micro manage these goals and break them down into the monthly chunks, and then work out how long you have. This makes your savings goal manageable and achievable. Instead of a dollar amount, you have a countdown, and each month it gets closer and closer, building momentum.

Micro-manage your spending, breakdown your savings, and build the momentum.

Be frugal

There are many ways to be frugal. From what you buy, what you spend, regular payments etc. The main tip I’m going to give is make yourself guilty for what you are spending. What I used to do, is withdraw $400 or $500 per month in cash. I’d keep this cash in a separate wallet in a different location to my main wallet.

It works out to $100 per week on pure spending. Extra dinners, going out, friends, coffee etc. Now in the past, I’d find that I’d spend so much money, using my card, it became so easy, I’d check my account and realise I’d horrifically overspent.

With this plan, I’d put $100 a week in my main wallet each week (on Wednesday usually). I found that when I was buying items, coffee, dinner, I was far more conscious of the amount in my wallet. I would spend less, be more crafty. Make the money last.

Even when it didn’t last, if I was craving something or considering taking money out of my other wallet (with the rest of the weekly spending), I’d drive home, every intention of doing it and taking it. By the time I got home, or got the wallet, the impulsive thoughts for the purchase were overtaken with guilt. I was guilt tripping myself out of buying it.

Even if I’d depleted my $100 by Saturday or Sunday, I could easily make myself wait till the next Wednesday. Discipline helped, but the fact that it was 2 days of being cheap and frugal, as opposed to 14 days (paid monthly), it was more manageable and achievable.

There are many strategies you can make, and you can design your own. It’s important to find one that works for you, and stick to it almost religiously.

Get rid of that Credit Card

It ruins your life. The ease of paying everything on credit and assuming it be easy to pay off. It’s the first step in the downward spiral of debt. Don’t make the mistake. If you’ve got one, cut it up.

If your bank allows it, have it there, with a very very  low limit, as low as you can find. In this way, you can use it for emergencies. Ignore the notifications to increase your overdraft, and keep it hidden away, and forget about it until you absolutely categorically need it because you are screwed.

Don’t go out

Blasphemy to any young person I know, but the biggest savings I made, were stopping drinking and stopping smoking. Do these, you will save so much money. Cut these luxuries out of your life, and find cheaper things to enjoy. My friends and I would drive to parks, talk, watch cheap movies, watch movies at home, watch TV, hang out. Sounds boring I know, but its cheaper.

My mantra for not going out drove my desire to succeed financially and with my various work ventures. I would be told that I’m missing out on the fun parts of life, and that I should enjoy life now, and be ‘boring’ later.

I heard that, and thought, you know what, I’d rather work my arse off now, while I’m fresh, have the energy, the time, and nothing holding me back (kids, mortgages etc.), and retire earlier and enjoy life later.

I’d happily give up a few weekends at Kings Cross in Sydney getting wasted every Friday and Saturday, and instead enjoying 6 holidays a year around the world, spending time on a boat, beach, working 2-3 days a week in a business I own when I’m 30.

Put everything into perspective. Realise your goals, not just for the next 3-4 years, but 20 years. Where do you see yourself? I can guarantee that whatever you imagined, when you break down what you need to do to achieve that goal, it all came back to saving money, and putting together a business plan/budget for your life.

Start Today

Don’t plan to start. Do it now. Close this article, and write your budget. Plan your life.

Image Credit: TaxCredits

Author

Michael Turner is a Property Development and Analytics Specialist operating in Sydney’s Growth Centres and corridors. He is a Director of YPI, along with several roles at property development firms and agencies. He can often be heard on various radio mediums talking about Football and Property. You can find him on Twitter @mturnerypi or email him directly at m.turner@youngpropertyinvestor.com

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