9 Habits that Helped Me to Buy My First Home
Home ownership is a common goal for many Australians. It was certainly an important personal goal for me. It was primarily driven by a desire to feel safe and secure in addition to creating long term wealth. I had been living in university dormitories and sharehouses for the good part of a decade and whilst the social aspects of this lifestyle were fun I was tired of moving addresses every year or so. I wanted a place of my own that I could style my way, that no one could kick me out of, and that I could make a sanctuary for myself.
It was quite a shock, however, to learn just how much property in the capital cities cost after growing up in rural Australia. Housing affordability has only deteriorated in recent years with the 2022 Demographia International Housing Affordability report indicating that five of Australia’s capital cities are among the most unaffordable markets in the world. Home ownership was going to be a marathon effort, not a sprint. I’m proud to say that, whilst it took quite a few years, I was able to eventually buy my own home. James Clear, the author of the best selling book, Automic Habits says that “outcomes are a lagging measure of our habits”. So here are nine habits that helped me to achieve my dream of home ownership.
Breaking down my goal into mini goals
The key to setting effective money goals is to be clear on what you want to achieve, how much money you need to do it and set a date by which achieve it. Sometimes our goals will be significant and feel insurmountable unless we break them down into smaller incremental goals.
My goal was to buy an apartment in Sydney with a 20% deposit plus enough money to cover stamp duty (a state property transaction tax), legal fees, and bank fees before I turned 30. My target savings goal was $120,000 to be saved over 8 years, if not sooner!
With this information, I was able to break down my goal into a savings amount to set aside each paycycle. I was also able to set incremental mini goals to ensure I was staying on track each year. Just quietly, saving the first $10,000 was the hardest. After that, I had momentum and my savings accumulated more easily!
Setting money aside every pay day
I reframed the habit of ‘savings’ which felt boring and restrictive to ‘paying myself first’. This meant that every pay day when money hit my account the first thing I would do was ‘pay myself’ (AKA put money into my Home Deposit Account) before I paid Mr Rent, Ms Gym Membership, Miss Vodafone, Mr Insurance and so on. Why pay myself first? Well I had worked hard for the money so I should get to keep some of it and get first dibs before I paid everyone else. Suddenly, saving felt fun and rewarding!
Automating my money
Who’s got time to manually move money around each pay day? Not me! That’s why I put my money on autopilot. The benefit of doing this was that once my savings plan was set up it was done and I didn’t have to even think about it. It just happened automatically.
How it worked was that I first worked out how much money was going toward my savings goal. I then set up an automatic funds transfer for that amount every pay day. The added bonus of automating my savings is that it removed the temptation to spend it and helped me stay on track with my goal.
Practicing mindful spending
Originally I thought that if I was working toward a big financial goal then I would have to forgo all short term pleasures like lunches, brunches and weekends away in order to achieve my goal. I believed that only a very restrictive and frugal budget would get me there but it’s not true! In fact, what I learned was that a restrictive budget actually undermined my goal because it was too hard to commit to. What I learned to do was practice mindful spending instead.
So how did I practice mindful spending? First I reviewed my financial commitments like bills, membership and regular spending to reflect on whether or not I was spending money on the things that mattered most. I looked for areas where I was incidentally spending money like catching ubers instead of public transport because I was disorganised or ordering take out because I hadn’t done my usual meal planning on the weekend. I also reviewed my bills to see if I could get better deals. For example when my car insurance came due I reviewed it against other providers instead of just paying the renewal. As a result I found a more competitive offer and saved myself a few hundred dollars. Another way I made small savings was to start hiring outfits for events like weddings and social occasions instead of buying an outfit. Not only was it good for my hip pocket but also the environment too.
I find it helpful to review my expenses annually and order them in terms of ‘high’, ‘medium’ and ‘low’ priority. I ensure I always have money set aside for high priority spending and try to cut out any ‘low priority’ spending when I’m looking to save money. You can use my handy template to help you do this for your own personal spending.
Hustling for extra cash
There’s plenty of ways to save extra money outside of your regular salary; you just need to get creative! Some of my favorite ways to hustle extra cash include selling unwanted items on Facebook Marketplace, getting cashback on everyday shopping with Cashrewards, answering market research surveys and through my side hustle as a financial coach. The extra money I earn is then deposited straight into my savings account bringing me one step closer to achieving my goal.
I’ve listed just a few methods to hustle extra cash. You might prefer to walk dogs on Madpaws, pick up some cleaning gigs with Urban Company or Airtasker, write an ebook that you sell online, teach a skill on teachable.com, rent out your car/storage/garage space, driver for Uber, house sit, promote your design skills on Fivr or Upwork, or use your expertise to answer questions on justanswer.com. The list is endless! A great book with lots of ideas for hustling extra income is ‘The $1000 Project’ by Canna Campbell.
Investing instead of saving
When I set out to save my first home deposit it was clear that it would take several years to reach my goal. My timeline was about 8 years which meant that instead of just saving cash I could use investing as a way to achieve my goal. It’s worth calling out that I don’t do this if my goal timeline is less than three years away. In that case, I always save cash. If, however, the timeline is longer than I choose investing in an appropriately diversified portfolio to help me get there. In the case of my home deposit, I chose a portfolio that had a good blend of cash, bonds, property and shares returning an average of 5%p.a. Each pay cycle I invested additional funds into this portfolio and overtime it grew to reach my goal amount.
Paying my loans and bills on time
When you apply for a home loan a bank will consider three things - your capacity (can you pay back the loan?), your character (will you pay back the loan?) and the collateral you’re offering (what are you contributing to the transaction?). They measure your ‘character’ by looking at your employment history, your residential history and your credit score. Your credit score is a number between zero and either 1,000 or 1,200 that represents your creditworthiness. This is based on your historical behaviour when borrowing money, how many credit applications you’ve made and whether you pay on time. The higher your score, the more likely a bank is to lend you money. Ensuring that you always pay loans (i.e. credit cards and car loans) or bills (i.e. telephone, electricity and gas) on time positively influences your credit score.
To give myself the best score possible I ensured all bills were paid on time and worked hard to pay off my car loan early. By doing so I was demonstrating good credit worthiness to my future home loan provider.
Observing the property market
Staying in touch with how the property market is performing is a great way to keep your goal front of mind and inspire you to stay on track with your plan. It also helps you understand what local property costs and how the market is performing. This will help you to make an informed decision when you are eventually ready to buy. I would monitor the properties in my desired suburb through realestate.com.au and domain.com.au. I got to know the local agents and even observed a few auctions to get a feel for how they worked.
Getting expert advice when I needed it
The journey to buy my own home was not one I conquered alone. I had never saved that much money before and I had certainly never bought a home before. I sought advice from the experts to help me reach my goal and make a good purchase decision on the property I bought. Initially I consulted a Financial Planner to help me work out how I would save enough money to buy a home. They helped me identify my target savings amount, how much I needed to put aside and how I could use investing to help me reach my goal. When I was closer to making my home purchase I sought the help of a Buyer’s Agent who supported me to find a property that met my criteria, complete the pre-purchase building checks and negotiate the sale.
At the time my journey to home ownership definitely felt like a long slog. I was fortunate to incur some pay rises during that period which helped me to achieve my goal ahead of schedule. So, in the words of Rachel Hunter in that famous 90s Pantene Shampoo ad, ‘it won’t happen overnight, but it will happen’ and it’s your everyday money habits that will make it so.
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