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"How to save for your first home" article

Discussion in 'General Property Chat' started by Jacque, 12th Apr, 2016.

  1. Jacque

    Jacque Buyers Agent and Bookworm, Sydney Business Member

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    I know this may appear basic and commonsense for most, but I thought it worthwhile posting up here in case anyone else has older children, just starting out in fulltime work, who might benefit from a little Noel Whittaker advice. I certainly passed it onto my eldest, who is finding it challenging juggling budgeting, living and saving overall. Every little bit helps :)
    How to save for your first home
     
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  2. RiMo

    RiMo Well-Known Member

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    Thanks, Jacque. This might be basic for most of us here but it contains good financial principles for a lot of young (and older) people.

    I know a 16 year old boy who is desperate to have a car right now so his dad told him to save up and get a second hand car for a couple of thousands. But no he wants something really cool and pesters his mum to pay for it (mum & dad are separated). Mum is unemployed and doesn't know how to say no. She took out $10K out of her super to purchase a car for her son o_O
     
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  3. Dan Donoghue

    Dan Donoghue Well-Known Member

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    All the help I got growing up was my folks signing guarantor on my first loan for a car. Now I respect and look after everything I buy because I know how hard you have to work for the things you want in life.

    I don't have kids but if I did I wouldn't buy them a car, no matter how much money i had, they have to work for it to learn the value of money.
     
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  4. RiMo

    RiMo Well-Known Member

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    I'm with you, Dan. I believe sound financial practice starts at home and it is SO important for parents to have agreement on how they would teach their kids about money. If one parent is a spender and one is a saver some of these kids tend to gravitate towards the one they can get away with the most (ie. the spender).
     
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  5. neK

    neK Well-Known Member

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    I got tricked by my parents (well it wasn't tricking, they did say they would consider, i should have known better. :D)

    I wanted a 180SX. Was told my parents would consider letting me buy one once I had saved up the money (my money my savings, yet i need permission?? Its an asian thing i guess).

    Anyway, got enough money, got told NO!
    Was told to buy a house. None of my mates had bought houses yet, but they had cars, so there was no desire to buy a house.

    Any disgruntled i reduced my savings substantially, but i didnt touch my savings. Anyway, bought a house a year 1 later (because a friend bought one). Terrible performance in 2003 to 2008. Awesome performer now :)

    Did my parents have good intentions ? Yes.
    Did they execute it in a good way? No.
    Am i glad they did what the did? Yes
     
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  6. Big Will

    Big Will Well-Known Member

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    I believe buying a car is a big expense and would hope to do the same thing my parents did to me.

    They bought me a 2nd hand car for my 18th birthday (about $3,000) it was manual to learn to drive (although 4 gears) and had no air con, had AM radio only but it allowed me to work (earn $$) and save rather than take out a loan on a car and try pay it back (with interest).

    This gave me a great kick start as I didn't have to worry about buying the car just maintaining it (all my cost).
     
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  7. Jacque

    Jacque Buyers Agent and Bookworm, Sydney Business Member

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    Agree with the above in that being fiscally responsible starts with good habits and valuing $$$ and how to obtain them. Is there anyone here (Sydney-based) who saved up their first home deposit (IP or PPOR) in their twenties (and is still in this age group) and would be willing to be interviewed about how they did it? May need a media case study soon. PM me if you fit the bill :)
     
  8. skater

    skater Capitalist Premium Member

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    I'm the mean parent. I didn't buy either of my kids a car. I made them both save for their own. I believe in teaching the value of money, that a little each week saved can go a long way, and to learn the different between what you need & what you want.

    One of my children embraced this....the other didn't. Regardless, they both bought their own cars, and I think they both valued those cars a lot more than if we had just handed them cars on a platter. I also remember one of them telling me that their friends thought her car was a heap of ****, yet these 'friends' would always be getting lifts with her, as they didn't have a car of their own.
     
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  9. Cbrgirl

    Cbrgirl Well-Known Member

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    When my daughter was 14 I told her that whatever amount she saved up for her first car, I would put in the same amount of money. It worked well. By the time she was 17, she had saved $1,500 (which is a lot for a teenage girl) and so I gave her $1,500. She bought an okay car for $3,000.
     
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  10. chylld

    chylld Well-Known Member

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    Did you grow up with Initial D / Best Motoring by any chance? I wanted an S15 really badly when I first started working, thankfully I didn't know about finance back then and postponed the dream until 5 years ago when I bought my first dream car (Golf R mk6)

    I feel that cars are unfairly singled out as bad financial decisions. Like every other asset and liability it can be reduced to networth, cashflow and depreciation figures, and they are only bad decisions if they have a significantly detrimental impact on a balance sheet.

    Back to the topic, I was taught how to save by Kiyosaki's games Cashflow 101 and Cashflow 202. The goal of those games was to increase passive income to an amount greater than living expenses. It teaches the concept of ROI really well :)
     
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  11. Big Will

    Big Will Well-Known Member

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    Cars are a depreciating asset (unless classic car) and do not bring cashflow (unless you are an uber driver). Hence why it isn't classified as a great asset.

    Even wine isn't a great asset as yes they can increase in value but if they go off or you drink it (this normally what happens to mine) then you go no value.

    Cars follow similar to technology as technology improves people want the newest however in time people will want to buy the older stuff as it is more of a hobby rather than an investment.
     
  12. neK

    neK Well-Known Member

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    Agreed. But cars (and other toys) can be great assets if they inspire you to create more wealth.

     
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  13. neK

    neK Well-Known Member

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    Yes i did :) - Though the character that drove 180sx in initial D didn't do the car justice :p
    There was just something about the pop up headlights that I liked.
    And the turbo
    And the turbo spooling
    And the blow off valve

    As an 18 year old, those were AWESOME!
     
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  14. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Great article. Hardest part to buying a first home for many in my opinion, will be realising that an attitude change must come first, otherwise they will likely be renting for the very long foreseeable future.
     
    Last edited: 12th Apr, 2016
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  15. neK

    neK Well-Known Member

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    In other words... mindset :p
     
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  16. Fielding

    Fielding Well-Known Member

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    I started saving soon as I got a job at 16 and my parents drove me to work for 6 months, until I had enough money saved to buy a car for cash. The car cost $6500, I really wanted something cool, like the VL Holden, it seemed to be the rage at that time but when I realised my mates spending all their money each week on their cars and not having the money to fill the petrol tank, I chose a "Girls Car", which they used to call it (Hyundai Lantra) but they were going through tires and clutches and all sorts of other things for their cars then they would upgrade. I started to save in an ING direct savings account which seeing the interest that my money was getting without me having to work for it drove me to save as much as I could. Fast forward a few years I read an investment book which my cousin told me about and I loved it, so I went and started to get investment advice, none of which I liked, so I just continued to save. Forward another couple of years I'm working in real estate at 24 and came across the perfect property, showing real high rent returns. I bought it and that re-lit that investment fire. I had a good amount in savings and I had more than the 20% deposit needed to avoid LMI. I shared this same saving and investment passion with my cousin, who was the first person I told we always talked about it and unfortunately he never got to see it because he was killed in a car accident a month later. This sort of flipped my whole world upside down and got me thinking about life. I quit my job and because I wanted my weekends back to enjoy life and see my friends, I also planned a European trip which I used the rest of my savings. After the trip I came home and worked my arse off to buy more property I did large amounts of over time but never worked a weekend, I left that time for me, which became a rule. Everytime I could afford another property I bought one with what I saved or just equity from other properties I had. Now i have a investment portfolio worth a lot and have an income for life that no super could ever of provided for me in retirement. My parents always offered me money and to go garentor but I declined because I didn't want them to spend their money on me. I also have a really close friend who became a millionaire young and he once said the best thing his father ever did was say no to lending him the money for a truck, he told him your smart enough to find a way of getting it for yourself. Now he has the gratification of saying he did everything on his own, this stuck in my memory and its so gratifying knowing I have done this on my own. On my journey I have had the privilege of meeting really great friends, like a builder who has worked for me on some renovations I met on a Contiki tour in europe, I also met the pest and building expector I use on the N.S.W properties on the same Contiki lol. Now I'm 33 and ready for another chapter.
    PS I still Drive a girls car apparently, now they call it a Tampon.
     
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  17. chylld

    chylld Well-Known Member

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    Good on ya @Fielding :)

    Ignore people who say you drive a girl's car; if cars aren't what drives you (sorry for the pun) then there's no need for cars to be part of your larger plan. I'm a car person but some of my friends are foodies, some are travellers/campers, some are dedicated to a sport etc.

    Your investments have bought you the freedom to go and do what you want. So ignore what everyone else says and go do that :)
     
  18. C-mac

    C-mac Well-Known Member

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    Great story @Fielding thanks for sharing. And lols at the slang for driving a ladies' car! Hadnt heard that one before haha
     
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  19. Darlinghurst Boy

    Darlinghurst Boy Well-Known Member

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    Sometimes you have to do without to save..... This year i had been planning to go to South East Asia and tour... Flying business class and hotels etc would be nearly 8k to 10k i worked out on this trip.

    I could save that 10k for a IP ... And next year take the trip maybe.
     
  20. C-mac

    C-mac Well-Known Member

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    You fly business class? I never have (though I'd love to do it one day!). You could do an Asia trip like that for a fraction of that cost. Last year I did 2 weeks in Vietnam, all-in, for about $3k.

    You could do something like that and still have the $7K to go towards an IP!