Open any advertising network or turn on a radio these days and you will find media commentators talking about how expensive property has become and how hard it is for young people to buy their first home. Is this a much-discussed phenomenon or just another urban myth?
While many young people complain that once they’ve paid rent, car payments, phone bills, credit card and so on there never seems to be much left out of the pay packet for saving for a deposit. There are a few that realise that they have chosen lifestyle options that benefit them in the present rather than making sacrifices for the sake of security in the future.
Investment-conscious people recognise the difference between an asset and a liability and minimise expenditure on liabilities. Holidays, credits cards, designer clothes and flash electronic gear may be fun but they don’t put money in the bank for saving home deposits, or leave spare income for paying off a mortgage.
Young people who want to save for their future, no matter what they earn, should pay ten percent of their income directly into a secure, interest-bearing account for long term investment purposes. Most people think of what they could buy if their income went up by ten percent rather than how they would budget if their income were reduced by 10%. Ways of reducing expenses include paying board at home rather than leaving and paying rent, not buying new cars (they drop 15% in value as soon as they leave the showroom and borrowing money to buy them means even more money lost in interest) taking your lunch to work, taking inexpensive holidays, giving up smoking and so on.
Credit cards need to be approached with caution. They are useful for people who re-pay them on time but for many people they are a disaster because of the penalties for not paying on the due date. It’s not hard to work out that if you need credit to cover your expenses one month, you will be even further behind the eight ball when another sixteen percent is taken out simply for the dubious privilege of getting into debt.
Saving requires planning and self-discipline – an ability to defer gratification on the basis that sacrifices now will mean financial security and flexibility later in life. Of course it is not easy for first home buyers, and property, especially sought after inner city or beach property, is certainly out of reach for an increasing number of people. But the reasons for this lie not simply in the cost of the property: they also lie in the budgeting choices individuals make in their everyday life. There are those who complain about the cost of real estate and criticise the lifestyle of Baby Boomers and Generation X’s who seem to ‘have it all’. But perhaps they should compare their own lifestyles with those of these generations when they were young and starting out. Would the old-fashioned thrift and deferred gratification that many of their parents and grandparents practised seem too uncool and too much like hard work when there is so much fun stuff out there available to have right now?