This article was first published by Jessica Haynes on the 20th Oct 2016 via abc.net.au | Image: Housing might be hard to afford, but having a plan for property is better than none. Dean Lewins- AAP
So you’ve fallen into the generation where housing is unaffordable, education is not free and health cover costs more than you really want to think about.
And you can’t even eat a slice of smashed avocado on toast without some Baby Boomer telling you that’s why you’re locked out of the housing market.
But it shouldn’t be all doom and gloom.
Here are just some of the ways those in Gen Y (and any other generations for that matter) can help move their finances in a better direction, and maybe even buy a home.
Have a plan
It might be for 12 months, five, or even 10 years.
The only thing that is certain is not having a goal can pretty much guarantee you’ll be in the same place you started.
“You’ve got to have a plan,” said Bruce Carr, principal of Loanscape, an independent mortgage broker in Sydney’s inner west.
“What I might do is sit down with the person or the couple and say this is … where you need to be in 12 months or 18 months.
“You’ve got to have a savings target.”
Become an expert
Read up, see how weekly auctions go and watch the markets.
Some are predicting the property market will slump, and cities like Melbourne and Brisbane will see a 15 per cent drop in value in the apartment market, so watch accordingly.
It means when you are ready to buy, you will know a lot of the property traps and potential wins.
Go through your spending and debt with a fine-tooth comb
We’re not for one minute suggesting you should give up your delicious avocado on toast. But have a really good look at where your hard-earned money is going.
Are you paying for a gym membership you don’t need?
Could you get a more competitive price on your car insurance?
Taj Singh, co-founder and director of First Home Buyers Australia, said there were plenty of ways you could save money.
“Some of the stuff includes taking your lunch to work … and also using public transport where you can rather than driving, especially in states like Sydney, Melbourne and Brisbane where there are tolls … it can prove to be quite expensive,” Mr Singh explained.
“Also other stuff like paying off your debt if you’ve got credit card debt or personal loans, that should be your number one focus.
“These debts comes with double-digit interest rates.”
Replace spending in free fall with being frugal
Once you’ve seen how much you actually spend each week, it can be a little daunting.
One coffee a day can add up to more than $1,000 per year.
But it isn’t about being completely boring.
The idea is to stop spending money on the things that don’t bring your life any joy.
Increase your earnings
Times are tough, and for some young Australians a lack of work and lack of full-time work is a big point of frustration.
While this does depend on the city you live in, there are still ways you can earn a little extra cash.
Apps like Uber, Airbnb and Airtasker all allow you add extra money to your pocket.
Have a spare room? Take on a flatmate.
Got a flat full of clothes you don’t wear? Sell them.
Unless you really are living week to week, and there are plenty of young Australians that do, you should be able to automatically save at least some of your wage.
Put this into an account that you can’t touch, and as your earnings go up, increase your contributions.
Ask for help (if you can)
If your parents are in the position to, ask for a loan or for them to go guarantor.
If that seems too daunting for your parents, Mr Singh said banks now structured loans with only a portion being from a guarantor, meaning less risk for your parents.
“Some of these involve a family pledge where [the] parents make a pledge for a certain amount of money for the deposit,” he said.
“That is one thing that can help first home buyers save on mortgage protection insurance.”
If they can’t help you in that department, but they live in the same city, ask to move back in for a while.
It doesn’t work for everyone, but if you have a plan, outline a timeline and what you can contribute financially and around the house.
Take advantage of grants and schemes
Mr Carr lamented that there were a lot less concessions for home buyers nowadays, but we’ve found a couple that still exist.
In Queensland you can get a $15,000-$20,000 grant for new homes, depending on the date of the contract.
In South Australia you can get $15,000 for new homes.
Lower your expectations
Mr Carr said another issue was that some young investors, who make up about 15 per cent of his clients, want to buy large houses for their first home.
“Where Gen Y have not been good, and are learning the hard way, is the art of compromise,” he said.
“I used to see lot of people wanting to buy their mum and dad’s house on day one.
“You’ve got to accept you’ve got to do it in at least two to three stages.”
This might also mean looking further afield or even interstate for your first purchase.
Mr Carr said he had even warned people against buying homes and over-extending themselves, all because people have the belief that any housing investment was a good investment.
He said just because the bank was willing to lend you a certain amount, it was not always the rational thing to do.
“Maybe go and buy … a $300,000 investment property and keep renting where you are.”
Push for better housing policy
It might seem pie in the sky, but Mr Singh said it was important for young people to share their views on the policies that matter to them.
“We conducted a survey and more first home buyers said the biggest issue was [saving] a deposit,” he said.
“That’s because property prices are rising much faster than their income … and with youth unemployment being abnormally high at the moment … that’s definitely an issue.”
He said he wanted to see the Federal Government reintroduce the first home saver account, a tax-free account for people to put their deposit money.
He also wants state governments to abolish stamp duty for first home buyers.
And remember, if you don’t buy a house it’s not the end of the world
Don’t beat yourself up too much.
It’s a heck of a lot harder to get into the market than it was 20 and even 10 years ago.
But having a plan, watching your spending and putting away for your future will serve you well even if you don’t end up making a purchase.
*Please note, not all of these tips will suit every individual and you should always get professional advice before making any big financial decisions.