Hints on home ownership

Oily raggers are not ones to dwell on the negative so they are probably not taking a lot of notice of the negative talk about young people not being able to afford to buy a home. As oily raggers, we know that home affordability is more like a molehill than an insurmountable mountain, so we thought it worth while reminding those who are yet to be converted to the oily rag mind-set of this fact. Here are some key words to remember about home ownership:

The first is commitment. Start saving early and often. We have a general rule of thumb that 10 cents in every dollar that flows through your pocket (and bank account) should be captured and caged. By captured we mean saved, and by caged we mean put to work in an investment account of some kind. If the person on the average wage did that during their life-time then by the time they are of an age to receive super’ they will have more money than they would have ever have imaged when they made that first deposit into their savings account. That’s not exaggerated puffery, it’s just how the numbers work – and compounding interest really is just as simple as 1, 2, 4, 8, 16….

Commitment also means giving up some of the nice things so you can have the important things. Give the flash cars and fancy restaurants a miss – put that money into debt repayment. Just remember a mortgage repayment will have life-time benefits. If that money were instead used to buy a car it becomes a liability with diminishing resale value and increasing annual costs. Every dollar matters – don’t waste any of them.

The second key word is KiwiSaver. There are huge benefits to be had for those who have yet to buy their own home. Literally there are thousands of free dollars waiting for you to grab and use as a deposit on your first home. One would need to have cup-cakes in their head to not take advantage of it!

The third key word is time. Use it productively. Turn off the tellie and use that time to generate some extra income or use it to save money by putting in a vege garden or doing some other money-saving activity. If you have a particular hobby, try to turn it into a positive cash flow. Time is also about having a date in mind when you want to buy your first home. That defines the time frame and creates an imperative that turns it into a goal, rather than just an idle wish.

That leads us onto the fourth key word, which is mind-set. Don’t expect anyone else to do things for you. If you want something it’s up to you to get it. As much as you or others may wish it, the government will not give you a house. Unfortunately there is a perception that it will, which tends to make people stand in a queue with their hands out, while the rest of the world walks on by with a purpose. If you want something, one generally has to give up something to get it. Figure out what is least important to you and give that up first. We think booze and cigarettes are at the very bottom of the ‘needs’ list and should be the very first things to get the boot.

The fifth key word is humility. A first home need not be a Kings’ palace. The important thing is to get on the property escalator. A humble abode in a nice street is likely to turn into a tidy investment. Add the embellishments from the many savings that can be made by living off the smell of an oily rag.

There are a lot more words that could be said about home ownership. But we think five words pretty much sum it up: commitment, KiwiSaver, time, mind-set, and humility.