I'm a recent graduate who has just commenced my first job, earning $60,000 before tax. I currently live with my parents. Are there any particular steps I need to take to start saving for a house?
From Matt
Top answer provided by:
Ben Nash
In this situation, cash flow is king. Getting into good habits early will provide huge benefits now and in the future. Recent entrants to the workforce will be well placed to set up an automated cashflow strategy to give them the lifestyle outcomes they want today and set themselves up for the future.
Getting clear on your cash flow targets will provide a huge motivation boost to stick to your plans, and make it much more likely you'll get the results you want.
Depending on what you want to do as a next steps with your money, this is also a good time to get started with a regular investment plan. Albert Einstein called compound interest the greatest invention of mankind, and he was a pretty smart guy. When you start making any money moves, initial momentum is the hardest to build so start sooner and you're going to build traction faster.
Also getting into the swing of making a regular investment will get you into good habits and mean you always pay yourself first so you don't fall into the trap of relying on your income to support your lifestyle.
When you have time on your side, you just need to be smart and make things easy to get the money and lifestyle outcomes you want in the future.
Automate everything. Be smart. Avoid failure and minimise risk. Do this and you'll be the master of your own destiny in short time!
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"Firstly, congratulations on graduating champ! I remember what a great feeling it was knowing I had completed my degrees! Secondly congratulations on scoring a job straight out of uni! In response to your question, I'm going to give a wholistic answer - looking at how saving for anything - in your case a house - should be integrated into your overall spending plan. The best way I've found to save money is to think of it as fixed cost like rent or my water bill - something that I MUST pay. My definition of a fixed cost is the costs I would still need to pay for, even if I wasn't working. For me, there are five fixed cost categories: 1.Regular bills – costs that are billed on a regular basis, whether that is weekly, fortnightly, monthly, bi-annually, or annually. For example, phone bills and utilities – still need to take a shower and eat, even if I’m not working. 2.Unexpected costs – this could also be known as the ‘repairs’ fund, for when things we use every day break down and need repairing or replacing, often at the most inconvenient times. For example, when a tyre needs replacing, or you accidentally drop your phone in water. 3.Emergencies – for when life throws you a major curveball and you need a financial safety net to allow you to keep paying your fixed costs for three to six months. This type of emergency could be a job loss or a major illness or injury – to you or a loved one. 4.Debts/loans – credit cards, mortgages, personal finance loans – basically anything you’ve paid for with someone else’s money that you need to repay. Personally, I love the strategy of repaying debts from smallest to largest, as this will give you the confidence and momentum to keep up debt repayments. 5.Savings – or what I like to call a ‘dream fund’. Ask yourself, what’s something you’d like to save for. This could be long-term, like your dream house, or short-term, like a holiday to sunny Honolulu in the middle of winter. Now that you know what the five fixed costs are, the next step is to automatically direct money into accounts set up only for these fixed costs. Think of it as an electronic version of ‘jam jar budgeting’. Instead of five jam jars on a shelf in your house (not so safe), you’ll have five virtual ‘jars’ in a bank that money automatically goes into on a regular basis. I find the automation is another step that helps to simplify the process (no more having to remind myself to transfer money, or forgetting) and remove any temptation to use that money for something else at the same time. #winning. Whatever is left in the spending account is then up to me to spend guilt-free, knowing everything else has been taken care of. Now, there’s a bit more to learn around guilt-free spending. If this is something you’re interested in, my eBook, Your Winning Number, will show you how to do this. You can download Your Winning Number for free here:https://www.infinitysolutions.com.au/free-ebook/. Good luck with your money story."
David Hashai 23:37 on 28 Jul 19