0:00

Hello and welcome to It All Adds Up

0:02

the podcast where we chat about money, how

0:04

to get it, how to spend it, and how to invest

0:06

it. I'm senior economics writer Jess

0:08

Irvine, and you're listening to our summer

0:11

series, where we're replaying some of our

0:13

hottest hits to help you get in shipshape

0:15

financial form for 2023.

0:18

It all adds Up will resume normal programming

0:20

in February with a brand new season

0:22

full of money saving tips and insights.

0:25

So until then, sit back, relax

0:27

and enjoy. Hello

0:37

and welcome to It All Adds Up the podcast

0:40

where we chat about money, how to get it,

0:42

how to spend it, and how to invest it,

0:44

and seek to demystify the world of finance

0:46

and investing. I'm senior economics

0:48

writer Jess Irvine, and.

0:50

I'm money editor Dom Powell. And for our first episode,

0:52

we've decided we may as well just dive into perhaps

0:55

the biggest topic in personal finance, the

0:57

very vexed question of home ownership. We're

1:00

going to take a look at how much it costs to buy a home in

1:02

Australia these days and strategies to help you

1:04

or a loved one get a foot in the door.

1:05

We're also going to be sharing some of our own

1:07

personal stories of getting into

1:09

the housing market and things that we

1:11

wish we knew before taking the plunge.

1:14

And later in the episode, I'll be offering my

1:16

budget tip of the week, which is going to be

1:18

a regular feature to help you cope

1:20

with the rising costs of living.

1:22

But first, just a reminder that the information

1:24

we're about to discuss is general in nature

1:26

and does not take into account your personal financial

1:28

situation, goals or objectives.

1:31

Yep, good point. Now we don't

1:33

know each other too well just yet.

1:35

But I knew I was super impressed with you

1:37

when I'd heard that you'd bought your first

1:39

home at some tender age. I'm not

1:42

even sure.

1:42

I was 23.

1:44

23. And I think that's quite

1:46

impressive. And I think that is quite anomalous

1:48

in today's market. So I just wanted

1:50

to ask you, you know, what was your experience

1:53

of purchasing a home? How did you decide

1:55

so early in life that you were going to even

1:58

try?

1:59

Well, look, my experience is quite unique.

2:03

Definitely not the experience of of

2:05

most people out there. The reason that

2:07

I, I owned

2:09

property at the tender age of 23 is because

2:12

I got quite lucky with a little thing called cryptocurrency.

2:15

You went to the moon?

2:16

I did. I went to the moon. I was

2:18

at the right place at the right time. I do not

2:21

profess to be an investing genius. I

2:23

just got curious in

2:25

the world of crypto at the start

2:27

of 2017, rode

2:30

the market to a

2:32

decent point, sold out and made

2:34

a decent enough enough money that I could start

2:36

actually thinking about home ownership. And before that

2:39

it wasn't even on the cards. It wasn't

2:41

even something that I was thinking I would do anytime

2:44

soon. But after that, you

2:46

know that that fateful year I

2:48

was sort of in a position where I could start to think

2:50

about actually buying a home. And

2:52

then in about 2018,

2:55

2019, I started to look and bought a

2:57

building, an apartment in in Melbourne in 2019.

3:00

That's funny because that ended we ended up buying

3:02

in the same year because I bought my first home

3:04

in late 2019.

3:07

So snap at the tender age

3:09

of about 39. I think I

3:12

was.

3:13

Still a tender age.

3:14

Did you turn up to a whole bunch of

3:16

auctions and get knocked back? What was it

3:19

like for you?

3:20

Yeah, well, it was interesting. I am. So

3:23

I should also add, because I don't want to be one of

3:25

those man buys home at 23

3:27

from crypto savings like that is

3:30

true. But I also had help from my parents, so there

3:32

was a bit of both. Like I don't want I just want to make that

3:34

very clear. I'm not, you know, some sort of 1

3:36

to 1 in, but I went to a lot

3:38

of auctions. My first,

3:41

the first one I bid at, I was quite demoralised

3:44

to find out that the sort of

3:46

price that I was hoping to to get the place that was

3:48

just eclipsed very, very quickly.

3:51

But in the end, I bought my home in a pretty

3:53

weird way. I put it in an offer and then

3:55

a number of other people put it on offer and we ended up having

3:57

a boardroom auction.

3:58

What's that?

3:59

They sit you around in the boardroom

4:01

of the of the Real estate agents office, and

4:04

there was about three other people there for the people

4:06

there. And you have an auction. But

4:08

instead of being out in the street, you just sitting there

4:10

at the put in the boardroom. It was bizarre. It was

4:12

such a strange experience. But in the end I

4:15

won that. So yeah, Then I

4:17

bought my place at the end of end of 2019.

4:20

Yeah. And I hope by sharing our stories of how,

4:22

you know, we've got into home ownership, it's not I'm

4:25

just incredibly aware of the privilege that I

4:27

had in sort of having a good, decent income

4:30

to accumulate my own savings.

4:32

I didn't have any sort of cash from

4:35

mum and dad, but I did have them go guarantor

4:38

on my loan, which is something which we'll discuss

4:40

later when we get to sort of some potential

4:43

solutions if people are looking for ways to

4:45

get in. I had my deposit

4:47

ready to go for a couple of years

4:50

actually, and I was just watching the market and I

4:52

actually spent a lot of time on the sidelines just,

4:55

you know, prices would go up.

4:57

So I'd go, Oh, that's okay. I can live in an

4:59

apartment. That's okay. Maybe, you know,

5:01

I can just not have a balcony. And I kept trying

5:03

to adjust down the, oh, I can

5:05

buy further out. And then really

5:08

just at the end, sort of had to go to the bank and say,

5:10

what is the maximum amount you will

5:12

lend to me? Like it's getting away

5:15

from me. And then I did sort of end up looking

5:17

for slightly more expensive properties.

5:19

I paid about $870,000

5:22

for a two bedroom apartment. So

5:25

in 2019, and

5:27

I think the bank was going to lend me a million plus,

5:29

but I sort of just decided that wasn't

5:32

necessary. I did get

5:34

up. We did an auction. So

5:36

the week before I bought, I sort of turned up

5:38

and I was have my maximum bid. They

5:40

say you should write it on a piece of paper in your pocket.

5:43

So I put my number and then during

5:45

the auction, I proceeded to bid substantial

5:47

proportion above one number as the do.

5:50

Yeah, I think that's just the way it goes

5:52

for any auction, right?

5:53

Exactly. And the successful bidder

5:55

was an investor. Basically

5:57

the classic story of sort of just

6:00

having way more money than I. So then

6:02

I started looking about a suburb out

6:04

from where I was originally and happy Days.

6:06

So the point of sort of picking this is

6:08

our first topic, I think in my

6:10

mind is that really home ownership,

6:13

you know, the decisions that you make about

6:15

property will be one of

6:17

the biggest factors that will influence your

6:19

future financial capability

6:22

and your wealth. It's just so, so

6:24

key.

6:25

Absolutely. Having a mortgage is

6:28

sort of just makes you think about everything

6:30

differently, I think, in terms of your personal

6:32

finances. Like, you know, just when

6:35

you have such a large asset in your life,

6:37

I guess it just changes your perspective on

6:40

everything. So I think you're right. It is it is a massive decision.

6:42

And, you know, it does sort of make

6:44

a very big impact on the way you think about money.

6:47

And it's also probably the most expensive thing

6:49

that you're going to have to pay for throughout your life

6:52

is figuring out. Are you renting? Are you buying?

6:54

And what's your strategy there? You know, when you retired,

6:57

are you going to own a place outright or will still

6:59

be renting? It's just so important. Now,

7:01

look, preparing for this episode,

7:03

you've you've been out there and you've been

7:05

researching some pretty scary statistics

7:08

just to give us the current state of play of

7:10

where houses are at with home ownership.

7:13

So do you want to run us through a few of the very

7:15

scary stats? Yeah,

7:17

it's not gross.

7:18

It's not great. So something

7:21

that did surprise me, which is

7:23

the first statistic, which is that two thirds of

7:25

Australians own their own home, which I thought

7:27

might be a bit lower, and it used to be a bit

7:29

higher. It used to be about 75%,

7:32

but that's fallen over the last two decades

7:35

to 66%. So, you

7:37

know, it is coming down, more people are renting.

7:39

But that sort of tells us

7:42

that houses are expensive.

7:44

We knew that this is not this is not surprising

7:46

and have become much more and

7:49

significantly more expensive over

7:51

time. So in 2000, you could buy

7:53

a house in Sydney and this is like a house, not a not an

7:55

apartment for just under $300,000

7:58

and in Melbourne, just under $200,000.

8:00

And that was at the turn of the millennium today.

8:03

That's at about 1.6 million

8:06

in Sydney and about 1.1

8:09

million in Melbourne. And the median

8:12

across all capital cities is sitting

8:14

pretty much exactly at $1 million

8:16

to buy a house.

8:17

A freestanding house, a.

8:19

Freestanding house, obviously different for four

8:21

units. But as

8:23

most people think, you know, there's a sort of

8:25

home ownership dream is owning a house typically.

8:28

So that's that's sort of the reference. So

8:31

that's a obviously, you know, an astounding

8:33

rise in property values

8:35

over I know obviously two decades is a long time,

8:38

but that is a massive increase

8:40

in the price of a property.

8:42

Yeah. And way out of line with

8:44

wages growth, you know, as a multiple

8:46

of incomes. It's just it

8:48

is to be stably got much

8:50

much harder.

8:51

Yeah nothing else you know few

8:54

other things that have risen as much as you

8:56

know as property prices have in the last 20

8:58

years. So what that sort of means

9:00

for home owners who are trying

9:02

to get into the market at the moment, is that to buy

9:05

a house, you're looking at a deposit of at

9:07

least $200,000.

9:09

That's a lot of money. You know, that's it's an

9:11

immense amount of money.

9:12

To have the full 20% deposit,

9:14

to have.

9:15

The full 20%. Sorry, this should be clear.

9:17

And is it that it's not hilarious? It's very

9:19

painful that so we're saying that's

9:21

how much she needed to buy a house in

9:23

20. In 2000 and now that's

9:25

how much you need for a 20% deposit.

9:28

It's just gobsmacking.

9:29

Exactly. So what what could have bought you a full

9:31

a full on house the whole hog back in

9:34

back in 2000 now just gets you

9:36

a measly 20% of it. So yeah, I

9:38

think it's pretty clear to say that that the odds

9:40

are stacked against young

9:43

homeowners. A first home owners, young or not,

9:45

it's a huge amount of money to save. And

9:48

the stats are, you know, Australians save

9:50

on average about $700

9:52

a month. So you're looking at maybe

9:54

8 to $10000 a year. So

9:57

that's looking at, you know, for one

9:59

person, 20 ish years

10:01

of saving, if you're just saving straight

10:04

off your own back to afford a home deposit,

10:06

That's fascinating.

10:07

What's the source of that?

10:08

So that's from some savers savings

10:11

surveys I found online from Finder.

10:13

But I've checked a few other places

10:16

and that's pretty accurate in terms

10:18

of the ABS data as well as on

10:20

sort of, you know, the amount that people save per

10:23

year. Obviously, the older you

10:25

are, you save more, the younger you are, you save

10:27

less. But that's the average sort

10:29

of thing. So obviously these these sort

10:31

of figures change if you're saving for someone else like a

10:33

you on a partner want to buy a. That sort of drops

10:36

drastically, But you're still looking at a

10:38

good number of years if you want to sort of go

10:40

from zero to a house deposit. And

10:42

I suppose this is where we can

10:44

come in and look at what you

10:46

can do to cut that period of time down

10:49

or sort of circumvent it or whatever

10:51

the possibility is.

10:53

To help, because I think people would hear that.

10:55

And I think a lot of people have just kind of given

10:57

up and just gone. It's just

10:59

not for me, you know, I'm going to

11:01

have to look at a rent vesting sort of

11:04

strategy where I'm investing somewhere

11:06

else or.

11:06

Just rent full stop and not even invest,

11:08

Right. Yeah. You know, a lot of people can't afford to

11:11

do investing on the side. So they're just sort

11:13

of resigned themselves to renting for the rest of their lives.

11:15

So yeah. And meanwhile, the rental market

11:17

is getting tighter and people are getting squeezed

11:19

there. Yeah, I mean, I sort of have

11:22

done a lot of looking at that issue of

11:24

renting versus, you know,

11:26

buying and whether which one's appropriate.

11:29

And I did use to be sort of I'll just

11:31

be a rent. VESTER But I think I was just

11:33

putting off city because I was doing the

11:35

renting, but I wasn't doing the vesting, investing

11:38

part of it. The common.

11:39

Common scenario for many people in the in the renting

11:41

bucket and.

11:42

I think the sort of the having

11:44

had a mortgage now and it's

11:46

sort of it's enforced version

11:48

of that that you know you it forces

11:51

you to put aside, you know not only

11:53

you're paying for the interest obviously on the

11:55

loan that you've taken out, but the any principal

11:57

you make is is a form of investment because

11:59

you're increasing your ownership stake

12:01

in an asset that you've purchased. And

12:03

the ability I mean, there is nothing like

12:06

property for banks to lend

12:08

you money. So the ability to leverage and

12:10

purchase an asset upfront of which

12:12

you would enjoy any percentage

12:14

gains in a tax free environment

12:17

is pretty unparalleled. So when I've

12:19

looked at renting versus, you know, buying

12:22

a property to live in sort of comes back

12:24

to that leverage thing of how much you'll

12:26

be able to shackle yourself with

12:29

one of these super sized mortgages,

12:31

you know, which hurts on the interest front,

12:33

but also gives you access

12:35

to ownership of a large asset

12:38

earlier in your life. So

12:40

I am all about telling people that we've

12:43

rigged the system such that property

12:45

ownership is is structured in

12:47

a way that if you can get on there,

12:49

that hopefully will mean

12:51

a good financial future for

12:53

you, assuming you don't borrow too

12:55

much. So whilst we acknowledge there

12:57

are so many challenges out there, I really,

12:59

really want to help people who

13:01

are on the cusp or who might be close

13:04

if they just did a few of these things. Yeah,

13:06

we could maybe will help. Maybe we can help

13:08

if we get there.

13:10

The first thing I think is that we've we've spoken

13:12

a lot, you know, just in this podcast so far about

13:14

the 20% deposit and you

13:16

don't need 20%. You can go in

13:18

at less, you can come in at 10%

13:21

or under, but you'll have to

13:23

pay what's known as lender's mortgage insurance

13:26

and have like, how much is that? Just

13:28

like what? What is what's the sort of the average

13:30

amount that you would expect to pay if you're paying

13:32

lenders mortgage insurance?

13:34

Yeah, I have in my mind sort of about

13:36

$10,000 being

13:39

on a typical or a median sized home.

13:41

It depends and it varies. But

13:43

yeah, that's the insurance. You pay not

13:46

to cover you in any capacity but to

13:48

cover the bank. If you've borrowed

13:50

on a lesser than 20% deposit,

13:52

there's less equity that you have

13:54

in the property. So, you

13:56

know, the lender actually takes out this

13:59

insurance to protect them.

14:01

Yeah. And it can be a really high

14:03

upfront cost. It is something you can build

14:06

into your loans, so you just borrow

14:08

that extra amount to cover it. And

14:10

then there's also a government scheme which

14:13

I think we'll get to. But yet number,

14:15

you know, we've got a list of five solutions that

14:17

we're going to offer to the people through number

14:20

one, it doesn't seem like much of a solution, but

14:22

to have less of less than 20%

14:24

don't. If you're sitting there waiting to get your

14:26

20% deposit, for many people,

14:29

the 23 years, that's just not you're

14:32

not going to get there. And it

14:34

just seems to be the way things are moving

14:36

that the system is encouraging you and facilitating

14:39

more people to get in earlier with smaller

14:41

deposits, which is kind of scary when house prices

14:43

are falling by 30 to absolutely 20%.

14:46

Yeah.

14:46

And you shack yourself up with a with a big mortgage

14:48

and then, you know, interest rates go up

14:50

and you can't repay it. Like there's a lot of it's

14:52

not a it's not an elegant solution going in at less

14:55

than 20% it is an option.

14:57

But I think it is important for people to know

14:59

that is what everybody else is doing. So,

15:02

you know, absolutely you're sitting

15:04

there waiting diligently to get your 20%.

15:06

And like another option I'll second

15:09

offering, which is doing

15:11

similar to what Jess and I have done. And instead of looking

15:13

to buy a house, looking to buy

15:15

an apartment, so the median price for a

15:18

per unit across all capital cities is

15:20

about 600,000. In Melbourne,

15:22

it's less than that. In Sydney, it's quite a bit higher.

15:25

And you know, apartments

15:27

are really nice. I love my apartment. I've got

15:29

to have a great time.

15:30

I love my apartment too. And I tell

15:32

people, don't forget about. Ground floor

15:34

apartments where you sort of all

15:36

of us, apart from all the people living on top of you,

15:39

it feels like you you know, you

15:41

can have access to a bit of a garden

15:43

as well. Yeah. I mean, as a

15:45

solution, again, it's, you know, it's not what

15:48

you dream of. You want the quarter acre block

15:50

particularly. Got, you know, I've got a kid and

15:52

I sort of it took me a lot of

15:54

mental adjustment to go, That's

15:56

just not going to happen. I'm not going to live

15:59

in the sort of house that I lived

16:01

in when I was a kid. And I think

16:03

mentally adjusting to that can be hard

16:05

because you feel like you want to provide that. But

16:08

lots of great people, including us,

16:10

are living in apartments.

16:14

The only thing to watch out for that is

16:16

strata fees. And I think people don't necessarily

16:18

factor that in is which is a large

16:21

ongoing cost.

16:22

What are your strata fees each year in

16:24

Sydney?

16:25

I'm paying about a $9,000

16:27

a year in strata fees. Oh.

16:30

9000. I'm truly shocked.

16:33

The building that's got a lift, it's got

16:35

communal gardens. We've got a pool,

16:37

which is actually lovely, but you know,

16:39

you're paying the cost. And I have

16:41

been meaning to do the sums. I don't know

16:43

if you bought bought a freestanding house,

16:46

whether you would be spending $9,000 a year

16:48

on upkeep. What are your fees?

16:50

1400 a year.

16:52

Oh, goodness.

16:53

Yeah. So.

16:55

Wow, maybe that's a Sydney, Melbourne

16:57

thing because I'm.

16:57

Guessing it might be. Also, I've only got 14 people

16:59

in my block. Like, it's not a big it's not a big,

17:02

big apartment. No lists. No

17:05

lists. It's got actually communal gardens, it's

17:07

got carports. It's like pretty low key on the maintenance

17:09

front. So that's that's obviously the difference. But I'm not

17:11

sure if that's, you know, seven

17:13

and a half thousand dollars difference. That's a phenomenal

17:16

amount of money.

17:16

Yeah, I wish I had paid a little bit closer

17:19

attention to that, actually, the ongoing

17:21

cost, you know, because I'll own my

17:23

apartment outright so there will be no mortgage,

17:26

but when I'm retired, I'll still have this large

17:28

ongoing cost. Yeah. Anyway,

17:30

so just to take that into it, just take.

17:32

That into account. What's our next

17:34

tip?

17:35

So solution three and this

17:37

is what I wish I'd known,

17:39

is that don't just sit there kind

17:42

of thinking and wondering. You have

17:44

to actually start going and talking

17:46

to banks and to mortgage brokers

17:48

pretty early on in the piece. And actually

17:51

a large part of the education that I got

17:53

about the process of getting a loan came

17:55

from literally one day I

17:57

walked into three different banks on the high

17:59

street and just, you know, can

18:01

I have a loan? And, you know, I'm a financial

18:04

expert and

18:06

it's just you have to go through that process

18:09

because they then start to ask

18:11

you all these questions like, okay, well, what's

18:13

your income? What are your expenses?

18:16

You know, and that's how they determine how much surplus cashflow

18:19

you've got. And at the time, I was not

18:21

the budgeting wizard that I am today.

18:23

If you see.

18:24

My famous, famous budgeting website.

18:26

Instagram account, my money with

18:28

Jess, I now keep a almost

18:31

unhealthy level of tracking

18:33

of my expenses. So now

18:35

I know. But they will get

18:37

you really thinking early on about

18:40

focusing in on, you

18:42

know, what's your income, what what are your expenses?

18:45

Where could you trim back? You know, and I remember

18:47

when I told one banker, oh, yes, I spend

18:49

about, you know, what, three or $4,000

18:52

a year on hair treatments. And he sort

18:54

of gave me the one I raised

18:56

and went, Do you? Well, you don't

18:58

now, you know, if you want your

19:00

mortgage, you're not going to, you know, be able

19:02

to you have to actually, you know, and

19:05

I had to sort of live to a more modest

19:07

lifestyle to afford my loan

19:09

than I was previously. And know

19:11

if you do go and have that conversation about

19:13

your borrowing capacity, it can help you to

19:15

sort of bring back to reality,

19:18

you know, the some of the sacrifices that you probably

19:20

will have to make.

19:21

Though I think we should make it clear that we're not telling

19:23

people to stop eating avocado toast.

19:25

No.

19:26

No, that's not part of that. You will never hear that

19:28

on this podcast. We're never going to stop telling you to

19:31

stop having your brunches. Yes, fine.

19:33

Brunch is.

19:33

Allowed to have.

19:33

It, had a life. Maybe don't have

19:36

that every day.

19:37

Have it felt that if you were having an every day,

19:39

I'd probably tell you to stop just from like a health point of view

19:41

rather than like a finance point of view. I mean.

19:43

Nutrition.

19:45

Yeah. Would put them on nutritionists hat and say to stop

19:47

eating the toast. Mix

19:49

your diet up mate.

19:50

Best healthy fats out of an avocado.

19:53

We digress.

19:54

We digress. Another sort of

19:57

and this is this is the one that you sort of loathe

19:59

to mention, but it is sort of the reality for

20:01

so many people in Australia, which

20:03

is the bank of mum and dad, right? Yeah, it

20:05

exists. It's big. It

20:07

offers a lot of very generous

20:10

and low interest loans

20:12

to a lot of people that a

20:14

lot of people have to get money

20:16

from their parents or they have to have their parents

20:18

guaranteeing their loan. Like, you

20:20

know, we've got two examples of either

20:23

situation here, right? So it

20:25

is sort of unfortunate that that is the scenario

20:27

that we're in in Australia, where the generational

20:29

wealth is such that that you have to

20:31

rely on your parents to. I

20:33

had the money for your house, and

20:36

you then might have to do that for your own kids. But it

20:38

is a reality for many people who are

20:40

in the position that where their parents can do that. And

20:43

you know that some it is a lot of ways

20:45

to get into the property market.

20:47

Yeah, it makes me really sad. We've

20:49

designed such a terrible system

20:52

that we've let house prices inflate away.

20:54

And if you didn't carefully select

20:56

your mother and father at birth.

20:59

Which we all.

20:59

Did to be someone who owns property

21:01

and, you know, in urban areas. Yeah.

21:04

The idea I hate giving this piece of advice

21:06

and I was very loathe to get my

21:09

own parents involved. I was like, No, I

21:11

should be able to do this by myself. I

21:13

want to be able to do this by myself. I was really

21:15

worried about having mom and dad on the hook

21:18

because they went guarantor by loan,

21:20

but it is a conversation worth having.

21:22

If your parents do own property,

21:24

they've got substantial equity in their home.

21:26

You know, they might not have the cash to actually

21:29

stump up to help you with deposit.

21:31

But there there are parental guarantees.

21:34

And what was reassuring to me and

21:36

it's just worth talk to a mortgage broker, talk

21:38

to a banker about how to use these sort of

21:40

guarantees. They weren't sort of on the

21:42

on the line or on the hook, if, you know, if

21:44

I didn't pay my loan, they were going to have to pay

21:46

back my whole loan, but only for

21:48

the missing amount that I had in

21:50

my deposit versus having the 20%

21:53

deposit. They went guarantor on that

21:55

sort of smaller amount, which meant that I

21:57

avoided paying lenders that

21:59

lender's mortgage insurance that we spoke about.

22:01

Okay, So you can sort of and organize

22:04

it so it works in a different way.

22:06

Yeah. So I think I mean, I could have borrowed with I think

22:08

I had about a 15% deposit

22:11

at the time and I could have done it and just paid

22:13

lender's mortgage insurance. But it did,

22:15

you know, having that guarantee meant

22:17

that I avoided into that, that part

22:19

of the cost. So it's not that I couldn't get it

22:21

without the guarantee, but

22:24

it did help me save save a little

22:26

bit upfront. And then actually

22:28

what happened is after in the

22:30

year after I bought the the

22:32

value of the property went up and

22:34

then I was able to release them from the guarantee.

22:36

Once your loan to value ratio is under

22:39

the 80%, then you

22:41

can release them. So that was a lovely

22:43

moment to be had to right release I release

22:45

you back into the wild, you know.

22:46

Not they're not part of this.

22:48

So yeah, I'm an independent lady all again,

22:50

all over again. So there are

22:52

the bank of Mum and Dad is not totally flush

22:54

with cash. There are other ways

22:57

that, that they can help. And you know,

22:59

if you have access to that, it's a conversation

23:02

worth having.

23:03

Yeah. And also, again, you know, this is another

23:05

sort of thing that a lot of people are very privileged to have, but

23:07

a lot of people are not. So exactly. Obviously

23:09

that piece of advice is not apply to everyone, but

23:11

this piece of advice does

23:13

apply to everyone, which is there

23:16

are a number of first time buyer schemes

23:18

out there. There was a I'm not

23:20

sure if people remember the election. That was a bit of a that was

23:22

a bit of a topic. So we have we have some

23:24

sort of some some fresh home

23:26

schemes that are available on the federal one.

23:29

There's 35,000 places a year.

23:31

They allow you to buy

23:33

a place for as little as a 5% deposit

23:35

and they'll sort of back you like the

23:37

government will back you.

23:39

Yeah, they essentially become the bank

23:41

of mum and dad for you by going

23:43

the guarantor. It is income

23:45

tested. Yeah. For people to

23:47

be aware of. But yeah, that's the first home

23:49

deposit scheme which seems

23:51

to be a new feature and a feature

23:53

that's going to stay in the landscape.

23:55

Absolutely. But obviously the caveat with that

23:57

is that you have to apply. It's not for everyone

23:59

and there's only 35,000 every year.

24:01

So, you know, it's it's a bit of a

24:03

limited scheme, but it is a good way to get

24:06

yourself into the into the property market with

24:08

a very small deposit. And then

24:10

obviously on top of that, there's all

24:12

the state based first home buyer schemes, which

24:14

are pretty similar as far as I'm aware.

24:17

Often it's a grant of about $10,000.

24:20

They'll waive stamp duty up to a certain

24:22

value of the property and then over that

24:24

they'll reduce the stamp duty like I

24:26

didn't pay any stamp duty on my place, which

24:28

was, which was good.

24:30

Because it was under the threshold.

24:32

Yes. It was under 600,000. Yeah.

24:34

And then the final one we wanted to mentioned was

24:36

the first home super saver scheme,

24:39

which I remember when that was invented back in

24:41

the day. I'm showing my age now, but when

24:43

Kevin Rudd got elected, you know, housing affordability

24:46

was a big issue. How long a good Kevin

24:48

I seven. So that's 15 is still a big issue.

24:50

And this was their sort of offering which has since

24:52

been expanded, that if you have

24:54

a plan and if you're ahead of time, you know,

24:57

a couple of years down the road before you want

24:59

to purchase, you can make voluntary

25:02

contributions to super up

25:04

to a $15,000

25:06

a year and then capped at a sort

25:08

of $50,000 total

25:10

that you can put into super and take out again

25:13

for release under the first Home Saver

25:15

scheme. The advantage of that is

25:17

that you pay lower tax on that money. So

25:20

rather than be taxed at your marginal rate, you

25:22

get to save in this lower tax

25:24

environment of super and

25:26

the that that can really you know, the amount

25:28

of tax that you save adds

25:31

to the deposit that you can then.

25:33

A mess.

25:34

Yeah. And if the market's having a good year, make

25:36

it a little bit of money on your. On your deposit, too.

25:38

Yeah.

25:39

And you just hope it wasn't sort of the last year

25:41

or. Yeah, you sort

25:43

of want to be looking at us sort of a couple of years

25:45

time horizon, I think. But

25:47

if I have my time again, you know, and I got

25:49

my act together a bit earlier, that's definitely something

25:51

I would have looked at.

25:53

That scheme made to I think about none of

25:55

that. I would have put a bit more cash in. So something like

25:57

that. Well, look, we hope that

25:59

that sort of helps a little. Obviously, that doesn't erase

26:02

the massive, overarching

26:04

problem of housing affordability in Australia,

26:06

which is something that no one appears to want to

26:08

talk about or do much about. So

26:11

moving on from that, Jess,

26:13

we do have your budget tip of the week. Is it related

26:15

to housing?

26:16

It's not.

26:18

Well, that's probably refreshing, to be honest.

26:19

Unless you have home insurance. My

26:21

budget tip of the week is to live your

26:24

life to excess.

26:26

Okay, great. You know what I said about avocado

26:28

toast earlier? I'm just going to go grab some.

26:30

Just go eat. No,

26:32

this is to look at your

26:34

excesses on your insurance

26:37

policy. So everyone's tightening the belt.

26:39

Starting to review, you know, household

26:42

expenses. Something that I've

26:44

done throughout my personal finances

26:46

is to go through all my insurance.

26:48

So car insurance, health insurance,

26:52

home insurance, and a strategy that

26:54

I have in place because I know that

26:56

I do have an emergency savings fund.

26:58

I've got my $36,000 that sits

27:01

there, which I've calculated is roughly my

27:03

six months of basic living expenses.

27:05

So I know that if I do need

27:07

to make a claim, if I agree to a higher

27:10

excess, which means that I agree to pay

27:12

a higher dollar amount out of pocket

27:14

in the event that I need to claim that my

27:16

premiums go down. So with

27:18

private health insurance, they recently increased,

27:21

you know, the excess that you're allowed to

27:23

accept up to 750

27:25

for singles and 1500 for

27:28

couples. And so I just go

27:30

for the biggest excess possible.

27:33

And I know that I've got the savings there to pay it if

27:35

I need to pay it out of pocket in the event of a claim. But

27:37

I have saved so much of

27:39

my premiums on across all of my

27:41

insurance is that it's probably already made

27:44

up for whatever excess

27:46

I would need to pay. And you could be unlucky, unfortunately.

27:48

And you know, maybe you have a claim

27:51

fall soon and you've, you know,

27:53

agreed to the bigger excess and that's not going to work

27:55

out for you. But it's definitely something you can

27:57

tinker with because those are some

27:59

very large parts of household budgets

28:02

and insurances, particularly private

28:04

health.

28:04

Premiums, are one of those things that I think when I bought insurance

28:06

for the first time, like I bought a car for the first time last

28:09

year and I was like, I don't really understand

28:11

this. I'm just going to set it at a number that feels about right.

28:13

Like I didn't even I don't even think about it.

28:15

So I should I'll I'll go back and review

28:17

my excesses and be more

28:19

excessive.

28:20

Be more excessive.

28:22

Well, I think that's probably all we have time for this week.

28:24

But in future episodes, we would love to

28:26

answer your questions, so please email

28:28

them through to. It all adds up at nine.

28:30

Accommodate a few or even

28:33

send them as a voice memo so we can play

28:35

them if a live. That's alright with you because we'd love

28:37

to hear from you.

28:38

This episode of It All Adds Up was produced

28:40

by Chee Wong. Information discuss

28:42

is generally nature and does not take into account

28:45

your personal financial situation, goals

28:47

or objectives. You should always do your own

28:49

research or get professional advice before

28:51

making any major financial decisions.

28:54

If you like today's episode, hit follow in

28:56

your podcast app. Leave us a review

28:58

and recommend it to all your friends. You can

29:00

submit your listener questions in text or

29:02

audio format too. It all adds

29:04

up at 9:00 for you. Thanks

29:07

for listening.