Don’t give up on home ownership – you’re off to a good start

Savings are the only reliable generator of long-term wealth

Iprobably use this rather old saying a little too often, Kate, but with money in particular it really is “never too late to get started”.

We’ll get onto the critical steps in the short to medium term in a moment, but I would not give up on home ownership in the years to come. I believe it will be possible for you, mainly because you have already shown me some really good money habits.

Money success for most of us who don’t have a fairy godmother, win the lottery or receive a shock inheritance from a forgotten relative is not about dreams. It is the super-simple first step, which you have done, of spending less than you earn.

I don’t really care what people earn. Obviously, more makes it easier, but it is all about what we spend. After more than four decades of talking to people about money and my own life experience, it is just really simple to always spend 110% of what you earn, no matter how much you earn.

Savings are the only reliable generator of long-term wealth, so I am just delighted you have saved $10,000. This tells me a lot about you and your ability to be self-reliant with money.

It is sad that you share the common concern about financial advisers selling you “products you do not need”. This is certainly the truth for a minority, as we saw at the Hayne royal commission.

But most of those cowboys have been run out of the industry, and I am very pleased to find excellent quality advisers in our community these days.

But I don’t think an adviser is for you at the moment. There are also “budget help” groups, however. I have had a lot of feedback from people that these groups can provide the discipline to build and grow savings. A good analogy could be one of the companies that provides weight control advice. A good “budget” group also gives you motivation.

But you are already off to a good start, which tells me you can save. Also, money is not as hard to understand as calories. You either spend a dollar or save a dollar.

I reckon you can set your own path, but if you did want to talk to someone who is working in the area of saving and budgeting, I’d give the Financial Planning Association a call and ask to be referred to a professional, feecharging firm that specialises in cashflow planning.

Frankly, that suggestion is more for readers who do need a hand to get their savings moving. I have no doubt you can set your own path. Keep that savings habit going.

I would talk to someone like Vanguard – a very low-fee, broadly based fund makes sense.

The next great money trick is dollarcost averaging. If you sort out an initial investment and then a monthly contribution, your wealth will soon start to build.

Where the home comes in is that your teenage daughters will be expensive at this time in their lives. I believe that as you build your savings and confidence, then more quickly than you realise your girls will become adults and your cost base will change, allowing the possibility of home ownership. This may start as buying an investment property, where the rent helps to pay off your future home.

Then, of course, you have your superannuation. This will grow into a very nice amount as you get closer to retirement. That could provide you with additional income or pay off the rest of your mortgage.

This, though, is all in the future. Step one is to keep the saving going, chat to a low-fee fund manager, get an investment started and top it up on a regular basis. This simple action will set you up for long-term wealth creation.