Uncensored Money: Ask Mel Anything – Buying Your First Property & Putting Extra $$ into Super or Savings
Melissa Browne: Ex-Accountant, Ex-Financial Advisor, Ex-Working Till I Drop, Now Serial Entrepreneur & Author, Financial Wellness Advocate, Living a Life by Design | 13/04/2023
Welcome to the ‘Ask Mel Anything edition’ of Uncensored Money.
In the ‘Ask Mel Anything’ series, Mel answers your questions in the hope you realise you are not alone and that it helps to increase your financial literacy and confidence. In the first episode of ‘Ask Mel Anything’ Mel answers questions; about buying your first property and whether you should put extra money into savings or superannuation.
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So in some good news, there will now be a second podcast episode released most weeks. And in this special episode, I'm calling it 'Ask Mel Anything' and the giveaways in the name, right? So I've gone out to my community and I've said to them, what would you ask me if you could ask me anything? And what I'm gonna do is take two questions, one or two questions, depending on the type and the chunk of the question, and answer them here every single week.
And this is the very first episode. The aim is to release them on a Friday. And we'll just see how it goes. So I'd love to hear your feedback and you can let me know by either coming and giving me a DM, @Melbrowne.money, remembering there's an E on the end of Browne, or flick us an [email protected].
So this week to kick us off, there are two questions. The first one is all about buying a very first property, and the question goes like this: we want to purchase our first property in 18 months. We earn good money, have a good chunk of savings, but probably not enough for a deposit yet. Outside of your plans, is it best to speak to an accountant or financial advisor on the best way to maximise our savings and get ahead?
So this is a great question and one of the reasons I chose it is I'm trying to do them in the order that they turned up so that I'm not extending my bias. But I know that there are so many people in this situation, they have some money for a deposit, they suspect they don't have enough and they really want some tips and tricks for how to get ahead.
One of the things obviously is to come and look at the My Financial Adulting Plan, which is an eight week course. The next round opens in May, half May, and this one has the best waitlist bonuses that we've given away yet. So head to the show notes and jump on that cause that's gonna give you so many tips and tricks to be able to get forward.
But if it was me, other than doing that, another thing that I would do is you wanna figure out, what I see is that a lot of people are really good at tightening their belts, right? If they've got a plan like this in order to maximise their deposit, they're not bad at tightening their belts and reducing their expenses.
But potentially what they're not great at is finding more income. And that's why I actually have a free download called 50 Ways to Find 10 K in 12 Months. And I'll pop it in the show notes. And my question for you as you are listening to that is to ask yourself, what am I prepared to suffer for? Because if you decide, you know what, I just wanna get into my own home within 12 months. And I need it at least to double my deposit size. Then you may be prepared to suffer by moving and doing share house, or you might be prepared to house sit or paw sit for 12 months where you can just get rid of the cost of your housing entirely. You might be happy not to do a holiday or eating out at all. Or you might go, you know what? I'm not prepared to do that. I'm happy for it to take me three years. So the first thing to decide is what are you prepared to suffer for? And I wanna challenge you as well to say, are you choosing to own your own home cause that's what you really want for yourself?
Or is it because of what society wants for you? And so if that's what you think you should be wanting, in which case a rental property may be better rather than your own home. So I wanna even challenge the notion of your own home before we even get to it.
But when it comes to experts to help you, I'm gonna be honest, an accountant isn't the one to speak to about saving. You know, an accountant's role is to maximise your tax. If you've got a business, and you wanna know how to earn more money in my business in order to have more profits so that I can get to that deposit faster, then sure, a great accountant will be able to help you maximise your business profits. And a good accountant will also be able to work with you to say, you know what, if I'm a business owner, I don't wanna be minimising my tax at the expense of getting this loan. So you definitely wanna talk to your accountant, if you're a business owner around your plan to buy a home and what sort of income you might need to be declaring.
So that's one, and that's the reason if you're a business owner, sure, but for everyone else, accountants really not your go-to person fit.
The second person is your financial planner. And again, the answer is, it depends. I think you'll get far more out of something like my course when it comes to saving for a deposit than you would by spend spending three and a half thousand dollars with a financial planner to get a plan set up when really you could pay your money and do that for yourself. Because what you are not going to wanna do is you're not gonna risk investing in the share market to maximise your deposit. Now share investments are a long-term strategy. That's something that's five to seven years plus. We don't wanna risk our house deposit in the share market.
So if you're gonna speak to a financial advisor, they might talk to you about ways to cut down on your expenses. They might talk to you about ways to boost your income, but they're not, that's gonna be really, they're the two levers they're gonna have available to them. So sure, you could spend thousands with them or I think you'd be far better off spending a third, less than a third of that, and doing my plan and figuring that out for yourself.
But finally the thing, the person that was missed out from the question is actually the person you should be speaking to. And that's a mortgage broker. So even if you are not, if you don't have enough for a deposit yet, even if you are just started on your saving for a deposit journey, I would go and speak to a mortgage broker.
So this is gonna be the key person that you want in your corner as you are looking to buy a house, so the reason you wanna speak to them early and before you're ready is cause a good mortgage broker will look at your situation and go, right, your income. They might say, look at your income side. And if you're a business owner, they might say to you, you need another 10 to $20,000 profit in order to get the loan that you want all the house that you want. And that means you can look at your business and go, great, I now have a target there. Or they might look at your employment income and go, you need to be showing an extra 5K worth of income. And that means you can sit down, you can work out your KPIs for your job. That means that you can go to your boss and ask for that, or it means that you can then look around for another job that's earning, that's going to pay more money. But again, can you see that it gives you choice?
But they'll also look at your assets and your liabilities, and they'll look at things like your credit cards, your personal loans, your HECS, your student loans and more. Your 'buy now, pay later'. And what you don't realise is that if you have a credit card, for example, or buy now, pay later. And even if it has not a single dollar of debt on it, a bank when you go to apply for that loan will times that by five to seven times and that'll reduce your borrowing power. So a good mortgage broker might say, pay off that debt and get rid of it. Close it entirely. A good mortgage broker might also say, you know what? A bank wants to see you with some sort of savings history and more. Or they might talk to you and say, you know what, you could get into a property today. But it might be about that you pay some mortgage insurance and if you are a terrible saver, but you are great at paying down debt, and if this property's gonna be something you are gonna have for 20 years, you may have no problem paying mortgage insurance, which is what you'll do if you don't have at least 20% deposit. You might feel completely okay about paying mortgage insurance, but you don't know that. And then the final thing is a good mortgage broker will also let you know the rebates and everything else that you're entitled to, which again might mean that you can get into that property faster. So that's where, just to recap, if it's business, yes, talk to your accountant. Financial planner, I think you're far better off doing my course. And the one piece that is missing is a mortgage broker, and that's one that I really think you should be speaking to, even as you start to save your first dollar. Even if the idea of a property is just a glimmer in your eye cause a great mortgage broker; never think you are wasting their time because they'll eventually make money when they get you that loan. And if they can get you that loan easily easier, then that's only gonna help them down the road. So the mortgage broker is the one that you wanna speak to.
And again, inside the My Financial Adulting Plan, we've got a little black book that we put people onto to add of great mortgage brokers to help with that. So we do that for alumni inside the My Financial Adulting Plan. So that is lots of resources, both free and paid, and otherwise that will help you to get to that first property.
The second question is, if I can spare an extra $50 a fortnight, is it better to put that in my savings or into super? I'm 41. I'm self-employed. I'm divorced. I've never previously worked full-time, so only 11 grand in Super right now and about $20k in savings. I'm currently doing a hundred dollars a fortnight into savings and $50 a fortnight into super.
Now, this is such a great question and probably one that I see people wrestling with often where they didn't work, they're potentially divorced, they're looking at a very low super balance, and they're starting to worry. They're kind of hitting that age, and often that's when you hit about 40, where you start to look at that and go, oh, wow. I can see that pathway to retirement and I know that I need to start doing something about.
And I just wanna share the stats with you as to why this is an important question. You know, in Australia at the moment, there are 450,000 women in their forties at risk of homelessness, 450,000 women in their forties at risk of homelessness. Women over 55 are most at risk of homelessness. So if all the demographics, women over 55, most at risk of homelessness. And if you add in that, indigenous and other categories, then that will just go up and up and up. So this is a really, really important topic and a really important question.
And I need to really start by saying that at 41 you have so much time. So you don't just have a little bit of time, you've got a lot of time. Even if you were saying you were 51, you've got so much. That's because if you're 41, you potentially could work for another 25, 30 years. That's a lot of time. If you're 51 again, you could work for another 25 years. That's a lot of time and you might not choose to work full-time right up till the end, but you could still choose to work part-time and be able to subsidise that retirement or be able to get more into your retirement or, or to earn more later in life. So I wanna start by saying that just because you hit a particular age, if you, you might feel like you don't have a lot of choice and you are having a lot of lack. And I wanna just say that you've got more choices than you realise.
So I also wanna start by saying this, that the answer is always, it depends. So in this example, if you've only got 11 grand in super, you've never previously worked full-time about $20k in savings. What I don't know is, do you own a home? Are you renting? And those other things. So all of that's gonna come into play. And what I think it's really important to do from the get-go is to sit down and ask the question, what do I want? You know, what do I want my life to look like? When do I want to stop working? And to answer that question, because if you were to look and go, you know what? I really wanna stop working at age 70, and I don't need to go overseas. I am happy just and. I don't own my own home, so I'm going to have to pay for rent. But I'm actually happy to live quite a frugal life otherwise. Then the answer for how much will I need and how much is gonna be enough is going to be very different to someone say that owns a home and also wants to maybe go overseas every year.
So that's where it really is about looking first at what do you want? And we've actually got worksheets that will help you with that. So we'll put the link for that in the show notes. It's not how much, what do you want? But more around catching up from a super break.
But inside the My Financial Adulting Plan, we actually have a module that is called How Much Is Enough, so you can start to really answer these questions and really dive down into what is the exact right amount for me. Cause I think that's actually a really personal question and it's a personalised question to ask. So inside the My Financial Adulting Plan, we've created a way for you to answer that question.
But if I was to look at this as a general question, now I would want to know things like, do you own your own home? And is that important to you? Because if I'm paying extra into super and I don't own my own home, then maybe that's not necessarily the right thing for me to do, if saving for that deposit is the right thing. If I'm a low income earner, there's certainly in Australia, there's something called the co-contribution that is available to me where the government will match some of my contributions. So putting an after tax amount into super might actually be better than a pre-tax amount. So I'm gonna wanna figure that out.
But also, there are also things that I could be doing, like putting extra into super knowing that even if I'll have an amount to pay off my mortgage by the time I retire, I could pull that out of super at the end and make a lump sum payment. But at least I've put the money into a super so that I can pull that out more tax effectively and pay that out later.
Which is why this is a really hard question to answer. Can you hear that? The answer is to what should I be doing is so nuanced cause it really depends on your personal situation. What I love is that you are considering this, that you are thinking about it so, I would start with asking the question, what do I want? What sort of life do I want? It might mean that you need to ramp up your working now so that you've got more choice so that you can put more into super and save outside super as well. But only you can answer that question as to what is actually right for me. What do I want? But certainly with such a small amount in super and such, a small amount in savings if you don't have anything else, if you don't have your own home, what I wanna say is two things. One is you have time, but two, you've gotta start. And I love to see that you are doing that. So you are putting money into savings, you are putting money into super. But I want you to go and look at that download of 50 Ways to Find $10k in 12 Months.
Because if you can supercharge either that savings or that super by finding more income, then that's gonna put you an in an even better situation and give you even more choice. So what I would say is no matter what, go and look at that. And no, I'm not talking about just going and getting another job in that. There are so many ways that you can do that, even for someone that's time poor and doesn't have any other hours in the day.
So you might feel like that's a real non-answer and a bit of a cop out to this question, but I hope you can hear that the answer is actually, it depends because finance is personal. It depends what you want and because I don't have the whole picture of this person it, there's another layer of, it depends as well. So it's actually asking the question, what do I want today? What do I want in five years time? And then what do I, when do I, what do I want in 10 years time? When do I want to retire? How do I want to retire? And when you start to answer those questions, then you can bring that back to now and say, right, what does that mean for me today? What am I prepared to suffer for? It might mean skewing those percentages into savings and super. It might mean trying to find more income.
But ultimately it'll be a personalised thing for you so that you can actually start to answer the question of what's right for me. What I love more than anything is that you are starting to answer ask that question. It's the right question for where you are now.