When you finally purchase your first home, you’re likely cracking the champagne as you draw a big, thick line across your bucket list.
“Done!” you think. One item down, 50 more to go. It’s a tremendously satisfying feeling, finally getting those keys and securing a mortgage for your new house in Sydney. Take that, housing bubble! You win!
From one homeowner to another – trust me when I say that buying your first home in Sydney is just half of the financial journey. It’s an important milestone, yes, but taking care of your finances is a habit that needs to extend beyond your mortgage repayments.
Maybe your goals are to own multiple properties, or just to secure a nice little nest egg for your family’s future. Maybe you want a big family and you want to send them to the best schools in Sydney.
I’m a father of two young daughters. We own our own home, but securing the best future possible for them – with education, experiences and of course, emotional support – is top of my agenda.
And I know that establishing financial stability is part of the key to providing this for them.
Whatever you have planned for the grand scheme of things, getting your finances in order after you’ve purchased your home is essential for ticking items off your family bucket list, and ensuring that you can show up as the best person to provide for them.
We all have personal bucket lists: skydive in Equador, throw tomatoes in Rome, scream obscenities into the Grand Canyon, or maybe just get your first tattoo.
A family bucket list takes into account your values as a collective whole, and serves as an extension of your personal dreams.
It could look something like this:
- Teach the kids a second language
- Go travelling together for a year
- Have dinner out together once a month at the best restaurant in Sydney
But in order to reach these milestones, you’ll need to get your finances sorted first. Consider this the most important step in personal development and creating financial freedom.
How to get your finances in order
Step one: Build up emergency funds
Think your credit card’s an emergency fund? Oh boy. Stop right there. Getting further into debt is not the answer.
Emergency funds are an essential part of decreasing stress in times of illness and other emergencies. Yes, you might have things like sick leave, or income insurance. But sick leave only lasts a few days, and income insurance requires jumping through quite a few hoops to receive the payout.
Or maybe you need to fly overseas urgently to visit a sick relative, or you need to make an urgent repair on your home that’s not covered by insurance.
Emergency funds are your stop-gap between getting chaos in order, and losing your sanity over lack of money. Make sure you and your partner save up to 6 months worth of expenses. 6 months seem a bit steep? Try for 3 months instead. Some savings are better than no savings at all.
Step two: Review all subscriptions and direct debits
I know you’re probably thinking, “But Andrew, my $11.95 Netflix subscription won’t really make a huge dent in my grand scheme of financial plans, will it?” And the answer is, well, no, it won’t. But the practice of reviewing your expenses is going to help you develop a razor sharp, critically conservative frame of mind when it comes to spending. When you stop and consider one relatively meaningless expense, you’ll start to thinking about all the other tiny factors that come into play here, too.
So do yourself a favour – spend one evening or weekend morning looking at all of those deductions in your bank account or credit card. Add them up on an excel spreadsheet. It’s crazy, right? If you’re paying $120 to the gym down the road and not working out, just quit. If you’re getting the Sydney Morning Herald delivered every day, but just using it to clean your windows, just cancel it. Your finances will thank you.
Step three: Automation – direct debits and scheduled transfers for everything including savings
I’ve spoken about automation before – it’s by far the easiest way to save money and stay on top of your bills. As long as you make sure there’s enough funds in your nominated account, or choose a direct debit day that corresponds with pay day or pay week, you’ll find the whole process entirely efficient. And because it’s all done for you, you’re freeing up the mental energy to go and do other things, like tick items off your bucket list.
Step four: Use spending money in cash
While it’s incredibly convenient to swipe with Pay Pass, it’s also an easy way to spend money you could otherwise be saving. More than that, we’re taught from a young age to finance purchases with debt. So don’t scoff when I tell you that withdrawing cash from the ATM, and paying for meals, coffee, clothes and public transport with cold hard cash is far better for your bank balance.
It’s scientifically proven that credit cards and debit cards weaken your impulse control.The reasoning behind it is pure psychology: one study published in 2010 showed that consumers were more likely to spend unhealthily when using their credit card. When it comes to your mode of payment, it’s scientifically proven that credit cards and debit cards weaken your impulse control.
Use your cash wisely. You’ll find you’re much less wiling to part with it.
Step five: Make automatic extra payments on your home loan
Let’s be honest – you probably won’t miss an extra $50 a week. If you start bringing lunch from home, opt for breakfast out rather than Friday night dinner, and take the train rather than an Uber home, you’ll find it adds up quickly and easily. Ka-ching!
Step six: Cover yourself
When you’re young, single and healthy, you firmly believe you’re invincible. Wednesday night happy hour is a given, because you’re more than equipped to power on through the next day at work.
But once you find yourself with dependents, it’s a wise decision to consider what would happen if you couldn’t provide for them. If the worst should happen and you’d fall ill, become injured, or couldn’t work full-time, how would you manage your day-to-day expenses?
This is where life insurance, total and permanent disability insurance (TPD), and income protection should be high on your radar.
Sure, you’ve probably seen that your super account offers something along these lines, but it’s usually very limited cover. It’s a wise idea to engage with a financial planner to find a plan that benefits you.
Once you have all of the above in order, you’ll be able to start dreaming big. You’ll have the confidence to know that your bucket list is highly achievable, realistic, and a reflection of your values and commitment.
You’ll finally be able to do things like:
- Save extra money for family holidays and give your kids the gift of overseas travel.
- Pay down any loans and other debts quicker.
- Invest in your children’s education so they can get the best start in life.
- Build up a nest egg for the kids, or the grandkids.
- Consider investing in property.
- Travel to more places, more often.
- And most importantly, spend quality family time together without stressing out about money.
What’s on your family bucket list? Let me know in the comments.