Having up for a deposit is a huge step in adulting. It can feel like a big step with lots of unknowns and lots of people trying to give you unwarranted advice.

This guide is here to cut through the noise and tell you exactly what you need to do to — to properly start saving up for a property that you can afford and love.

Step 1: Audit yourself

The first step is to audit your income, expenses, assets and liabilities. These are some technical terms so let’s work through them one by one:

Income: cash that you bring in from work, dividends or the sale of something.

Expenses: anything that you spend your money on that is not a debt. Things like eating out, flights, rent, etc.

Assets: anything that has a positive value that can be sold for cash. Think cars, boats, houses, stocks, etc.

Liabilities: any form of debt that you have. Things like credit card debt, car loans, afterpay, etc.

Banks look at your income, expenses, assets and liabilities before deciding how much they are willing to loan you. And the lower your debt and expenses, and the higher your income and assets, the greater the size of the loan you will be able to get.

Case study: Nigel and Jolyene want to buy a property but they have a car loan and some credit card issues. They sit down together to better understand their position. Doing so has helped them to better understand what they need to do to be in a better financial position.

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Step 2: Manage and reduce your debt before saving

Pay off any interest bearing loans as fast as possible. From a cashflow perspective, the interest on loans reduces your ability to save over time.

Debt is like a metal ball around your leg. You might not be aware of how heavy it is until its taken off.

Case study: Nigel and Jolyene decide to pay off their debts as fast as possible. With a car loan interest rate of 10% p.a and credit card loan of 22% p.a it is having a huge drag on their ability to save.

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Step 3: Create a vision for what you want and how you will get there

We believe this step should only come after Step 2 because when you have debt it is hard to think straight with what you can afford. When you are financially free, things become a lot easier.

Think about your audit and how much money you can potentially save each month. Think about your timeline and your goals. Start plotting a way to get there. This can be with friends, family, your partner or on your own.

Start playing with mortgage calculators to see what you can afford on your own, with your partner or with others. This will give you some insight on if your property aspirations are achievable.

Case study: After paying off their debts, Nigel and Jolyene are serious about buying a property.  

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Step 4: Create SMART goals with a plan

Now that you have some idea of the type of property that you want to buy, by creating smaller SMART goals. These are Specific, Measurable, Attainable, Relevant and Timely goals. We recommend creating monthly SMART goals. This will ensure you can review them at the end of each month and continue to update them as you start to build a deposit.

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Step 5: Automate!

Try and automate as much of your plan as possible. For example, as soon as you get paid, set a automatic transfer of how much you intend to save to your savings account. Make this untouchable. Better yet, make it hard to transfer money out of — like a fixed term deposit (especially since interest rates have gone up).

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Step 6: Don’t lose focus!

It can be tempting to take a break or spend a bit more money now that you have a good amount saved up. But this is a trap! Stay the course with your long term goal and keep earning interest on that interest.

Compounding interest is your friend and use it to get ahead as much as possible. Don’t split up your savings into separate accounts.

Saving for a home deposit is a long-term commitment that requires discipline and patience. Stay motivated by visualising your future property and the financial stability it can provide. In saying that, celebrate your milestones along the way to maintain your enthusiasm and momentum.

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Step 7: Surround yourself with the right people and get the right advice

Each person and their property goal is different. Find yourself a really good financial advisor to get the right advice and get to your property dreams faster.

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Plan, Act, Review and Repeat

Knowing what you can afford is a little chicken and egg. You need to know what you want to buy to plan for your finances. And you also need to know about your finances to know what you can buy. But with setting some goals, and sticking to a plan, you should come to a good understanding of what you need to do.

And if you need any help, Slice will be by your side. Reach out if you need any help :)