The past 18 months of lockdowns gave me the opportunity to spend more time thinking about my financial future, but it didn’t give me all that much hope.
Every year, my dad asks me if I’ve read the copy of The Barefoot Investor he got me as a gift when I was younger.
Every year, without fail, I dodge the question. This year will be no different. Well, maybe a little different. Like many young Australians, the last 18 months of lockdowns made it a little easier to rein in my spending and pay more attention to where my money was going.
After spending a little too much money on quarantine distractions during 2020, I was determined to make the most of Sydney’s most-recent winter in lockdown. One of the many privileges of working in the media industry has been a relatively smooth transition towards remote work during Sydney’s various stages of lockdown, so why not make the most of it?
The opportunity to get my finances in order, work down outstanding BNPL debt and replenish the bite that my last overseas holiday took out of my savings has been a rare silver lining on an otherwise dark cloud. I even had the opportunity to experiment with cryptocurrencies. I still don’t know if I recommend it.
But the last few months of being in control of my finances haven’t given me much hope for the future. If anything, they’ve made the advantages and disadvantages faced by my generation starker than ever.
With little to do, and even less to spend money on, I could not have asked for better circumstances to supercharge my monthly savings. Where I’d typically save around 10 per cent of my monthly income, Sydney’s latest lockdown sometimes saw me save as much as triple that.
And yet, when I look at my long-term financial goals, it still feels like the odds are stacked against me. Even saving triple what I ordinarily would each month, I don’t feel any closer to major financial milestones like a deposit on a house.
This is probably because I’m not.
Over the past 18 months, I’ve saved a lot more money than usual — but my savings haven’t grown by nearly as much as Sydney’s median house prices have.
Even in the ideal savings-friendly circumstances of lockdown and even if I was to consider getting the federal government’s permission to pillaging my own superannuation fund (which I’m not), saving up the 20 or so per cent of $1.3 million that I’d need for a house deposit would require me to live this way for another 13.5 years.
It will take approximately half of my current age to save for a deposit so that I may begin the process of buying a house and paying off a mortgage over another few decades. And that’s assuming house prices don’t continue to rise, of course, which they probably will because that’s been the trend for the last 25 years.
Now, I know what you’re thinking. You’re just not looking in the right places. You just need to adjust your expectations. Have you considered rentvesting in the regional suburbs? I’ve heard it all before, and I don’t want to spend too much time rephrasing the same old song and dance.
These lines of argument assert that every property purchase should conform to the logic and language of asset investment, ignoring the fact that this is often not the case. For many first home buyers, a house is something you buy because you want somewhere to live.
Regional homes may in fact be more affordable for first home buyers. However, moving to the regions is not a workable solution for many because we have built our society around urbanised metropolitan infrastructure.
Isolating yourself from friends, family and your local community by moving to a rural or regional area with significantly less job opportunities for the decades-long commitment of paying off a mortgage is not a particularly appealing pathway to property ownership for many young people for obvious reasons. Rentvesting seems to work for some people, but it can easily go awry and isn’t a good fit for many more.
In my opinion, rhetoric suggesting that these younger generations ought to get over themselves and put in the hard yards to earn their spot on the property ladder is as fundamentally dishonest and hollow as any other meritocracy.
Previous generations did not have to make these kinds of trade-offs, and younger generations are being asked to because they were born a few decades too late or to the wrong social economic class.
If we’re being honest, the only thing that’s ever made my ability to budget and save money easier has been leaving a job that did not pay me enough for one that paid me more. It’s that simple. There’s no magical or radical shortcuts that have helped me find any sense of financial stability.
When I was paid less, money was a thing I got stressed about. When I got paid more, that stopped because I had more money. The literal reality couldn’t be simpler.
I understand that this may not be particularly useful advice to some, but I can at least say it’s more honest than the myths we make about young people and home ownership.
As a young person, the one thing I should be able to count on is time. I’ve got plenty of years left in the workforce. Plenty of years to get smarter about my investments and a healthy amount of compound interest to tilt the odds in my favour.
Unfortunately, my disillusionment about these so-called immutable forces of wealth creation could not be higher than it is right now.
Lockdown gave me the chance to get better and smarter about how I manage my money, but the more I spend looking at my bank account, the less I like what I see.
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Reproduced from nestegg