Whenever the topic of financial planning is raised, most people think of planning for their 'golden years' of retirement and this is a perfectly valid point.
It is interesting to observe the difficulty that some people have in formulating and implementing a financial plan at this stage of their life - particularly if they have not had any financial discipline earlier!
Once the process of financial planning is understood and implemented, those who are interested in their future are much better prepared for the journey ahead. It therefore makes sense to start this pattern early on in life, and the government's First Home Saver Account scheme is a good place to begin.
Not surprisingly, this scheme has not achieved universal acceptance among aspiring home owners - clearly the attraction of instant gratification outweighs the more sensible approach of saving longer and therefore paying less interest on your mortgage.
For those who haven't heard of a First Home Saver Account, it works like this:
- You save at least $1000 a year into a special First Home Saver Account (not available through all banks)
- The government supplements your savings at a rate of 17% a year (up to a maximum of $6000 - so if you save $6000, the government gives you $1020, tax free!)
- You only pay 15% tax on the interest you earn (normally it would be 30%)
- After a minimum four years of this, you can withdraw the lump sum (with $4080 at least from the government) and use it as a deposit for your first house.
After your four years is up (assuming you only put in enough to get the maximum government contribution), you would have a little over $30,000 - more than enough for a 10% deposit on a modest house.
But more importantly, you will have laid the foundation for a responsible attitude to planning your financial future, and this will be worth a lot more to you in the long-term!
Taking a long term view is a better strategy as long as it is part of a well-thought out plan. You may want to achieve certain long-term goals, but if you have not subjected yourself to the discipline of careful planning and taking action, you are unlikely to achieve anything worthwhile.
While you are planning to buy your first house is an excellent time to plan the rest of your financial life. Enlisting professional assistance to make sure that your plan is workable and headed for success is the first step. Make sure it is written down, easy to understand, and that the required actions are clear.
You need to be held accountable for implementing your plan as well - at least if you want a chance at success. Regular follow-up needs to be an integrated feature of your plan.
So, like many things in life, the real value is in the journey and not the destination.