If I cannot even afford to pay rent how am I supposed to think about saving for an investment property?
For most millennials – many are unable to recognise the importance of having a financial safety net. Whether it is in the form of shares, a considerable cushion in the bank to fall back on or as an investment property, millennials tend to fight to anticipate future financial struggles – getting lost with living in the moment.
The dream of being financially free lies in the hearts of most millennials. Sipping pina coladas on a tropical beach for the rest of their lives is the only thing that comes to mind. It’s not motivating these individuals that cause conflict, it is the inability to foresee how they are going to build their wealth that stops most millennials from setting financial goals in the first place.
So with future financial struggles not being anticipated and financial freedom so far out of sight, how are millennials expected to adopt a mindset that encompasses the importance of saving to create financial investments?
Like me, many individuals around their mid-20s earn a wage. Working a job they’re not interested in, 10 hours a day five days a week, just to get by. More than 50% of their pay will go into their rent and the rest goes into groceries, entertainment, transport or potentially even paying off their first car – anything left goes to keeping their partner at bay.
Realistically, they might have a couple of hundred dollars a week spare that they can save. All of a sudden, their new car needs four new tyres and that six month Europe trip they have been saving for, for the last year becomes a little more out of reach. (That’s where all my money goes)
So, how can we even begin to rationalise saving for our first investment property?
Post finishing high school, my parents encouraged me not to take time off – allowing me to get ahead of the pack and to go straight to university. Having chosen a business degree, I landed a retail job on the side – finding a passion in selling vintage clothing. Working my way up over the course of 3 years to be offered a partnering position as a vintage clothing wholesaler, I was still struggling to even buy groceries after paying my rent. Although the hours were almost illegally long and the pay was not financially viable, I used the opportunities of working on the front line of one of Sydney’s biggest vintage clothing wholesalers to start an online retail store.
The ability to recognise the opportunities available and the willingness to make sacrifices educated me to always anticipate future financial struggles.
When I was 12 years old, I would always say to my parents that I could not see myself living past the age of 22. Now, at 23 years old I still struggle to see myself at the age of 50. It is this mentality and the desire to solely live and spend in the moment that is hindering our generations from really building a mindset that focuses on the importance of saving to acquire financial investments.
A true story – Two individuals have worked on the same construction site for the past four years. Both share a very similar income and both are 25 years old. The first is a crane driver. He has just put down the deposit for his 3rd investment property. Combined, his properties are valued at $1.1 million and generate $1,350 in rental income p/w – he still lives at home with his parents. The second, a project manager, has just finished saving and has put down a deposit on his first home worth $1.2 million which he is going to move into as his principal place of residence. Which one is better off?
“The most important word in the world of money is cash flow. The second most important word is leverage.” – Rich Dad, Poor Dad (Robert T. Kiyosaki)
“The home you live in is not an asset it is a liability. An asset is something you invest in that generates income” – Zah Azmi, CEO – Luxland Investments
Do millennials share a mindset that property in Sydney is so expensive and out of sight that why bother even trying to save? Why not wait for our parents to pass and inherit as much as we can? Is that the only way we will own a property in Australia’s major capital cities? With the median house price in Sydney reaching $1.1million at the end of 2016, (Domain) it’s not hard to understand how this mentality originated.
CHANGE YOUR MINDSET!
Financial literacy is not taught in school. Therefore, the importance of acquiring the financial security or finding the right median to do so is often a struggle for millennials. They like fast cash and get caught up in the trends. By investing in property it’s not a way to get rich quick, it’s a way to get rich guaranteed. – Luxland Investments.
Forget Bitcoins! There will always be someone who challenges what you believe. They will say that the property market will eventually crash and you will lose on your initial investment. Humans will always need food, water and shelter.
“You can’t live under a bitcoin.” – Marc Fattore, General Manager – Luxland Investments
Trends will come and go, but no investment offers the guaranteed successes and financial security like real estate. It’s not timing the market, it’s time in the market.
Build a Specific, Measurable, Attainable, Relevant and Time-bound plan! (SMART) – you don’t want to be eating two-minute noodles for the next ten years.