Many first home buyers think buying their first home will tie them down financially to the point where travel and luxury items will be unaffordable. That’s simply not the case for many young Aussies who have managed to get into the property market and manage their cash flow in a way that gives you the same financial freedoms you had before buying the house.
Here are a few tips on how to buy a property, manage your money and travel as much as you want!
Reduce mortgage repayments with a buffer in the onset account.
If you’re worried about high mortgage repayments, factor in from the beginning a chunk of your savings to go into the offset account to help reduce your mortgage repayments. This means taking a bit out of your deposit payment for this, which will reduce the amount you can borrow overall, but at the end you’ll be in a situation where you aren’t forking out big bucks from your pay check each week to cover the mortgage.
In time, your property will grow in value and you can refinance to pull the extra value out of it in cash. You can then use some of this as a buffer for the next period of time and spend the remainder on another investment or some luxuries.
Rent out your rooms.
Renting out your spare rooms is a smart way to reduce your mortgage repayments when you’re home and away.
Essentially, your housemates are paying off your mortgage for you, allowing you the freedom of a little extra cash. Having somebody at home will also provide extra security when you’re away jet-setting.
Rent out your house and move into a cheaper rental.
Renting your house out and moving into a cheaper rental will save you big bucks. This option can reduce your mortgage repayments, reduce your taxable income, and generate passive income for you to allow you the freedom to travel as you please.
This seems like an obvious solution and having a budget in place is crucial to being able to comfortably afford your mortgage repayments regardless of travel. These additional cut-backs are just an extension of this to allow you the freedom to enjoy your holidays without the stress of debt. You may notice that many people who travel regularly are very frugal when they are at home.
Create a budget, prioritise your spending and stick to a regular savings plan. Instead of going out for dinner with your friends, invite them over for a home-cooked meal, make your lunch daily, limit expensive purchases like clothing and flashy new toys, and set monthly savings goals. You will soon start to see the benefits in your hip pocket and feel more in control of your spending.
Choose a career that allows you to work wherever you are.
Having a career that allows you the flexibility to work online and conference-call in when needed, is a massive advantage when it comes to living the life you want, whilst still having a steady income to support you along the way. These jobs might be tricky to come by, but they are definitely out there.
They are also a great option if you decide to settle and find a local job, you’ll have a solid track record of employment to rely on.
Work and travel.
In most countries, you can secure a short-term working Visa before you turn 31. This opportunity allows you to extend your travels a little longer and work easy jobs in bars or on farms picking fruit for a few weeks of the season.
This work often pays cash in hand and will boost your holiday budget when you need it. Not to mention the great friends you’ll meet along the way!
Purchase a home with someone else.
If you want to purchase a $400,000 home but only want to spend $200,000, there are still options out there for you. You can co-purchase the property with a family member or friend, or join a shared equity scheme with the Australian Government.
These schemes allow you to own a portion of the property, which means living in a better area with lower mortgage repayments. This option isn’t available for everybody, but it is worth a look if you want to limit your debt.
Get savvy on travel hacks.
There are a number of ways to save money while you’re on the road. A great option is to join online communities that offer cheap (or sometimes even free!) accommodation. Check out couchsurfing.com. Similar websites like Air BnB have some fantastically located apartments and even single rooms for rent in areas close to major cities that would otherwise only offer expensive hotel rooms.
You’ll also get to stay with locals and find all of the best spots that aren’t in your copy of Lonely Planet.
Alternative travel means.
Traveling around internally using taxis and planes can blow the budget out and cut your holiday short. Make sure you check out alternative options such as trains, buses, rickshaw's and TukTuk's for cheap ways to get around.
Be a bargain hunter.
You may be surprised to find that there can be massive differences in price between hotels, trips and flights on different websites. Make sure you shop around and secure the best price available at the time. If you’re thinking about going on holidays, sign up to alerts from airlines and travel websites, they will let you know when they’ve got cheap deals coming up.
Voucher websites such as Cudo and Scoopon also offer daily travel deals in a number of exotic locations, often with luxury hotels at cheaper rates, airfares, airport transfers, meals and massages thrown in. These packages can be a great option for a quick luxury holiday on a budget.
Reduce your investment property mortgage repayments to interest only.
With interest only repayments, you’re only ever paying off the interest on the mortgage and not any of the actual mortgage amount itself (i.e. the principal). It’s somewhat of an old-school mentality to chip away at your mortgage until it’s paid off. However, have you heard of good debt and bad debt? Look at your mortgage as good debt as it allows you to own a property that goes up in value over time. So the value goes up, but the mortgage stays the same while you pay the minimum repayments.
It’s a strategy used by many investors and will reduce your repayments so you can afford to travel.
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