Lack of discipline hitting property dreams

Lack of discipline hitting property dreams

Posted on Friday, January 16 2015 at 10:41 AM

Most property investors know that if you want to play the game right, saving up some cash is going to have to come into play somewhere along the line.

However, a recent survey of Australians’ savings
intentions, undertaken by ME Bank, has found that a lack of money discipline is
keeping many Australian households from realising their financial goals.

According to the figures, about 59 per cent of
Aussie households don’t consistently set a budget and 41 per cent don’t
regularly stick to one.

What’s more, only 38 per cent of Australian
households kept written or electronic records of their monthly expenses in the
past six months – information that builds realistic and effective budget plans.

“Good savings habits require commitment to
detail and discipline,” ME Bank’s Nicolas Emery says.

“But it’s easy to resolve: you just need to
track the real costs of your household expenses, set a realistic budget and
commit to every single detail, consistently.”

In addition to budgeting discipline going awry,
about 46 per cent of Australian households reported they were credit card
‘revolvers’, never or rarely paying off their debt in full; and almost 20 per
cent failed to consistently pay off their household bills on time.

“Real problems start to occur when you get stuck
in a roundabout of not paying your credit card or bills on time,” Emery says.

“We strongly advise anyone struggling with
credit card debt after Christmas, or any time of the year, to address the issue
as soon as possible.

“Consolidating debts… can remove you from the
interest payment roundabout. Once you’re in a position to start saving,
consider making automated deposits into a high-interest savings account or term
deposit to keep you on track.”

Perhaps not too surprisingly, younger generations are less likely to follow good habits
– 72 per cent of gen-Y didn’t or rarely kept a record of monthly expenses, and
67 per cent didn’t or rarely set a weekly or monthly budget.

Despite our record-low interest rates, people’s
financial goals infer a somewhat cautionary or conservative approach, with
three out of the top four financial goals related to paying off debt.

These included ‘paying off a mortgage and/or
debt as fast as possible’ and ‘saving for a rainy day’.  

Investors are more confident buying an
investment property this year than those saving enough to buy a property to
live in.

Seven per cent of respondents expect to pay off
their mortgage this year, while 14 per cent of gen-Y and 26 per cent of gen-X
expect to reach their goal of buying a home (compared to 18 per cent overall).
Forty-one per cent expect to reach their goal of buying an investment property.

Apparently we’re using a range of savings
strategies, although a manual savings method was the most popular approach.
Forty-seven per cent transfer money to a savings account when spare funds are
present, 22 per cent set up an automatic transfer to a savings account and 21per
cent pool money into a savings account, transferring an allowance to a
transaction account. Meanwhile, 17 per cent keep savings in accounts with
withdrawal restrictions (i.e. term deposits) and 16 per cent add funds to a
home loan offset account.

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