How to set yourself up for life without buying property, Published on The Cusp, November 2017

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So you’re pretty savvy at saving, you don’t throw money around like you used to, and you manage to deposit a nice amount of your paycheque into savings each month, leaving you with a nice little nest egg to your name. Finance-wise, you have it all together, right? That is of course until someone asks about your living situation and you are forced to admit that you still live in a share house and the thought of being a landlord one day feels like a very far away dream. We feel you. Despite knowing what a high interest rate looks like and how much your super contributions are, it’s easy to feel like you’re lagging behind financially if you don’t have property or a mortgage to call your own.

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Comparing yourself to people around you who either own a property or are on the expressway to getting one can make you feel even more financially unstable. As old mate Teddy Roosevelt once said: comparison is the thief of joy. With these wise words in mind – and in the wake of countless Facebook posts about the housing market – we thought it was important to talk about the other ways to invest in your future that don’t involve a mortgage. As with all things adult, knowledge is power. We hope that sharing savvy investment schemes you may not have considered before will serve to remind you that there are other ways to make your money grow.

 

Term Deposits

A term deposit is basically a chunk of your money that is held with the bank for a certain period of time.

 

Term deposits are fairly straightforward and they can be set up online easily. Your principal is the original amount of your deposit. Once the time frame of your deposit ends we like to say it has reached maturity (anything else would be crass).

 

There are two key benefits of a term deposit. The first being that you are able to lock in on a fixed interest rate for the period of the term. That means if you agree to keep your money with the bank for a fixed return rate, that is the rate you will receive for the period you agreed to. The second major benefit of a term deposit is that you can’t touch it. Penalties apply if you want to opt out before the fixed term is up – obviously this means less temptation and a guaranteed profit from the interest rates.

 

Most banks have their own rules and regulations about the minimum amount you can invest. Westpac has term deposit options to fit nest eggs of all shapes and sizes, ranging from $5,000 for 1 through to 60 months.

 

High Interest Savings Accounts

Australia is blessed with a bounty of high interest rates on savings accounts and if you don’t believe us, just ask any Australian living and working in overseas in big cities like London. If you aren’t already taking advantage of this you need to get on board, stat!

 

You probably know how it works but let’s all refresh our memories: high interest rate savings accounts deliver you a percentage of your savings each month. Ideally, you have a savings account linked to your everyday bank account and you deposit money into it whenever you get paid. You may be so attuned to saving regularly that you haven’t properly clocked what a powerful investment tool a savings account is because, well, it’s so basic. Over time, high interest rates can be the extra cream, chocolate topping, sprinkles, and cherry on top of what you have already saved over the financial year. This in turn of course, helps to get you where you need to go, whether it be then moving your money into a long term deposit, putting your money into a larger investment, or making a huge withdrawal to head to the famous The Avocado Show where all your avocado on toast dreams can finally come true.

 

As an added bonus some banks even offer interest-based incentives on their savings accounts, such as Westpac’s Reward Saver account. The Westpac Reward Saver account grants bonus interest to savers who make no withdrawals from the account and deposit at least $50 into it each month. Not only does this offer you more than other transaction savings accounts, it gives you a reason to avoid temptation too.

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Superannuation

One of the most important ways that you can set yourself up for life without buying a property is learning to understand how to make your superannuation work for you. Superannuation can sometimes feel a bit like an urban legend that your future-self has to deal with. Despite clocking that 9.5% of your payslip each month, it is easy to lose sight of the fact that your super is actually one of your largest investments.

 

Lots of us have three or four super accounts floating around, but it’s actually super easy to get them consolidated. If you can’t remember what fund you had in your first job or if you have completely lost the account details you can use the handy SuperCheck tool to help find it. Out of sight may mean out of mind from your perspective, but not from your super fund: keeping each of these accounts open costs you a fee each month, which is an added drain on your retirement goals. Merging your super funds has the added benefits of reducing paperwork and making it easier to track your financial progress.

 

What’s more, you are going to have to get into the habit of regularly tracking your super so you have a clear idea of where future-you is headed. Try to allocate time in your financial schedule to check your account and familiarise yourself with your total, your growth, your fees, and how all of this correlates to where you are at in your financial timeline. You could alternatively decide to put your super conveniently located with your banking – so you have the luxury of being able to check your superannuation each time you log in to your online banking. If you have your super with BT Super For Life and you’re a Westpac customer, accessing your superannuation is as easy as managing your online banking. Setting up a BT Super For Life account with Westpac takes less than five minutes, and their SuperCheck will even help you locate all those lost funds you have floating around.

 

Familiarising yourself with your superannuation might seem a little intimidating at first but the more time you spend understanding it, the better you feel equipped to manage it. Plus, you might find that tracking your superannuation expectations might even spur you on to make contributions of your own, wouldn’t that be exciting.

 

Trading

All investments are known for being risky but none are perhaps as notoriously fickle as the stock market where you can swing easily between mega gains and losses. So why include it here? Well, despite its wild reputation, if you are looking to invest without the commitment of buying a house, the stock market can be a good alternative.. It might be seen as a little less traditional than buying a home, sure, and of course you don’t have a tangible purchase to prove your investment. However, in some ways the two investment strategies are similar in that their value and gain potential is reliant on external market factors.

 

The way the stock market works theoretically is fairly simple. Basically, when you buy a share, you are buying a portion of that company. When the business performs well and there is a market demand for shares in the company, the value of shares increases. So what you bought for $4 last month might be worth $5 or $6 next week.. Likewise, if the company isn’t performing and there isn’t a demand for buying shares, your $4 investment could drop to $3 or $2. The aim of the game is clearly to get out when you’re on top.

 

Hence, the tricky bit to navigating share investments comes down to place and time – where do you want to invest your cash and when do you want to buy or sell? Before buying any shares it is important to look at a company’s long term performance and get savvy on their current rating in the market. Not only will this empower your decision to invest or not it will also impact the longevity of your relationship with the company as a share-holder.

 

As with all things financial, there is jargon you will need to wrap your head around in order to properly understand how the system works. Basically, you, the person investing the money are the investor. The collective term for the shares you have with different companies is called your portfolio. Often you will hear people talk about diversifying their portfolio. This basically means buying shares with different companies to limit their chance of losses in the case of a crash or a dip in the market. A stock broker is the guy that buys and sells your shares for a nominal fee. Just like buying a home, buying and selling shares has associated costs that need to be factored in before making any snap decisions.

 

With so many alternatives available to home-ownership you do not need to feel guilty if mortgage-life is not on your radar right now, whether that is because you don’t have the financial security to support the dream or because you quite simply do not like the idea of being tied down to such a large investment. Whatever your reasoning, there are other ways to take control of your financial future and set yourself up for life without having to buy a property.