How to break up with debt and start saving for your dream digs

We’re big fans of living our best lives seven days a week, but when it comes to saving for a deposit, prepare to reign that in a little. Everyone’s lifestyles and budgets might differ, but if you’re ruthless, you’ll be surprised to see how fast the numbers stack up – especially if you’re doing it with a partner, family, or friend. For Haddow, she admits she spent big in her twenties, so saving for a deposit certainly had its challenges.

“I had $11,000 worth of credit card debt and almost nothing in the bank—I knew I had to turn things around—so, I moved home with my parents when I turned 30,” she explains. Haddow then dug deep doing what she calls a “power-save”—which meant putting away as much as she could during a 12-14-month period.

“During my 'power-save', I worked to a strict budget. After I deducted my essentials like bills, food and rent from how much I made each month, I had about $150 to spend per week on things like makeup, haircuts, coffee, going for dinner or a drink with a friend and the rest would go into savings. It would depend on how I spent that $150 in that week. If my budget allowed it, I’d still brunch, I just couldn’t brunch all the time. I reduced my spending by ditching my gym membership and went running on the streets instead, plus I dyed my peroxide blonde hair back to brown which meant fewer trips to the hairdresser,” she explains.

Haddow also says it’s not just about reducing what you spend, but increasing the money you make if you can. “I also had a side hustle. I wrote freelance articles on top of my job so I had extra money coming through the door.“

Haddow understands that saving for that lump sum might seem like a daunting task, but once she saw the price of entry-level properties and understood what the deposit was, it soon felt like she could pull it off. “The aim was to make a smart purchase that would increase in value so I could then, hopefully, buy something bigger and better in time,” she says.

In an era where property prices have risen faster than our wages, saving a 20% deposit is the goal but for some first home buyers, a 5% to 10% deposit is the reality—and that’s where Lenders’ Mortgage Insurance (LMI) comes in. LMI is a premium banks charge to protect the risk they take on you when you have a deposit of less than 20%. It’s a buffer in the instance you default—like if you’ve had one too many smashed avos and you’re unable to make your loan repayments.

The amount you’re charged for LMI depends on how small your deposit is and how expensive the property is. “For example, if you have 15% and you want to buy a $400,000 property, your LMI could be a few thousand dollars. If you only have 8% and you want to buy a $600,000 home, it could be a lot more,” explains Haddow. “There are loads of LMI calculators out there to help you do your research and avoid any surprises."