Been thinking about this RNZ article I came across:
How many years would you have to skip coffee to save enough to buy a house?
The audience of the article is ostensibly folks who have yet to buy a house, but
are planning for it. They heard that maybe, through small, daily, personal
sacrifices they could save enough to get their first home. I am not sure if this is
a commonly held belief: do folks think the only thing preventing our first home is
your daily coffee? It feels like a notion some website can create whole-cloth and
people assume we are all discussing it in a corner of social media they haven’t
seen.
Anyway, this is the math they give:
...if you currently buy a coffee a day for $5.50 and decide to save the money
instead, you could save $2007.50 a year.
If you could do that every year, with a 5 percent return each year, you’d have
$26,000 after 10 years, $69,000 after 20 years and $138,000 after 30 years.
At the moment, a typical first-home deposit is about $140,000 (or roughly
25,450 coffees if you paid $5.50 each).
If you were having breakfast at a café once a week and saving $20, giving that
up could save $1040 a year or $70,777 after 30 years.
In other words, if you didn’t buy coffee for 30 years, and had a pretty good
return rate on your savings, then you’d get halfway to your first
deposit.
But no worries, the realtors are quick to shoot this down.
Liz Koh, founder of Enrich Retirement, said the problem for many people trying
to save a house deposit over a long period of time was that house prices
increased faster than their savings.
“By the time you have spent a few years accumulating the deposit, houses would
have tripled in price. However, it is a still a good idea to save and it’s an
even better idea to cut down your outgoings so you can borrow more.”
Sidenote: I absolutely hate the way realtors and money people talk. It reminds
me of funeral directors, where there is an aversion or taboo to the subject they
are discussing and so cannot say it directly, and so will create new terms to
discuss it indirectly. How we get the word “cremains”, or here the term
“outgoings”. Why are finance folks so averse to their subject though? Is it some
guilt they feel?
Anyway, this realtor says that it doesn’t matter how much you save cos the rate
of saving isn’t going to ever match the rate of houses going up. But, no matter,
you should do it and should even cut back even more. Just sit in in an austere
stillness until you can borrow enough to maybe buy 30 to 50 years in the
future.
But actually, her advice is even worse:
“A better approach is to buy something small and run down and add value to it,
then sell and do the same thing over again,” Koh said.
“Part of the problem is that first-home buyers seem to want to buy their
forever home from the outset, and it’s not always practical or affordable to do
that. Investing in property is a great way to make money, and a good lesson to
teach is the lesson of leverage and how you can make that work for you over time
to build wealth. It just requires some smart thinking about how to buy the first
property.”
In other words: The problem with people trying to buy a home is that they are
trying to buy a home. They should instead become house-flippers or slum-lords.
Their tip for first-time home buyers is to buy something they cannot imagine living
in, with the promise it will be leverage for that first home. The first rungs of
the property ladder are buried underground.
It’s crazy to me that this is what she’s saying, in a single quote:
-
it’s imposible to save up enough to ever buy a home
you should still cut your spendings
you should also be buying more property
What is the property they are referring to here? An empty lot? A slum? The
implicit subtext is you are buying something to quickly sell it, but to whom?
The concept of saving enough to buy a home you can grow old in, to not see it as
investment but just a home is just absurd to them.
The worst is at the end, this other realtor:
Dean Anderson, founder of Kernel Wealth, said while house prices had
historically gone up faster than savings for many people, he was not as sure it
would continue into the future.
“The metrics supporting house prices are at their limits.”
He said someone who was on a lower income and in debt could pay that off more
quickly by cutting down on small luxuries like a cup of coffee.
If you have a loan of $20,000 on a 12 percent interest rate that you’re paying
off at $306 a fortnight, you could have 156 weeks left to run on the loan. If you
topped up that payment by $20 a week, you could clear the debt 20 weeks
early.
“metrics at their limits”, ”..to run on the loan”, “topped up the payment”,
“clear the debt”. An aesthetically disgusting vocabulary.
And this guy’s advice is the same as the other person: stop buying coffee. It is
a luxury–a small one, but still a luxury.
He continues though:
“However, when past that it is about choice and trade-off of value. A daily cup
of coffee to me is worth it, that’s because I know I can derive greater value by
focusing on my work, building a business, building my salary, which will be far
more impactful than the cost of the coffee,” he said.
What is he talking about? Other people should not buy coffee to top up their
loan repayments, but for him the coffee helps him focus on his grind and building
his salary? Coffee is an investment in his hustler mentality.
And he goes on:
‘Thinking aloud, and even based on chats we’ve had internally in the last week,
if I was starting out today I wouldn’t be worried about the coffee. I’d be doing
everything I can to figure out how to protect my future and income prospects from
being disrupted by AI.’
The conclusion: stop worrying about houses and coffee, be freaked out about the
robots.
“Based on internal chats we’ve had this week” is an incredible idiot phrase and
this man sounds coked out. Like he gets a call from RNZ asking this coffee question
and his answer is, “Sure, yah, if you can cut down coffee you should, get outta
debt. Me, coffee is a key to success, I ain’t going to cut i t because it brings me
more money through proper mindeset. But anyway, just spitballing, AI is going to
disrupt everything, why are we talking coffee and houses? You should be preparing
for that. Anyway i gotta go!” THAT is his first-time home-buying advice. How can
you read this article as anything but hopeless?