Ah, the great news piece of our time, with wealthy property millionaires suggesting restraint on one side and a generation of overly indulgent kids on the other side creating a straw man argument to quickly hit back.
The dishonest, ‘get views and revenue at the cost of journalistic integrity’ Australian media quickly picks up this straw man and runs with it to make a quick buck.
For anyone for which the analogy flew right over their heads or for the media that play intentionally ignorant, let me distil it down in a way that is a little more direct
Smashed Avo = An analogy for multiple, excessive and unnecessary indulgences that when combined add up to considerable costs over time. If forgone, would allow one to save enough to buy a house.
You see it is an analogy, most of us learnt about these in high school, right?
This should be something that high school educated people understand. Let alone the University degree qualifications and years or decades of experience a journalist has when they write an article like that linked above. Not to mention the multiple editorial checks that an article must go through to be published on a major news website.
Luckily for those millennials now feeling a sense of futility about saving for a home deposit, Pat the Shuffler is here to be honest. This is because Pat the Shuffler actually writes this shit for fun and not just to extract the maximum page views possible.
Those who still choose to ignore the opinion of Pat the Shuffler, they do so at their potential own demise. However Pat the Shuffler is still here to show you that you can indeed save enough for a house deposit. That’s because I don’t like the lies and misinformation that do nothing to help those that so desperately just want to reach their goals in life.
Some people who talk to me say things like
“Pat, you earn a fuck load, why do you bother saving $4 on coffee?”
The answer is simple, I actually understand how small purchases add up to be enormous over time. Those familiar with Mr Money Mustache may be familiar with his article “A millionaire is made 10 bucks at a time” which is a nice distillation of the concept and part inspiration for this post. One $4 coffee really isn’t much, but if I thought that way about all small purchases I would spend far more than I do.
Here is how much each of your habits costs an aspiring home owning couple over a relatively short deposit saving time frame such as three years
So the truth is finally revealed for all to see, smashed avos really do get in the way of home ownership. However these people then may respond with something like
“But you don’t want to deprive yourself”
“You only live once”
“That sounds like some extreme frugality”
Lucky for all of the naysayers I have some previously prepared responses to this extremely flawed logic as well! This is down to a simple misunderstanding about what makes us happy and hedonic adaptation. Before writing any angry comments below you must read these 2 posts.
The real math of Smashed Avo and home ownership
Again I would like to emphasise it is not my suggestion you do any of this. I am simply showing it is possible for those who are intent on doing so. I will lay out the math for a couple wanting to buy a family home. A single buying a smaller place would have a slightly longer saving time frame.
The median house price in Sydney is $1,151,565. However if you are a first home buyer, you have no business buying the median house. You need to do what my parents did and what the vast majority of current home owners have done, that is buy well below the median and upgrade later. Suggesting otherwise is being awfully entitled.
This means a house much further out than you would ideally like or an apartment. Remember life isn’t about impressing people, it is about making good decisions to do the best you can for yourself . A quick perusal of the realestate.com.au invest page shows large apartments that would easily house a young family can get down to $700,000 in the city’s west.
A lot of those straw man arguments like to shout the 20% deposit requirement. This is baloney, I do not know a single first home buyer that saved a 20% deposit. Nor do I know of a property expert that suggests you should wait until you save a 20% deposit. I will instead work with a 10% deposit as a compromise between the minimum 5% requirement and the no LMI 20% requirement . So that is $70k
Stamp Duty in NSW on a $700,000 property will come to $10,767 (Thanks to the new stamp duty partial exemption). Along with a few other fees associated with purchasing we can round this up to about $15,000.
So our aspiring young home owners need $85,000 to get the deposit on their first home.
This may seem quite daunting, but with a little hard work and will power, that $85k will melt away.
I think this can be achieved in 3 years by a suitably motivated couple both working on any full time Australian incomes*
So each of the couple need to successfully sock away $14,167 per year. This means that they each need to make only 2 smashed avo value ($20) decisions each day. Some of these are completely automatic like choosing to flat share and living near work to forgo the costs of car ownership. Others need to be thought about, like making all of your own meals, and choosing to spend your free time at a better venue than the shopping centre.
Australia’s minimum wage of $18.29 per hour is only $624 per week after tax, so this may sound impossible. But our young home owner aspiring couple are suitably motivated and realise it is a dog eat dog world out there, whether rightly or wrongly. So they get a second job, do some overtime, or get a side hustle. This is again what my parents did, and what I do. With an extra 8 hours per week at the minimum wage, our aspiring home owners now earn $1440 per week together after tax!
A minimum wage earners home deposit saving budget
Those with keen math skills will note that this is enough to save over $100,000 in 3 years! Holy shit, it turns out there is over $20,000 of extra fat in my calculations for financial mistakes, emergencies, presents and even more unnecessary luxury. If even a couple of minimum wage earners doing a tiny amount of overtime can do it, then surely comparatively wealthy people can too!
Now that is settled we can all choose to move to Brisbane, because even though it is possible to save a deposit for a Sydney home, it doesn’t mean it is a good choice to actually do so.
For a bit of fun play The Wealthy Bogan’s fun deposit saving android App “Smash the Avacado”
Shuffling away to another part of the country (eventually)
Pat the Shuffler
*If you don’t have a full time job or at the very least equivalent full time hours, you need to solve that problem first before considering home ownership.