How To Pay Off Debt & Save a Deposit

One of the hardest things as an investor is paying off debt and saving your deposit. When you don’t already have those income generating assets it can be a really difficult process to do.

But there are some tips that can help you along that journey.

0:00 – Introduction
1:30 – Simon’s Saving Story
4:25 – #1: Get Realistic With Your Situation and Set Goals
5:27 – #2: Pay Yourself First
7:32 – #3: Reduce Expenses or Keep Them Low
10:50 – #4: Make It a Habit
13:33 – #5: Increase Your Income
16:50 – #6: Delay Gratification
17:47 – 2 Years Ago
21:45 – #7: You Have To Sacrifice
24:10 – It Gets Easier As Time Goes On

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one of the hardest journeys as an investor is actually paying off your debt if you’ve acquired debt and then going ahead and saving your deposit when you don’t already have those income generating assets it can be a really difficult process to do but there are some things that can help you along that journey some tips that both myself and simon have applied to really tackle this in our own lives and today we want to share those with you so hey simon thanks for coming on today no worries how you doing man yeah really good so in this we’re gonna look at each of our situations so for simon he was able to purchase three properties in 18 months which is a huge achievement and he saved the deposits for his first two investment properties himself so really diligently saved over a number of years and for me i found myself in a situation where i went through a separation business went through a downturn i ended up in a whole bunch of debt like crippling levels of debt and i’ve been able to pay off tens of thousands of dollars worth of debt in the last couple of years and so i’ll be sharing my examples on paying off debt and you know being in a really bad debt situation and simon will share his examples of not being in that bad situation but actually the next step which is saving the deposit and going ahead with that so simon do you want to start with your story when you decided to start saving your deposit and what steps you put into place in the beginning yeah so i really only started about three and a half years ago um actually earning enough of an income where i can really save a lot so i moved up to the sunshine coast from sydney at the beginning of 2017 and um that was the first time that i had had a full-time income prior to that i was at university or basically just around and surfing but just living up living the life to be honest and um i did always have really good saving and spending habits which was something that was incorporated from my parents from a super young age basically from the first job that i got they always encouraged me to save 10 to 20 cents out of every single dollar that i earned so that was something that i always did and for somebody that never earned a strong income but still wanted to travel and go out with friends and and have those choices i needed to when when i was only earning a little bit of income i still needed to make sure that i was saving a bit of money so i could enjoy my life so i already had those really good budgeting and savings habits but then when i came up here and i finally started to earn a good income i still maintain the same spending habits and saving habits that i had so even though my income had dramatically increased my expenses and my lifestyle stayed relatively similar which was one of the biggest things for me so creating that budget creating those saving and spending habits is super important um it’s just not going to do it itself like it just really isn’t like you need to sacrifice and you need to put these little things that stuck in place but it really enables you to get to where you want to be a lot faster and it’s definitely allowed me to do that and you know even as my incomes consistently increase nowadays i like to buy myself a little toy here or there because my income kind of increased a fair bit like the other week i just bought myself a little moped scooter to cruise down to the beach with because my house is just around the corner from the beach i don’t want to have to drive um and you know but that’s completely fine but prior to that i was so regimented and so strict with my budget minimizing my expenses in my life you know never use after pay i would i don’t have credit cards i would never finance a car loan and i would you know not enjoy all the luxuries of life to make sure that i can enjoy those luxuries in life for a much longer time than the average person yeah so what i’m going to do now there’s so many good tips in there and little things that you do is that i’m going to break them down into the each of their components and then we’ll riff off of those and talk about those so i think the first thing to start out there is to actually like get realistic with your situation so paying off debt and saving a deposit are actually i guess extremely similar things to do paying off debt i think is harder because you’ve got that negative effect of the interest saving a deposit that’s bad saving deposits a bit more exciting because you’ve got you know some interest coming in but basically they’re the same in that you’re taking money from your everyday life and you’re putting it somewhere whether to pay off debt or you’re putting into a savings account to go towards your investment so the first thing i think is to i guess set your goals and get realistic of what they are so if you’ve got debt then that means writing down every single line item of debt that you have i know that was a big step for me to just say okay i’m not going to be in denial anymore i’m going to sit down and write down every single debt that i have tally them up and just go oh what have i done when it comes to saving a deposit it’s a bit more exciting than that you can say okay what what sort of property do i want to buy how much do i want to spend and what percentage do i need of that whether it be 20 10 you can kind of work out how much you need so doing that and then simon what you talked about next is just paying yourself first and having a set amount of money go away each and every pay cycle that goes towards paying off debt or goes towards actually investing and so simon i think something you said that was really good was when you weren’t earning a lot of money you still put money aside it wasn’t for investing it was for traveling and stuff like that but you had that habit in place of paying yourself first and i think paying yourself first is definitely a habit and definitely one that allows you to pay off debt and allows you to save a deposit so much easier and then as your income increases you pay yourself first more money would you agree 100 you know always i think it’s best to work it out as a percentage of your income like what my parents taught me as opposed to going a set amount work it out as a percentage you know how much it you know you’ve got to be realistic with this so how much your expenses in life because you need to pay your expenses you know you can’t live for free and then you know understanding you know what sort of discretionary spending do i do i have on average per week what sort of percentage of my income is that and then going all right well you know there’s all of this surplus income let’s make sure that we do that what sort of percentage is that and then you know just increasing that percentage because it’s unlikely that your expenses are going to increase dramatically um but you know that that income can increase a little easier yeah and so for me i’ve definitely done that running a business my income is a bit more sporadic i’m not paid every single week for night or month the exact same amount but i do percentages so percentage of revenue that comes into the business percentage goes towards you know paying the tax that i have to pay in gst percentage goes towards paying off debt which will eventually save towards my deposit as well so i have that percentage then i have to live off the rest the next tip um that kind of goes in line with this is to either drastically reduce your expenses or keep your expenses extremely low so as you said you’re a uni student living off uni student money and then when you got a full-time job you continued to live like a uni student in a lot of ways so you kept your expenses really low for myself i dramatically reduced the expenses in my life cut everything to the bone so everything from phone bills to internet to even moving back in with family to save on rent so that i could pay off my debt faster there’s a lot of different ways that you can do that but when it comes to paying yourself first i’m paying myself first then i’ve got a budget which i’m living off and trying to live off frugally and then any extra money that i have left over if the business does really well or if you get a bonus or you’ve got some extra income left over that i also use to pay off debt or i would use to save a deposit yeah and that’s one of the big things that i’ve done with my life now that i do get paid profit share and dividends from the business so the way that i’ve set up my my life is uh my income pays for everything everything in my life my mortgages my insurances rates water living expenses absolutely everything my discretionary spending um so just my weekly fund money um and then a hundred percent of the dividends that i get which is about 50 of my income goes to investing and goes to paying off debt or goes to savings so as soon as i get paid um my my dividend which is just a bulk payment you know once a month or once a quarter bang straight into a savings account because i know that my income my wage supports my lifestyle all of my expenses which is great so that’s been a really positive way for myself yeah and this is one of the great things about paying yourself first like you’re doing it in a different way rather than just a set percentage of your income each and every pay cycle it’s like your income is set up in two portions you’ve got your salary and then you’ve got your bonuses or dividends and so you can but you’re already paying yourself first because you’ve decided i’m going to live off this anything that comes in is going to go towards saving and what is really cool about that is you don’t feel like you’re missing out you don’t feel like it’s really hard to save when you can actually focus your mind on things it’s so powerful and it’s so good so to focus your mind on saying okay this is my income which is just for simon his salary i’m going to live off this for me with my business i set myself a budget okay this is my income i’m going to live off this anything i earn above that doesn’t affect my lifestyle that’s going towards paying off debt so both you and i taking similar approaches that’s our life and then we focus on okay how can we live the best life possible with this money that we have and then when we get those extra money or i get extra income from my business or you get the dividends it goes towards saving but it just feels like it happens automatically and that it’s not negatively affecting our lives or our lifestyle in any way it doesn’t feel like it anyway i think this is because we have created the habit we have you know it is so natural for us to do that now that the mindset that we have around budgeting and saving or paying off debt is exactly what we’ve just explained so it doesn’t feel like a negative impact at all doesn’t feel like you’re sacrificing anything because we’ve created those positive habits over years and years and years of practice so yeah i think really creating those those um budgeting and saving habits is super important uh because it’s going to take a while to get there especially through property yeah and that’s the thing i think looking at them as habits as well that was one of the problems i had with budgeting in the past and trying to do this in the past was i thought i just thought i was really bad at budgeting i tried all these different types of budgets the envelope method i tried tracking it on an app on my phone all of this sort of stuff and i really struggled with it and i just thought i’m just not good at budgeting and i kind of gave up along the way and then i started to look at budgeting differently and to say okay budgeting is actually a it’s a habit and it’s a skill and it’s something that you can get better at over time and so rather than saying am i good at budgeting or bad at budgeting i actually applied myself and said i’m going to get better at budgeting and so i started a budget with my then wife at the time and in the first couple of months we sucked at budgeting we always went over our budget we always spent too much we didn’t pay ourselves first or we paid ourselves first but then ended up you know taking from that uh pile in order to keep living but then as the month progressed we got better at it and better at it and better at it to the point where it became quite easy to stay within our budget and we had money left over at the end to invest and then i’ve obviously carried that on through the last couple of years had to become even better at budgeting to pay off debt and through that have become quite a decent budget i’ve still got a ways to go i’m not perfect but definitely better i think nobody looking at budgeting as a habit though and something you can get better at over time has been helpful to me because then when you do stuff up it’s like okay i’m not perfect but i’m going to learn from this and get better as time goes on and i’ve done a full video on what i call the 15 minute budget which is allows you to do a quick kind of income regular expense analysis and work out okay how much degra discretionary income should i give myself so i’ll link up to that down below if anyone’s interested in learning more about how i budget i guess i don’t know i i think that’s it right for us it’s really paying yourself first being diligent with your expenses and i guess the other thing we haven’t talked about which has been important in both our lives is increasing your income and focusing on increasing your income yeah definitely identifying different income streams or increasing your income is is imperative to to do this and get to where you need to be and it can be difficult for sure um but it’s definitely that compound or snowball effect that happens as you start to go like before i bought my first property it felt super hard to save and and to get into that first property but the second property was easier the third property was even easier again and it it really is that compound effect is as you continue moving forward life happens and with life if you’re doing the right things if you’re constantly trying to be a better version of yourself tomorrow than you are today if you’re constantly striving to be if you’re an employee the best employee in your business you’re going to get those wage increases you’re going to get those pay rises and then as you start to acquire assets you can you know have other income streams from those assets if you buy the right assets you may be able to add value to those properties so that you increase the income there as well but yeah if you can pull a few different income streams to get that up speed up the savings speed up the journey make it a lot faster yeah well that’s i guess it all kind of comes into this habit of doing it so with you and i it’s we’re paying ourselves first then we’ve set a budget for our lives and what we’re going to live off and then we focus on increasing our income simon’s done that through his job through increasing his wage through becoming a partner in the business and getting dividends i’ve done that through my business and working hard and smart to increase the income of my business but as our inc income’s increasing we’re not increasing our expenses in line with it we’re still just living the same life we were living so any increase in income that’s a big chunk of money that can go towards paying off debt or towards saving your deposit and so many people live their lives and they just have the income that they have and the expenses that they have and they’re trying to you know pay off debt or save their deposit within that which is really hard and those first tips we gave can help with that but if you can take that next step and say okay let’s now focus i’m going to work for the next 10 20 30 40 50 years anyway let’s focus on how i can increase my income over those years and you’re going to have so much more money to play with so you could do that through your career or you could do that by starting a side hustle or starting a side business taking some of that time that you might have spent watching tv watching youtube browsing the internet going surfing whatever it is that you’re doing with your life taking a portion of that time and applying it to income producing businesses or assets or you know working on the side or as simon said building up those assets and adding value to those assets look at different ways you can increase your income and apply yourself diligently to that and that can really speed up the journey and that that for me has been probably the biggest thing as how i’ve been able to pay off so much debt in the last two years is just increase my income keep expenses super low and then spend all my time focusing on increasing my income for sure and one thing that just popped into my mind after you saying that is um the idea of delaying your gratification um which is you know one of the things is paying off debt or or saving for something because you do you have to delay the gratification because you’re sacrificing something today for something tomorrow and you know that can be really hard that can be a tough pill to swallow it can be difficult but it’s far better than the alternative you know if you’re constantly chasing short-term gratification short-term results short-term money you’re gonna end up working until you’re 75 if you’re under the age of 30 now you know you’re going to do it so remember gratification do you remember when you were looking to buy your first property and you wanted to buy that mountain bike for three thousand dollars i think i’m gonna try and find the snippet from the video where you talked about that a couple of years ago walking along the water and you’re saying oh i nearly bought a mountain bike but then i didn’t i’ve been focusing on saving so much at the moment that i haven’t really done anything nice for myself but tell us tell them about the bike oh yes i had a little bit of a moment the other day and i i’d love my mountain biking and i’ve been watching some videos online and stuff like that and i’m like i need a bike i just need a bike and i had a bit of cash come in and i was like i’m buying a bike so i went to the store and looked at a three thousand dollar brand new mountain bike and then i was um just about to go to the store and pick it up and i was in the shower and i’m just like don’t do it simon my heart was telling me go and do it but my head was just saying you don’t need to do this like if you do it you’re gonna put your property on hold by another three months you’d say yeah and it’s just those bits of cash can be so hard to save and you’re so close as well to do that now whereas to keep pushing and to buy the property and then maybe reward yourself with the motorbike afterwards a bit of delayed gratification legit you’re legit like i delayed the gratification and it all paid off in the end you know i’ve got the mountain bike now so it all worked out in in the long run and and um how did that work for you did you did you buy the property first then i guess spoil yourself with a mountain bike after i did i i decided like basically what i’ve done you know i was saying that i saved basically 100 of my dividend um you know out of every single dividend i just keep a small portion for myself uh like a really small portion about you know 10 to 20 of it to do something nice for myself whether it’s by the mountain bike and i didn’t end up spending 3000. i just spent 1 000. um and or buying a new surfboard or going on a little holiday or buying some some new clothes or something like that um but i wasn’t doing that at the start of the journey you know like when we talked about before i bought my first property you know i wasn’t doing any of that i wasn’t spending any money on myself it’s only because i’ve got myself to a point now where i’ve got the asset of increasing income so much that now i’ve finally been able to go all right well i can start you know enjoying this sort of stuff a little bit shorter term because i did delay that gratification for so many years to set myself up so that now i’m like okay well i can justify spending let’s call it three thousand dollars a year on stuff which is toys or you know little little holidays or something like that because i deserve it because i delayed the gratification i waited until i was in a position to justify doing it and now i can reap the benefits of that yeah and you’ve also purchased your two investment properties your foundational properties you’ve got your own home as well so like you’re well on the journey to creating that financial freedom now it’s a lot for you it’s a lot about okay improving those assets but letting those assets pay themselves off and paying them off over time so for you you’ve acquired those income producing assets they now just i guess need time to percolate need time to grow before you achieve your financial freedom so you can do that for me paying off debt i guess i’m in the situation you were in earlier which is yeah none of the money’s going towards me and having a great time like i’m still driving around a beat up old car with the the side panel just fell off the other day on the inside just like a little cover and it’s like you know things like that but once the debts paid off once i’ve been investing then it’s like okay then i’ll start to use some of that money for myself whereas at the moment you know i’ve made the mistakes i took the responsibility i’m in this situation i’m gonna make the sacrifices to get myself out of it and i guess i would leave people with that is that it is a sacrifice to do this but what’s your alternative right if you don’t sacrifice to pay off your debt if you don’t sacrifice to save your deposit if you do nothing financial freedom isn’t going to just happen it’s just not like it just doesn’t happen by itself you have to diligently seek it out take the action in order to achieve it and if you’re not doing that it’s just not going to happen so you know for me and simon we’ve both been sacrificing and we’re both at different parts of that journey but yeah i think it’s worth it to get the life that you want to get and i think it pays off in the long run no doubt about it especially because i am starting to experience a lot of the benefits of all those sacrifices now and um you know for me i was super fortunate to be able to do it in such a short period of time that doesn’t happen for everybody but you know to me it feels like it’s been since i started uni um at when was i 22 since i started uni you know i’ve been making sacrifices since then so that’s six years of just non-stop sacrifice delaying the gratification and now i’m finally in a position where i can go all right i can’t enjoy some of it but still i’m still saving a much much much higher portion than i’m spending you know i’m still moving forward and i’m constantly going to be doing that you know i’ve got two major things that i need to do with both of my foundational properties which is convert them into dual income properties i’m ultra laser focused on that and then i’ve gone okay once i’ve done that and once i’ve done a little renovation to the house that i’m living in at the moment i’m just going to take a year or two of just doing nothing and just really you know kicking back and and enjoying all of that hard work that i’ve done so it will come at some point in time where you want to be it’s just going to take time and it’s going to take a bit of sacrifice but i’ll tell you the results so bloody worth it because i can completely visualize exactly what my life is going to look like because of everything that i’ve done yeah you say you’re going to take a couple of years off i’ll believe it when i see it you said you weren’t going to buy a property this year look at you now so you and ben are just as you and ben are just as bad as each other i’ll take i’ll i’ll take a week off and i’ll get bored and i’ll be like all right what’s next but yeah it definitely gets easier as time goes on as well so if you use simon now being in a position where you’ve got those foundational properties you’ve got your own home you’ve increased your income saving now becomes easier as you’re getting multiple income streams coming in as you’ve set those habits it gets so much easier to save the next deposit or to pay down your properties things get even easier over time and same for me with paying off debt in the beginning when i had my full debt which was a lot i was just i was drowning completely drowning my income wasn’t high enough but i spent the last you know two years building up my income stream so and paying off the debt at the same time so now my interest and my debt repayments are lower than they were in the beginning my income is much much higher than it was and it’s so much easier now that that last chunk of debt that i got left is going to get paid off super quickly super easily without it impacting my life and then you know the first deposit is going to be hard for me but then as you end up having multiple properties and they’re generating income and capital growth it starts to compound and get easier so just know that if you’re in the thick of it if it’s hard right now that’s completely normal but just know that it’s not always going to be this hard and it will get easier in the future so yeah thanks so much for coming on and sharing this today simon i’m actually going to link up to an old video that me and simon did where he was talking about saving his deposit so we can jump back in time a couple of years and look at the journey that you’ve gone through so link up to that go ahead and check that out everyone until next time stay positive

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