Make the complex decision of buying your first home while considering business growth and maintaining lifestyle in New Zealand.
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“We are in our mid-30s, with three young kids, household income of 150k per year, 120k is salary income, and 30k is profit from our business; both figures are before tax. We are currently renting a nice house in a nice suburb at a fraction of market rent (relatives own the house). However, we’d like to be financially independent. We are not good savers, but we’ve managed to save a deposit of 200k over the years, and we’re thinking about buying our first home. We’re having second thoughts since it would affect our lifestyle & ability to spend freely due to the current high-interest rates. We might also need to invest the deposit money in our business for growth. Any advice would be appreciated.”
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Financial Evaluation:
Start by comprehensively assessing your current financial situation. Consider your household income of 150k per year, with 120k from salary income and 30k from your business (pre-tax figures). Also, consider your monthly expenses, outstanding debts, and your existing savings, which amounts to a 200k deposit. This comprehensive assessment provides the foundation for informed financial decisions.
Home Purchase Consideration:
Buying a home is a significant step towards financial independence. However, the current high-interest rates should be factored into your decision. Calculate your borrowing capacity and assess how a mortgage payment might affect your monthly expenses. It’s crucial to balance fulfilling your dream of homeownership and maintaining your current lifestyle.
Business Growth vs. Home Purchase:
You’ve mentioned the potential need to invest your 200k deposit in your business for growth. Carefully evaluate your business’s financial health, its growth potential, and the expected return on investment. Weigh the risks and benefits of directing these funds into your business versus a real estate purchase. Consider how this decision may impact your family’s overall financial security.
Professional Guidance:
Given the complexity of your financial situation and goals, consulting with a financial advisor is highly advisable. They can help you create a personalized financial plan that aligns with your priorities. A professional can analyse the trade-offs between investing in a home and growing your business, considering factors such as interest rates, market conditions, and the potential for financial independence.
Family Discussions:
Engage in open discussions with your spouse to ensure both of your visions for the future are aligned. Consider not only the short-term effects of your decision but also the long-term implications on your family’s financial well-being, retirement planning, and overall financial independence.
The key is to conduct a thorough financial analysis, seek professional guidance, and make a well-informed decision that balances your homeownership aspirations, business growth objectives, and long-term financial security. Your decision should be driven by a clear understanding of your financial goals and a well-structured plan to achieve them.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
