Aussies’ relationship with housing is so intense, it might as well be a national sport.

We’ve seen countless folks who put every ounce of energy and every last dollar into transforming houses into homes. Their weekends become pilgrimages to Bunnings, and DIY triumphs turn into Facebook highlights. And when the national pastime is obsessively following property prices…it's clear we've got it bad.

This begs the question: when it comes to FIRE (Financial Independence, Retire Early) , how much does housing really matter? Is it the secret to building wealth? Or could it be the very hurdle that keeps us from crossing the finish line?

In this Aussie FIRE episode, we'll explore the big and the not-so-obvious ways this relationship shapes our journey to Financial Independence. Plus, Hayden is looking to buy his first home, and he has plenty of questions that may mirror yours. So, for this one, we're leaning mostly on Dave for his experience in buying a home.

Keep in mind, however, that we’re sharing our observations here, not professional recommendations. When we talk about nuanced topics like this, we generally tend to lean toward passive and straightforward ways of reaching Financial Independence. Hence, we encourage you to do your own research while reflecting on your financial standing and particular housing needs.

How much does housing matter to Financial Independence?

We often hear differing opinions about home ownership and its importance to Financial Independence. The most popular one is that owning your home is a must for anyone seeking FIRE. Some go as far as to say that without a home, you're not truly wealthy or independent.

And then there's us, leaning back, scratching our heads, thinking: "Well, it's not quite black and white, is it?”

We get it, though: housing is a hefty expense. If you have it sorted by owning your place, retirement looks a bit sunnier. You're essentially free from the worry of rent. What’s more, you’ll be able to live reasonably well with the pension covering your other expenses. Conversely, if rent is still on your plate in your retirement years, you're going to need more than a pension to manage.

Now, this might ruffle some feathers, but in the grand scheme of things, owning a house isn’t a must for FIRE folks. The question isn’t whether FIRE works without home ownership. Rather, it’s about financial flexibility. If we've played our cards right, saving and investing diligently, we’ll have enough to cover our living expenses. And that includes rent if that’s part of the plan.

We’ll unpack this perspective in the next sections…

Emotional and financial considerations of buying a house vs renting

Looking at home ownership, there are two sides to this: the emotional security it provides, and the financial aspect.

On one hand, the emotional comfort is undeniable. Homeowners do often feel a sense of permanence and control despite whatever is happening in the world. You know you're in your own space. It’s a sanctuary you can call entirely yours once it's paid off.

However, when you combine that sensation with a numbers perspective…things get tricky. Owning your home means you can knock down walls or change the tiles in the bathroom on a whim (council permitting, of course). But with great power comes great responsibility. And by responsibility, we mean maintenance.

The cost and hassle of up-keeping your home can eat into your finances and your free time. Renters, on the other hand, can simply call the landlord when the hot water system goes out of order.

The other thing is that achieving outright ownership is no walk in the park. It requires sacrifice, savvy financial planning, and often, a good dose of luck. For some, it's a burden that ties them down, chaining their finances to a seemingly endless mortgage.

With that said, not owning a home isn't the end of the world. In fact, for us chasing FIRE, it might just be the most fulfilling thing to do.

As we’ve mentioned, the pursuit of FIRE means living off savings and investments during retirement – even if it means renting indefinitely. Renting also offers flexibility, and the freedom to chase job opportunities or live in locations that feed your soul.

Also, plenty of folks feel the freedom from property maintenance and surprise repair bills is equally comforting. Without a property tying up their funds, they’re free to invest in shares or Exchange-Traded Funds (ETFs) that could potentially offer higher returns. In other words, buying a house is not the only route to achieving FIRE sooner.

In the end, whether homeownership is essential to FIRE is more nuanced than the usual "owners can, renters can't" narrative. It's about weighing the sense of security against the responsibilities and costs involved. Put another way: does home ownership – or the lack thereof – gel with other financial priorities? Does homeownership fit into your larger FIRE strategy?

What do we think about treating a home as an investment?

First off, there are countless perspectives and experiences out there about homeownership, and there’s a beauty in that. Most of us are doing this for the first time, and we discover unique paths to FIRE as we talk more about these things. If you find yourself disagreeing with our opinions above, we think that’s a good thing. It tells us you understand the nuances of buying a house as it relates to your circumstances and preferences.

Now, there’s a good chance that others may disagree with us for an entirely different reason. Specifically, it’s that buying a house that grows in value can supposedly speed up Financial Independence. We’ve seen them eyeing suburban houses like they're picking individual shares, which sounds like leaning towards speculative investing. Hence, this lengthy note…

But, if every house in the neighbourhood is also doubling in value, are you really moving the needle towards Financial Independence? Unless you’re plotting a move to a cheaper locale, that uptick in value is more of a feel-good metric than a step towards Financial Independence. Even with the potential tax discounts, most of us aren't really looking to profit from our homes after a year or two. We're more about creating a life in them, whether we’re talking solo or with little ones in the mix.

So, here’s where we land: investing all your money into one asset like a house in the hopes of a great return is risky and speculative. Pressures from media, family, and peers can make us feel like we need to keep up because we're told now is the right time. However, much like investing in the stock market, pinpointing the “best” time to buy is a hindsight game.

We may look back and lament not purchasing during what turns out to be a low point in the market. But, equally…we might congratulate ourselves for avoiding a stagnant or declining property value.

In the end, our personal “why” and financial readiness are the only clear lenses through which we can assess our housing choices. Do you love the area? Are you planning to settle there for the long term? Can your finances absorb potential interest rate hikes? If you have your heart set on a place to call your own, and the numbers make sense to you, then that’s all the justification you need.

How do you balance investing and saving for a house?

Let’s say housing is as important to you as reaching FIRE. At this point, you might ask: “ Should I save up for a house or invest? ” Well, we're throwing our hat into the ring because we’ve been there. And we’re saying it right away: we believe the real question isn't an either/or scenario.

In the spirit of being balanced, we think the financial benefit of buying a house first is removing that big expense called a mortgage from your life. Suddenly, you have much more control over where your money goes, like saving or investing more for retirement.

However, whether you’re renting long-term or living in your own house, the truth is that we need a solid plan for our retirement income. After all, our living situation won’t foot its own bill. This is where the FIRE community’s big focus on ETFs comes in.

Generally speaking, ETFs are long-term investing vehicles that mirror the performance of a sector, commodity, or sharemarket index. Hence, they’re diversified by nature because they track the broad economy, which, despite its fluctuations, has a way of moving upward over time. Most of all, ETFs have gained a following because many of them offer an income in the form of dividends.

(Note: If you want to learn about how dividends work in Australia, check out “The ultimate guide to dividends for Australians” .)

This brings us to the real question: how do we balance investing in ETFs and saving for a house? Fortunately, we now know there are different ways to do it.

1. Rent long-term, invest in ETFs + save for a house in the future

First up, we've got the long game approach. Renting now and investing on the side plays well into a FIRE strategy that prioritises building a financial cushion. Ideally, your investment portfolio will grow and, down the line, could boost the amount you’re saving for a house deposit.

2. Rent + also invest in property (Rentvesting)

Then there's "rentvesting". It may sound like a term we just made up, but it’s actually a straightforward strategy. You continue renting, but you also start investing in property. This way, you’re essentially locking in the property at its current price, even if you’re not ready for the lifestyle upgrade. Later down the line, you could sell this investment to buy your dream home or simply move in. Plus, it sidesteps the dreaded FOMO around property market gains.

3. Property first, shares later

At the opposite end of the spectrum, some folks prefer to grab onto the property ladder with both hands right away. The idea is to max out the mortgage because they’re betting on their property value to skyrocket. It's a high-risk move, and we wouldn’t recommend it, but it's one way to play the game. Down the line, they could downsize and use the extra funds to invest in ETFs.

4. Buy + invest on the side

For those with the high income to swing it, buying a home and investing on the side can be an option. This strategy is all about balance, keeping one foot in the property market while the other is kicking goals in the investment world. It's demanding, for sure. However, for those who can manage it, a diversified portfolio like this can offer both a safety net and a trampoline for finances.

Five ways to save for a home

We’ve laid the groundwork for balancing between investing and saving for a house. The next thing to consider is probably the toughest part for most of us. If you're anything like Hayden, you're aiming to scrape together that deposit and finally own a home. Some of us know exactly how to do it, but even more FIRE folks are still trying to figure it out.

So, let’s break down the options we have:

1. Save for a 5% deposit

Aiming for at least a 5% deposit is where you want to be at a minimum. It’s the golden rule, the starting line. And while we all wish we could magic up more cash to accelerate things, the reality is, how you grow that pot of gold really depends on your game plan. It also relies on how long you have to play.

2. ETFs are not ideal for a home deposit if your timeline is five years or less

If you're looking at a timeline of five years or less to buy your home, the sharemarket, with all its ups and downs, might not be your best option. The potential for gains is there, but so is the risk of watching your deposit shrink right when you need it most.

Now, not everyone's in a rush. If you're not married to a set "move-in" date, then investing your home deposit in ETFs might not be such a bad idea. Nobody knows for sure what will happen to our investments in the future. So, in a scenario when the market takes a downturn, a longer timeline gives you the breathing space to wait it out.

3. Savings account

In contrast, savings accounts – as vanilla as they may seem – can offer a stability that's hard to beat when you’re on a fixed timeline. They offer a way to preserve your capital while keeping it relatively safe from the swings of the sharemarket. Plus, with interest rates looking pretty decent these days, it’s not a bad place to grow your money while you work towards your goal.

4. It’s totally fine to reallocate funds from other investments

When it comes down to it, saving for a home is about finding what works for you. This includes finally deciding to sell some of your shares or ETFs for that home deposit.

We get it – after some time, you feel attached to your investments. And that’s totally a valid feeling. After all, the money in your investments is an extension of your decisions. Just remember, though, that you’re not starting from scratch. Your shares are just moving homes, from your portfolio into your actual home.

5. Cut costs on things that don’t matter to your priorities

To clear the air, it would be silly of us to sit here and pretend that everyone has lifestyle costs to cut and we don’t. However, we’ve realised in our own finances that cost-cutting is not about skipping the fun stuff altogether (unless you want to, of course). It's about getting clear on our priorities with the money we already have.

Once we get crystal clear on what matters the most, everything else starts to fall into place. Eventually, the tough decisions become a lot easier to make. Rather than doing it for savings’ sake, we go about it thinking we;re doing a favour for our future self.

How to buy something without crippling your finances

Now, even with some cost-cutting involved, the thought of buying a house might send shivers down your spine. It’s not just from excitement, but from the cold, hard numbers involved. You're probably thinking: “Can I afford it? What about the mortgage? Will it set back my FIRE plans?” These are valid concerns, especially when house prices seem to inch higher each year.

With this in mind, we’re laying out a few tips to keep in mind as you hunt for your first home:

Know what you can afford

When friends claim nothing’s liveable under a certain price tag, it’s more about preference than fact. Buying a decent home without it owning you (financially speaking) is absolutely achievable. For those whose endgame is FIRE, it makes sense anyway to pick a home that won’t stretch our budget to a breaking point. This way, we keep our financial goals in sight, and we can retire sooner rather than (much) later.

Choose practicality over perfection

Now, you might be nodding along but also not giving up on sprawling kitchens and backyard oases. It's natural to want the best of the best, right?

However, dream homes often come with nightmare price tags. We also tend to forget they’re the result of many years of hard work and saving up, not just a lucky break. Diving headfirst into that kind of commitment could tether you to a massive mortgage for decades. And that kind of leak in your finances would most likely set you back many years in your FIRE goals, too.

In contrast, there’s the benefit of flexibility if we get practical about it. Life changes, and so will your priorities. The freedom that comes with a more manageable mortgage means you can adapt more easily to opportunities that come your way. Maybe it’s a new job with a higher salary, which could pay for a relocation to a nicer neighbourhood.

This leads us to a crucial point: your first home doesn’t have to be your forever home. It’s only a base camp on your climb to Financial Independence. We just need to remind ourselves that, for now, we are building our wealth slowly but surely. And when the time is right, we can make a bigger move without compromising our early retirement plans.

Be willing to accept trade-offs for a nicer home

Now, if you decide that a location or a larger place is what you truly value, it's entirely possible to continue on your path to FIRE. It might just require more flexibility, some sacrifices, and a focus on why you’re doing it. This means picking up extra shifts, trimming down your expenses, or even reconsidering your must-haves in a home. But, hey, we’re definitely speaking from experience when we say it’s all worth it.

Final thoughts

Throughout our conversation, we unpacked how housing might matter (or not) to achieving FIRE. If you ask us, renting is not the path less trodden it once was. For many, it’s the strategic move. Then, there’s also flexibility if you see yourself having to move frequently because of a job or lifestyle.

Even so, this is where our opinions end and where your own research and reflections begin. Let your priorities, needs, wants, and constraints be your guide. We want you to feel confident in the path you choose, regardless of what society and the media say.

At the same time, we encourage open, honest conversations about these decisions. They're too important to make in a vacuum. Even when we encounter differing opinions, there’s always a gem to be found, a new angle we hadn’t considered. It’s those spaces we hold that enrich our understanding about nuanced topics like this. And sometimes they open our eyes to a path we hadn’t seen before.

If you’re ever in need of a sounding board or want to share your perspective, our inbox and socials are always open.

See you next time, and happy investing!

Dave and Hayden