18 to 35 – Get a Head Start
Arguably the best time to start building your financial freedom is between 18 to 35 years of age. Why? Because the earlier you start, the more time you have to create and build your wealth.
Two main areas of focus during the 18 to 35 years are budget and credit card debt.
What is a budget?
A budget is one of the best and most practical tools to help you manage your finances and unburden your life so that you can achieve things that are really important to you.
A budget will identify surplus money that can be used to achieve your goals. It can also identify excess spending that is preventing you from achieving your goals. Having a budget will help you to identify your spending priorities.
Who needs a budget?
Anyone with a limited income, debt, goals or dreams that will require money, plans for a large purchase or anyone wanting to fun higher education.
How to start or update your budget
Make a list of all of your fixed expenses, eg rent, mobile phone, car registration, car insurance etc. Make a list of all of your non-fixed expenses which are usually non-essential items such as going to the movies. Make a list of expected one-off costs. Keep a list of everything you spend your money on for one month.
When to start or update your budget
Today! Reviewing your budget regularly, at least annually, will help you keep your spending and savings on track, as well as keep you focused on your goals and dreams.
Budgets are particularly useful when you are looking forward to milestones in life
- Your first job, a new job or a pay rise
- Moving out on your own
- Starting a family
- Buying a home
- A large purchase such as a car or trip
- A child’s education
- Eliminate your debt
- Starting your own business
- Planning for retirement
Regular investing is a particularly effective and convenient way to help you reach your financial goals. Even a little money invested regularly can grow into a tidy sum over time.
The easiest way to save is through a regular investment plan. By investing an amount each month, you will be well on your way to developing substantial savings and this introduces you to the world of investing.
The Credit Card Trap
They are the cost of living independently and they need to be managed. Particularly, we must manage and control our spending patterns on credit cards.
Credit is not free money! The costs of interest, late fees and the vicious cycle of paying for yesterday’s purchase keeps those burdened with debt from realising tomorrow’s opportunities.
Debt does not just go away.
Debt such as car loans or higher education debts will not just go away. The longer you put off erasing your debts, the more interest you will pay.
Take control and tackle your debt
Your best bet is to tackle the more expensive debt first. Look into the possibility of consolidating your loans. Create a repayment plan. Don’t charge anything new while you are getting your debt under control.
Pay with cash, check or a debit card and leave the credit cards in a safe place at home. Also, avoid the temptation to accept every credit card offer that comes your way, to restrict the level of debt that you are able to get yourself into.
The real cost of cars
Do you know how much it really costs to keep a car running every year? From negotiating to buy the car, to the payment of registration and insurance costs, there are a host of new and ongoing costs associated with owning your own car. So before you dig deep to buy, take on a pricey lease or commit yourself to a loan, prepare yourself.
The real cost of education
The cost of higher education has been increasing at a startling rate, while at the same time our rapidly changing world requires higher levels of education to compete in the job market.
Typically, the total cost of tertiary education courses can range from about $20,000 upwards to $80,000 and beyond. The result too often is a huge stress on family’s finances and a debt trap.
Cost saving tips for students
Find part-time work. Try to make full or partial payment on your HECS fees to qualify for the discount. Meet with Centrelink to determine if you are eligible for a healthcare card and if so use the benefits, including medication and transportation. Ask Centrelink if you qualify for any other benefits.
Research grants and scholarships and apply. Find out if your school has student guild and if so make the most of its resources, discounts and giveaways. Keep your lifestyle simple – you will never have a better opportunity to keep lifestyle costs down than when you are young and flexible.
Planning ahead for higher education
Planning ahead is the best solution for tackling education expenses. Have a goal (target time frame and amount). Create a plan (financial advisers can assist with the development of the most appropriate plan for your needs). Maintain a disciplined approach, eg monthly savings plan. Invest according to your goals and time frame into managed funds, shares or term deposit accounts. Research your options, including grants and scholarships, HECS (Higher Education Contribution Scheme). Always maximise the return on the money you do have by opening higher interest earnings savings accounts, cash management account, term deposit or invest it wisely.
Speak with an adviser
There are investments designed specifically for education savings and these may have tax advantages. You will need to consider your education savings requirements along with your income and total financial situation and this is true as well when it comes to selecting the most appropriate savings and investment strategy. A financial adviser will help you put all the pieces together into a comprehensive plan that addresses your needs and goals as best as possible.