Financial Tips for People Starting Out: 20 to 30 Year Olds
STAGE: Learn to Budget, Save & Invest
At this stage of life, most young people are just starting to join the workforce or have been working for a few years. Whether you’re studying, working, travelling, living at home or with friends, saving to buy your own place, or you already have a mortgage, now is the best time to get smart with your money. The choices you make and the habits you form in your teens and twenties may impact how much financial freedom you have through the years and even decades ahead.
Unfortunately in today’s world of easy credit, the culture of “Why wait? Buy now, pay later” has taken a strong hold on our society. Many young (and not so young) people get caught in this trap. It sounds enticing but remember, credit will cost you. Most people don’t even think about it, but fees and interest payments can add up to thousands of dollars. If you are unable to fully repay your “interest free” loan before the due date, you will find that the interest rate is a killer and you will be paying a lot more for your purchase than you realised. If you have one of these deals, check out the interest rate on your contract. You might be very unpleasantly surprised at how high it is. The cost of the loan has already been factored into the cost of the product. It might sound a little basic, but you can put yourself way ahead, simply by budgeting, saving and managing debt well.
Those who are already smart with their money would have started budgeting, saving and investing for their future. They would also have learned that it’s not how much they earn that matters, but how wisely they save and invest. For example, someone who earns $30,000 and saves $3,000 per year is building good security for their future, compared with someone on a higher income who earns $100,000 or more and spends everything on their lifestyle. If the high earner was to suddenly lose his/her job they would have no savings and would no longer have any financial security. They would be at a disadvantage because they have not learned how to live within their means or manage their money well.
It is important not to fall into the credit card trap of thinking that you can buy lifestyle items now, even though you don’t have the money at the moment. By using your credit card for the purchase and thinking that your next pay packet will cover the cost, you are “living on credit”. What can and often happens to many people is that they make the purchase this week and find that next week they want other things. This means that their next pay packet will not cover all purchases, leaving a debt on their credit card at the end of the month. Credit card debt attracts a high interest cost, meaning that you pay far more for your purchases when you include the cost of the interest.
It is never too late to start planning for your future.
There are basic principles to follow and pitfalls to avoid for successful money management. You can learn how to become smart with your money and put together a plan using the following strategies to help you to create a solid base upon which to build your future wealth.
- Create a Budget
- Regularly Review Your Situation as it Changes
- Start Your Wealth Creation by Setting up Your Investment Account
- Ask for Help to Stay on Track
- Get Rid of Personal Debts
- Beware the Sneaky Banks
- Debit Card Option if You are not Good with Discipline
- Consolidate your Super
- Get Free Money for Your Super
Copyright 2010 Roseanne Van Boheemen