Age 18 – 30
Commencing your career
A most exciting time of your life – commencing your career! New people, new places, new opportunities and new challenges. In the early days, it’s about getting a start, putting your training into practical application and starting to make contacts.
Where will the path take you…………?
Budgeting and saving
The path to financial freedom is a long and winding one, with many obstacles along the way. Like any form of successful endeavour – start early and be disciplined in your approach! Prepare an expenditure budget (including an allowance for all your regular bills), to work out what you can save on a weekly, fortnightly or monthly basis – than stick to it!
Establishing a banking connection and getting a credit rating
You will probably already have a bank account and/or credit card – quite possibly the same bank your parents have used. You may need a car loan to buy your first “real” car after you pass over the “bomb” you’ve been driving. Proper servicing (repayment) of your credit card, and/or car loan, along with a demonstrated ability to save, will provide you with a solid basis for establishing a credit rating and therefore the ability to borrow in future.
Understand superannuation and investment
Most young people (and many older people) do not understand superannuation. Your employer will be contributing on your behalf – this is your savings for your future. You need to understand where your money is invested and how it is performing year after year. If you don’t understand – ask someone to explain it to you! It’s also important to understand the general principles of investment – the compounding value of money, how tax works on investments and so on. Get yourself informed!
Buying your first property
Somewhere in your 20’s, it’s likely you’ll be seeking to make your first property purchase – either for habitation or investment. Either way, you’ll need an appropriate deposit and the ability to service your loan.
With property prices very strong (particularly in capital cities), your first property purchase may well be a “joint venture” with your parents, a sibling, a friend or partner. There are some creative options worth working through to help springboard you into your first purchase.
Personal insurances – Income Protection / TPD and Life Insurance
An important next step in conjunction with your property purchase is to protect yourself against unexpected events by having personal insurance in place. Income protection, Total and Permanent Disability (TPD) and Life Insurance should all be considered. Get independent advice on this – don’t leave it to your bank – they will do what’s best for them, not for you!
Revisiting your budget and savings capacity
As you move through your 20’s (and most likely a couple of new jobs) as your income increases, you need to continue to rework your budget – this should be a lifetime job! Savings momentum creates a great positive vibe as you start to build your wealth.
Prepare a Will
Starting to build an asset base invites the question as to what happens if you and/or your partner die. It’s not common for people in their 20’s to think about a Will but it is an important part of your overall life and financial considerations.
As you commence your career and work through your first, second and third jobs in your 20’s, one of the most important things you can do is to work on building your contact network.
A good network will provide you with opportunities, support, growth and enjoyment throughout your entire life. It’s one of life’s greatest assets.