The success of your 20s is often measured by your ability to live in the moment, carve out an exciting career, and, well, pay your rent on time. With some planning, it can also look like financial freedom and improving your money management, which quickly extends to making smart investments and saving for your future self – limiting the questionable life choices to your various hair colours and awkward dating encounters.
Start thriving financially in your 20s (in no particular order):
1. Change your self talk
This may not seem like the obvious place to start but your mindset towards money can have a significant impact on your financial wellbeing. Becoming aware of your attitude and approach towards money – at a conscious and subconscious level – can help you change your behaviours and ultimately change your financial outcomes. If your self talk is constantly reminding you about how terrible you are with money or that financial freedom is out of your reach, you are likely to inadvertently choose pathways that fulfill that prophecy. Changing your mindset can be done, particularly if you get started early!
2. Make a plan (ie. a budget)
One of the best money moves to start in your 20s is creating a budget (ie. a plan for what to do with your hard earned cash). Carve out some of time, make a cuppa and start creating a list of your incomings and outgoings. A budget is a great way to stay on track and help you to achieve your savings goals. Here are some great tips to get you started.
3. Start “Emergency” or “F*** You” fund
Want to quit your job because your work environment is toxic? Forget to pay a parking fine and now it’s doubled the $$? A global pandemic hits and you can no longer rely on gig-income? When unexpected things happen or when you need a quick escape this buffer becomes your life-saver. We cannot stress this enough, a savings buffer is one of the most important aspects of financial wellbeing. If 2020 taught us anything, it’s how quickly things can change. When putting your budget together, start building your buffer.
4. Get on board with apps (not just the dating apps)
From apps that help you save money, to apps that guide you through the share market, there really is an app for everything. An app that tracks your spending does the heavy lifting for you and can help reveal spending behaviours you didn’t even know you had. And if you’re new to investing you might want to start with a round-up app that automatically invests for you. You might want to start by exploring the features of your banking app and see what other options there that might add to your financial toolkit. Keep privacy and security in mind when you’re exploring the world of finance apps and remember to read the fine print.
5. Know your limits
There are so many temptations to spend above our means (*cough* Afterpay). We are constantly bombarded with clever marketing from the moment we wake up to the moment we go to sleep. We don’t even have to get out of bed to be tempted with new retail purchase. Debt is easy to rack up in your 20s if you’re tempted by credit cards and buy-now-pay-later services. Learning to spend within the limits you’ve set in your budget is a skill. Start to hone that skill now.
6. Get your banking in order
A handy way to stick to your budget is by setting up a money system that helps you funnel your income towards your different financial goals. In this case, automatic transfers and separate accounts are your friends – if you get the set up right from the start it will make sticking to you budget, savings and investing goals a breeze.
You might also want to check that your bank is offering a competitive interest rate, reasonable fees and other services or features that might be important to you.
7. Be cautious of debt
It’s not just frivolous expenditure that causes debt. Banking and financial institutions with lucrative offers of stress free loans and credit cards can lead to bad debt. Not to mention the increasing number of buy-now-pay-later services. Before you jump into any big purchases, contracts, loans, or credit cards, be mindful of the long term repayments, interest charges and any other charges that you will have to pay. Carefully read through the terms and conditions to be sure there are no sneaky charges.
8. Go BIG with your savings goals
With the right mindset, money system and apps supporting you, it’s time to start thinking about your ultimate goal. Is it a house, a trip overseas, a car, or a massive nest egg so you can retire early? Whatever it is, be very clear about your goal. Figure out exactly how much money you need, how long it will take to save and how much you need to put away to get there.
9. Ask for a raise
Sounds simple, but you’d be surprised how many people don’t do this. Jump on to Glass Door and do a quick check to see how your salary stacks up. If you have been kicking goals at your job, put together a short presentation to make your case and be clear about how much you want to earn.
10. Take action
It’s no secret that the Australian financial system needs major reform to overcome gender inequality. On average, men take home over $25,000 more than women each year, women are much worse off in retirement, and the laws for casual and part-time employment (positions mostly held by women) impede on financial freedom, leaving women particularly vulnerable. These are deeply embedded, institutionalized issues that need reform at a government level. The best way to do this is to make your voice heard. Contact your local MP, sign Verve’s Make Our Future Fair petition, amplify the message on social media and be part of the movement.
11. Shop around
Whether you’ve been with the same health fund that your parents have been with for years, you’ve stayed with the same bank since your first job, or generally purchase something from the first place you see it, there is an opportunity to save a tonne of money by comparing what is out there. If you put in the leg work now it will pay off in the long run. With insurance, banking, electricity and other services, figure out the exact product you’re looking for, then shop around for quotes. Don’t stop there, every year, set aside a day to call all of your providers and seek a better deal.
12. Create a shopping list
Supermarkets are designed to make you spend money. If you have a shopping list, you set yourself up for a better chance of getting the things you need. If you can, online shopping for groceries can be an even safer option to deter impulse buys. Also, have a quick snack before you go. Food shopping on an empty stomach can lead to some pretty wild purchases.
13. Use the 20 day rule
You have just been informed that the latest gadget, winter coat, or device is on sale. You didn’t necessarily want it before you were notified, but now you feel your life won’t be the same without it. Before you get your credit card details ready, set a reminder for twenty days in your calendar. If you still have a burning desire to part with your cash (and you have the means to do so), go right ahead. Being mindful of consumption doesn’t mean deprivation, it means being conscious about the choices we’re making.
14. Reduce your footprint
Taking care of the planet can actually save you stacks of money. Growing your own veggies and herbs, buying a refurbished phone, opp shopping or simply repairing things around the house not only leaves more cash in your pocket, it also contributes to leaving the planet a little better off. Check out the One Small Step App for programs to help you shift your behaviours so that you can reduce your carbon footprint.
15. Split it 50/30/20
This is a basic principle to make budgeting a breeze. 50% of your take home salary goes towards living expenses (bills, rent, petrol, etc), 30% goes to spending on things you want (dinning out, hobbies, holidays) and 20% is put towards your financial goals (investing, emergency buffer, paying down debt). This exact split might not work for you personally, instead it might help to guide the way you set up your money system.
16. Get crafty
One great thing to come out of lockdown was the endless resources (ie. TikToks) on how to DIY pretty much everything. If you have honed your creative skills (there’s still time) try your hand at upcycling pieces to make furniture, making your own clothes, and even making gifts for people to save a bunch of money at Christmas.
17. Start investing
You probably weren’t taught about compound interest at school but it’s a really valuable financial lesson. Starting early as an investor means you can make the most of the magic of compound interest – earning interest on the principal amount you initially invested and on the interest that principal has built up overtime. Historically speaking, investing a dollar today is worth more than investing a dollar at a later date. Essentially this means the sooner you can start investing the better. If you’ve paid down bad debt and you have an emergency fund it might be time to consider investing. Not sure how? Start here.
18. Learn how to cook
Once you start tracking your spending you might notice that eating out can be a big expense. One of the greatest life skills to have is learning to cook. There are loads of books, shows, Apps and courses available to help you go from two minute noodles to Masterchef dishes. Cooking from scratch can save you lots of money on take out and ready meals. It’s a win for your health too!
19. Treat Yo’self
Finances and budgets usually imply sacrifices. To keep your budget viable and achievable, be sure to treat yourself every now and then. Budget “wellbeing” spending like getting your hair done, getting a massage or going out for a nice meal. Resist the urge to feel guilty for spending, financial wellbeing is about balance and that means treating yourself sometimes too!
20. Sort your super
Last, but certainly not least, take some time to think about future-you. Superannuation might be the last thing on your mind in your 20s but if you can give it some attention now it could be a gamechanger in the future. Sorting your super can be done in a few easy steps and the changes you make today could mean an extra $100,000 towards living the good life when you retire.