It’s usually in our 20s that we have our first taste of financial freedom. Gone are the days of part-time or casual work, trying to scrape together enough cash to pay rent to Mum & Dad with a little left over to have a beer on a Friday night with mates.
When you get your first ‘real’ job, you get a taste of what it’s like to have more money than you need on a daily or weekly basis. While it’s important to enjoy this freedom, there are a few things you should consider that set you up for the future.
Set Some Financial Goals
I know this sounds like a boring exercise, and most people don’t think about a financial goal in their 20s, but giving yourself something to aim for can give you experience in what it’s like to have to wait for that big-ticket item… like a house. Setting yourself a goal, like saving for a car in a year, will give you a taste of what it’s like to have a long-term target for your finances.
Save for a Rainy Day
There really is something to be said for dividing your finances up into separate elements, like an emergency fund. A good place to start is moving 10 per cent of every wage you get into a separate bank account, one you can’t access via any bank cards. No one can predict what is going to happen, and having a little nest egg of cash to fall back on can remove stress down the track.
Invest Smart, Early
It is never too early to start investing your money, and a fantastic low-risk place to start is in a vanguard account. This investment type means that you place capital in the all ordinaries of the stock exchange and comes with a return of 9 per cent (and has very low fees). Any capital you invest will more than double over a 10-year period, giving you a nice, tidy sum at a point you might be considering getting into the property market.
Don’t Spend All Your Cash
Having a large disposable income can be a double-edged sword. While it allows you freedom of choice, it can also mean you spend everything you earn. This can be a terrible habit to break and brings with it added stress. You should always be in a position where you live to earn, not earn to live.
You Don’t Need Credit
When you start to earn a higher income, one of the first things most people do is apply for credit, typically a credit card. A smarter choice is to approach credit when you need it, like when you branch out into the property market. Debt can take over and put you into a cycle that is hard to break out of. So ask yourself, if you really don’t need a credit card, why get one?
Enjoying all the freedoms that come with living your life in your 20s is something that everyone should do. Paying close attention to your finances can ensure you don’t have to keep paying for that freedom well into your 30s and 40s.