It’s MoneySmart Week, an initiative designed to get Australians to take simple steps to make a positive difference to their money health. Here at Mozo, nothing thrills us more than helping people live life richer, so we asked GenY blogger (and former Mozo staffer), Rebeccah Elley, to share with us her tips for being financially savvy in your 20s.
Financial success in your mid 20s
Your 20s are for having fun, spending up big and living your life to the fullest…Right? Well not exactly, as the decisions you make today can determine your financial success later on. Here are five tips to make you a financially savvy 20 something-year-old:
1. Get rid of bad credit
During your early 20s it’s easy to accumulate bad credit in the form of credit card debt and personal loans. Your eye for high-end fashion or the detailing on your hot hatch has landed you in debt; whatever the reason now is the time to clean up your debt.
If you have a credit card with a high interest rate it’s wise to concentrate on paying it back ASAP. Consider a balance transfer to another credit card with a low interest rate or if you have more than one loan, debt consolidation can help you get out of debt sooner.
It’s important to have a plan when paying back debt. A certified financial planner can help draw up a debt management plan to help you attack your debt. Remember bad credit will also help prevent you from future loans, as the banks will look at you as a bad investment. To find a certified financial planner, check out the The Financial Planning Association of Australia (FPA).
2. Create a spending budget
Nobody likes all work and no play. We all know the feeling of wanting to have fun with our hard earned cash. However, budgeting doesn’t mean you can’t enjoy yourself. Put aside money for your rent and everyday expenses (train ticket, coffee) and budget in some cash for the weekend.
Once you have factored in these everyday necessities, decide on a realistic savings goal and open a high interest savings account. Make sure you read the fine print, as many high interest savings accounts have an introductory period of around 4-6 months, and revert to a much lower rate once the period is completed.
Compare savings accounts on Mozo here.
3. Open an emergency account
You never know what the future can bring, so prepare for the unexpected. An injury at work or a redundancy could keep you out of work for several months, which means the rent won’t be paid and back to mum and dad’s house. Nobody wants that!
Open a separate high interest savings account, specifically for your emergency fund. Make sure it’s linked to your everyday transaction account, so it’s easy to access in the case of an emergency. A great way to save is by setting up automatic deposits, as small amounts can go along way in the future.
4. Work on your future network
In your 20s it’s easy to dismiss networking as a waste of time or a forced meeting of people. However, those networks you make in your 20s could be the stepping-stones to future success. Separate work and your social life, so while you’re at work it’s time to be a dedicated employee and make long lasting relationships with your colleagues.
By getting to know the ‘right’ people in your industry you will be up-to-date on any industry trends. Maintaining relationships can also open up new prospects and you could land your dream job due to your incredible networking skills.
5. Buy your first home or investment property
By the time you enter your late 20s buying your first home or investment property has probably become an attractive prospect. You may be sick of paying rent to someone else’s mortgage and think it’s time to put that money into your own home loan.
Once you have saved a deposit of around 20% and proven to the banks that you have a regular income and secure job you can search the market for a competitive home loan. Make sure you stick to your budget and keep that emergency fund accessible for this big step.
Your 20s is an awesome time to work, travel and have fun but it’s also the perfect time to set your finances for the future, so your 30s are even better!
Go to Mozo to compare home loans.