Mozo’s declassified (post) school survival guide
Whether you’re going to uni, TAFE or straight into the workforce, the transition from high school to the “real world” can be tough. How you’re expected to go from years of asking to use the bathroom to meeting expenses without so much as an instruction manual is beyond me.
Seriously, they’ll school you on Shakespeare but do they teach you how to submit a tax return? So, unless you plan on Macbething your way through life, you’re going to need a few extra pointers.
Which is why we’ve put together this little ‘adulting for dummies’ guide - to teach you all the finance basics you need to get by in the real world.
Bookmark it, print it out, stick it on the fridge, make it your iPhone wallpaper, heck, make it your actual wallpaper!
First things first: Bank account basics
Now before we get into credit scores and house deposits, first, let’s start right from the beginning and talk about bank accounts.
Step 1: Open a bank account in your name
One of the first financial boxes you’ll want to tick off is to open a bank account in your name if you haven’t already done so.
Most bank accounts come with a connected bank/debit card which you can use to withdraw money from an ATM or use to shop online. Nowadays, there are loads of fee-free bank accounts out there so steer clear of any with fees. If you’re a university student, you might opt for a student bank account.
Or maybe you’d prefer to go with an online-only neobank which usually comes with funkier card options if that’s something you’re after.
Step 2: Get yourself a solid savings account
Your savings account is where you’ll stash your savings (duh) and maybe even keep your regular pay in so you don’t spend it all at once.
To earn the most interest on your savings, opt for a high interest savings account. Keep in mind that interest rates aren’t so great nowadays, so a ‘high interest savings account’ doesn’t always mean you’ll score a high interest rate.
Once again, there are loads of student savings accounts around which offer exclusive deals and sometimes better interest rates to students.
The all-important: Earning your own money
One of the first steps to reaching financial freedom is to start earning your own money. No more will you put your hands out to mum and dad each time you want to buy something!
Now, if you’re heading straight out of high school and into full-time work then you can probably skip this lesson.
If, however, you’re continuing your studies at uni or TAFE then you’ll likely need to start earning some form of income to help pay for books, food and other things in life.
Here are some options:
- Part-time job: Many students will take on a part-time job to help pay the bills while they study. This could be finding work on the more traditional route like a job at a clothing store, cafe or fast food restaurant, or it could be something a little more unconventional, like Uber driving, food delivery or even participating in online surveys.
- Side hustle: Have an entrepreneurial mind? Then instead of applying for a part-time job, you might consider creating your own role by starting a side hustle. Nowadays there are loads of ways to start a business on the side, from content creation on YouTube to starting your own eCommerce store online. Whatever your niche, why not give it crack?
- Sell stuff online: If between lectures, tutes and studying you’re strapped for time, you might choose to sell some of your old stuff to score some extra cash. From eBay to Gumtree to DePop, the options are pretty much endless when it comes to selling things online.
- Youth allowance: Alternatively, if you're studying full time and need some extra help to get by financially and are eligible then you might apply for Youth Allowance or other government payment schemes.
The big challenge: Setting a budget
Ew, the ‘B’ word. But trust us, budgeting is the bread and butter of becoming a responsible adult who knows how to manage money.
Don’t be fooled, setting a budget doesn’t mean you have to miss out on the things you want. In fact, it’s quite the opposite. With a solid budget in place, you’ll be able to indulge here and there without feeling guilty about it or having to sacrifice your savings.
Here are a few pointers on how to set a budget and stick to it to help get you started:
1. List out all your expenses:
Pop all of your regular expenses and expected income into Mozo’s free budget calculator so you can work out exactly where your money goes and create a budget around it.
And when we say all your expenses, we mean nights out, online shopping, Uber Eats … the whole shebang! Be honest.
2. Set yourself an allowance:
If you thought you’d escaped your allowance days when you turned 18, guess again. Your parents didn’t just set an allowance for fun - it’s an important part of learning to manage your own money and not blow it all in one go.
So take a leaf out of mum and dad’s book and set yourself a weekly spending limit (a specific dollar amount) that you must not exceed. This should cover all the boring important bits (bills, food and rent) as well as the ‘fun’ expenses (shopping, socialising).
Remember to be realistic with the amount so that you don’t wind up breaking into your savings cause you went over budget. Make it a goal to not spend the full amount, and then transfer whatever’s left by the end of the week into your savings account. Every bit counts!
3. Out of sight, out of mind
You’ll be more likely to overspend if you can see a big lump sum of money sitting in your bank account, so split your money up across multiple accounts so you’re not tempted.
Keep your savings in one account, your pay in another and your weekly allowance in another. Then set up automated payments to transfer your weekly allowance into your spending account each week.
Separating your allowance from the rest of your money tricks your brain into thinking that that’s all the money you’ve got to spend, so you’ll be far more conscious of what you spend it on. Go a step further and keep with a different bank altogether so it requires more effort to access.
4. Track your spending
Download a budget and savings app to help track your spending so you can pick up on any significant money drainers and ensure you’re consistently sticking to your budget. Or if you’re a little more old school, then create a budgeting spreadsheet and manually input the numbers each month.
5. Always ask for a discount
Students! One of the perks of being a student is the discounts. Loads of places offer 10% off or more when you show your student/concession card at the checkout, so never be afraid to ask.
If you are a student, then be sure to download apps like Student Edge and UNiDAYS which give access to heaps of in-store and online student discounts on things such as food, clothes and technology.
The not so fun stuff: Tackling your taxes
There are two guarantees in life: Death and taxes. But if you’ve never had a job before then there’s a chance you won’t know the first thing about taxes. Here’s some help:
Why do we pay tax in Australia?
To put it simply, in Australia we (people and businesses) pay the government tax so they can provide health, education, defence, roads, railways, social security and other Centrelink payments.
How much tax will I pay?
It’s different for everyone. The amount of tax you pay will depend on whether you’re an Australian resident, how much income you earn, if you have more than one job and whether you have a TFN (Tax file number).
What is a TFN (Tax file number):
Your TFN (tax file number) is your personal reference number within the tax and superannuation systems which you should tell your employer when you start working for them. You’ll have the same TFN for life, even if you change jobs, names, or move interstate or overseas - so keep it safe.
You must apply for a TFN before starting your first job and provide it to your new employer within 28 days of starting (or else they’ll be required to deduct tax from your pay at the highest rate).
Lodging your first tax return:
If you work (earn an income) in Australia, then you’re required to lodge a tax return at the end of each financial year (30 June). The cut off for lodging your tax return is 31 October.
You can lodge your tax return online via myTax, with a registered tax agent or with a paper tax return. To lodge your return via myTax you’ll need to first create a myGov account and then link it to the ATO.
Tax Help program:
If you need some help lodging your tax return then you might be able to use the ATO’s free Tax Help program. The program offers people assistance from an ATO-trained and accredited volunteer with completing their tax return online via myTax.
Here’s a quick checklist of things you’ll need to do when you start working and paying tax:
- Register for a TFN: The way you apply for a free tax file number will depend on your specific circumstances so please visit the ATO (Australian Taxation Office) website to determine this.
- Keep receipts: If you plan on claiming any eligible expenses (deductions) on your tax return, you must be able to provide proof that they’re directly related to your income. So remember to keep a record and keep all receipts from throughout the year as proof.
- Lodge your tax return: You must lodge a tax return if you paid tax during the financial/tax year (1 July to 30 June) by 31 October.
Don’t ignore: Your credit score
Your credit score is more important than you think. Imagine you’re about to lay down a house deposit or take out a car loan for the car of your dreams but get knocked back for having a bad credit rating. You might be able to afford the loan repayments, but you won’t get approved with a poor credit score.
What’s a credit score?
Lenders want to know that you’ll eventually be able to repay the loan and your credit score is how they determine this. Your credit score helps the lender understand what kind of borrower you are, how much you can afford to borrow and how likely you’ll be to pay it back on time (or at all).
Comprehensive credit reporting:
Thanks to comprehensive credit reporting, lenders now have a full view of your credit history. This means that they can see when you’ve missed a bill or made a late repayment. But on the plus side, it also means they can see the positives too, like when you’ve consistently paid your bills on time.
So, before you apply for a loan or other form of credit (like a postpaid mobile phone plan), you’ll want to make sure your credit score is in good shape first to increase your chances of getting approved.
Don’t have any credit history?
As a recent high school grad, you might not even have a credit history yet - That’s a whole other thing.
Basically, you can’t get a loan (or other form of credit) if you don’t have a credit history. Annoying right? Just like the whole ‘needing experience to get experience’ when applying for a job sitch.
This is because the lender wants to know what sort of borrower you are before agreeing to lend you their money. So before you apply for a loan, you’ll essentially need to prove that you’re a responsible borrower first by building up a (positive) credit history.
How to build up a positive credit history:
It’s best to start small with say a postpaid phone/internet plan or small personal loan and consistently pay your bills on time and in full. Once you’ve got this under your belt, you might consider working your way up to something a little bigger, like say a credit card or car loan.
Remember to only borrow what you can afford to pay and always make your repayments on time - if you don’t it’ll get recorded on your credit history and could impact your credit score.
Beware of BNPL: Is Afterpay worth it?
Like most millennials, you probably love a good online shop. And you may or may not dabble in a few buy now pay later services like Afterpay and Zip Pay.
We get it, an app that lets you buy the latest Princess Polly drop when you don’t get paid ‘til next week? Sounds like the best thing since sliced bread! But, not all that glitters is gold.
Buy now pay later pitfalls:
Here are some of the pitfalls of using buy now pay later services:
- Impulse spending: According to Mozo’s Buy Now Pay Later Report, 65% of Aussies admitted that being able to pay in small increments over time influenced them to overspend and buy things they wouldn’t normally buy.
- Late fees galore: It’s all good and well until you cop a late fee. If you miss a BNPL payment you could get charged an additional late fee. Plus, if your BNPL account is linked to a credit card then you could wind up paying credit card interest on top. So that $50 splurge could quickly turn into a $100 debt.
Moral of the story: Be careful when using buy now pay later services and only make purchases that you can afford to pay back - or you could drag down your credit score.
Here’s the secret: Become a lifelong student
Gaining financial independence doesn’t happen overnight. Like most things, you’ll learn the ropes through time and experience.
But to help crack the code a little quicker (and to hopefully avoid having to learn things the hard way) it’s important to stay informed and continue learning.
Here’s where you can focus: